$70 billion. That’s the amount the television ad sales is industry is expected to surpass this year, according to eMarketer (September). This is a big number, needless to say. But the real question is: Is it sustainable?
Advertisers shifting to digital platforms combined with a fragmented ad marketplace pose a threat to TV’s longstanding history as the leading generator of ad revenue. By 2017, digital ad spend is expected to surpass TV -- to the tune of $75 billion with a 37% market share (eMarketer).This is a pivotal moment for the business. The television industry can maintain its leading position, but to do so, it needs to accept and embrace the new era of targeted advertising. The key to securing ad success is simple – the answer is addressability.
Advantage of Addressable
Addressability allows advertisers to target audiences rather than target programming. This is the most effective method for optimizing viewer engagement, thus enabling TV to remain relevant and competitive in the ad market. Capitalizing on user data gives sellers access to target specific household demographics, eliminates unnecessary inventory buys, reduces viewer burnout, optimizes revenue performance and drives efficient pricing.
So the next question is: With such a clear solution that will save and secure the future of TV advertising, why is there a reluctance from key industry players?
The Power of Data
Access to viewer data unlocks tremendous value for advertisers, but it also happens to be a major hurdle for television to adopt addressability industry-wide.
Today there are only two main sources of addressable advertising: (1) enabled devices, such as connected TVs, and (2) set-top boxes from satellite- and telco-TV providers, and cable companies for either on-demand or linear programming. The market for connected-TV viewers is growing, expected to reach 93.1 million or 75.2% of U.S. households by 2018 (eMarketer), and the level of granularity is increasing. For the first time, we are looking at addressable households, not looking for addressable households.
The Demand Curve
Agencies including GroupM, Starcom MediaVest and Horizon Media are moving significant dollars into addressable.The first addressable campaigns were considered "experimental budgets" by major brands, particularly in the consumer-packaged-goods arena. The “experiment” has proven successful. Early buyers of addressable inventory have seen double-digit growth in sales rates and household penetration.
There is also significant demand for addressability from the political arena. The 2014 mid-term elections marked a double-digit increase in addressable ad spending. With the 2016 election expected to reach $4.4 billion in television ad spending, addressability will be a key buying strategy, increasing the demand by three fold.
Leading the Pack of Sellers
Notable pioneers of addressable, such as DirecTV, Dish Network, Cablevision Systems and Comcast, continue to capitalize on the model by placing even higher bets on its success in driving revenue. Their bets are paying off.
Integrating set-top-box data and viewer information into addressable target audiences has created compelling inventory of value and efficiencies in combining set-top box data with third-party data. Sellers of digital inventory have been successful in poaching TV ad dollars because they have offered better precision-targeting of their audiences. Offering addressable television for advertisers puts television providers back on the map to compete with comparable targeting opportunities.
Industry chatter about the decline in television ad spend focuses on the challenges facing the industry, positioning the TV ad model as being outdated. The truth is, the TV ad model is more innovative than ever. It just needs to embrace the technologies and data available to offer addressable.
The number of addressable households is increasing; brands, advertisers and agencies have the demand; and the technology is there to support the ecosystem.
So here’s my request: Stop looking for an answer and start looking at how we are going to work together to achieve the answer: Addressability. Look at the success digital has had –with numbers forecasted to reach $93 billion by 2019 (eMarketer). Television providers have the ability to compete for that spend. The choice is ours.
Travis Howe is senior vice president of client services & operations at Invision, a New York-based provider of multi-platform advertising sales software.