Why are t.v. ad rates still so high?

I was having a drink a few weeks ago with a couple of friends, and the conversation veered towards the Internet. I argued that Internet advertising was much more effective than traditional media (i.e. television) because:

1) at it’s best, online advertising is active, as opposed to passive,

2) customer have the ability to spread your message virally online (I use the term “viral” based on Seth Godin’s definition of word-of-mouth versus viral), and

3) you have more transparency tracking online channels.

This is nothing ground-breaking, but I got the following question from my friend:

“If this is true, why do company still pay more for television ads, or pay for t.v. ads at all?”

I didn’t have a good answer for him… I tried the “marketers use what they know” argument, but this did not sway my price-focused, economist buddy. However, I think that I have an economic concept that helps to make my point:

Path Dependence

In short, path dependence states that adoption of new technologies is subject to its own history. By nature, businesses are conservative and have trouble adapting new technologies. However, the one that learn to adapt succeed, and the ones that don’t fail.

Hopefully, this helps me win the argument with my friend. That said, I’m going to research more into how people/organizations/companies overcome path dependence, as I’m sure it will be valuable someday


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