There seems to be nearly universal agreement that one of the key issues facing the future for national and local TV is the ability to implement addressable advertising.
The pluses for programmers include a higher potential yield from splitting a spot and selling audience rather than demo CPMs, as well as the ability to monetize certain exposures for which they’re not currently getting paid – namely, DVR playback outside the C3 or C7 window for national, and the Live/Same Day window for local.
These positives will carry over throughout the ecosystem, allowing advertisers to stop paying for impressions outside their target – in other words, consumers who don’t buy in the category – and viewers to start seeing more relevant, less disruptive and, hopefully, fewer ads.
Yet despite all of the industry benefits, it feels like we’re taking baby steps when we need to be making giant strides. Programmers need to understand all they have to gain from addressable and hasten the pace of adoption.
Let’s look at the opportunities, starting with material revenue growth. A Credit Suisse report issued in the summer of 2017 by Wall Street analyst Omar Sheikh outlined the opportunity, noting that TV moving from age/sex to audiences to addressability, along with the inherent measurement and real-time optimization capabilities that digitalization of TV enables, can mean material ad growth. Among Sheikh’s estimates:
- Dollars spent using TV for driving top of the funnel brand metrics will grow by nearly 80% between 2016 and 2030.
- Dollars spent using TV for driving bottom of the funnel sales will grow by 214%, providing a big boon for local broadcasters that are so much closer to transactions for categories such as auto.
- This translates to an additional $73 billion dollars for national and local TV, more than doubling the current market of $69 billion.
- TV’s growth will come at the expense of other marketing channels – think telemarketing and direct mail – aimed at the bottom of the funnel.
Addressable also enables programmers to expand their base of advertisers. One of the reasons for the massive success of Facebook and Google has been their ability to expand their ad business to small- and medium-sized businesses. Facebook alone cites having over 1 million advertisers in the U.S.
Based on recent Standard Media Index (SMI) data, nearly 75% of advertising revenues to Search and Social is based on these categories of businesses. Addressability will provide programmers with the means to use the power of linear TV to drive their businesses by delivering precise geographic target impressions. This may follow a trend we have seen nationally of direct-to-consumer brands having maxed out their spend on social and expanding into TV.
Additionally, addressable advertising drives yield. The growth of addressable from cable and satellite providers including NCC Media, DirecTV and Dish, combined with the launch of Connected TV advertising, has established a pricing structure that should greatly benefit networks and stations. Being able to price inventory based on eCPM or target audience price, and being able to split a spot into its component parts, should yield more revenue per spot than today’s linear model.
Research Measurement Technology’s Bill Harvey recently published an analysis estimating a linear TV spot that sold for $1,771 would generate $4,171 (nearly 2.5 times more) if that spot was sold to eight advertisers across fast food, travel, home improvement and auto.
It has also become clear that the C3/C7 currency for national and Live/Same Day currency for local have not progressed at the same rate as the change we have seen in consumers’ time-shifting behaviors. That means networks and local stations are delivering material amounts of unmonetized ad impressions due to DVR playback outside of those windows. Addressable will allow these impressions to be recaptured.
Now that we know what is achievable, it’s time to move fast and break things. The reality is that success in establishing addressable footprints at scale will require immense cooperation and collaboration between publishers, distribution partners, ad tech and data companies – with all working in partnership to agree on a common framework so that the industry can overcome barriers and accelerate the pace of adoption.
Strides are being made at both the individual company and industry levels, with the latter including the Project OAR initiative and the recent coming together of NCC Media and Open AP to agree on consistent segment definitions. Additionally, breakthroughs in watermarking technology will ensure the consumer experience with addressable is as seamless as the linear TV experience, helping move the industry toward a successful addressable world that drives ROI for advertisers and yield for media companies.
While there are still obstacles to overcome, the future will not wait. For the TV ecosystem to truly prosper, the industry must throw caution to the wind and start reaping the many benefits addressable has to offer.
Nil Shah is CEO of Verance Corporation, a leading global provider of standards-based watermarking for the entertainment industry. Verance® Aspect™ watermarking powers broadband features on broadcast television by enabling addressable advertising, census-like audience measurement, interactivity and personalization across all screens and distribution paths.