NEW YORK – Solid audience segment definition standards, effective pricing and better education for both buyers and advertisers will help addressable advertising finally live up to its potential, according to a panel discussion here Wednesday.
“The lack of standard audience segments is probably the single biggest impediment, said Acxiom EVP, Communications, TV & Media Eric Schmitt, said at the NYC TV & Video Week Advanced Advertising Summit. He pointed to an earlier discussion that said it could take as much as four-to-six weeks to define audience segments.
“Four-to-six weeks to figure out the target segment is just too long,” Schmitt said.
“We need to provide audience segments that are portable. Advertisers want to define a segment once. Whether it’s first-party data, experiential data, they want to do it once and make it actionable across the ecosystem.”
While the addressable market is growing – estimates are that about 40 million to 50 million homes across the country are addressable – it still makes up less than half of the total TV homes in the country. MediaVest/Spark SVP, director of advanced media Jonathan Bokor said that achieving scale will be critical.
Cadent CEO Nick Troiano said that most MVPDs plan to expand the addressable universe to about 70 million homes by then end of 2017, but scale isn’t the only factor for success. Being able to effectively navigate the different platforms and work flows between agencies, buyers, advertisers and distributors is critical.
“Before we see anything close to $500 million or $1 billion, the silos in the walled garden have to come down a bit.” Troiano said. “Until there is a mechanism to work across operators seamlessly, we’ll never get out of the test phase.”
Troiano said the current consolidation trend in the cable industry will help to an extent because it is an “effort to unify platforms. But that’s just on the operator side, it doesn’t touch the agency side.”
Educating buyers, sellers and distributors also is a big component, particularly around pricing. Because addressable ads can have CPMs that are double or triple traditional ad rates it is important to train advertisers and buyers to focus on the “effective” cost of targeting.
AT&T AdWorks vice president and head of marketing Maria Mandel Dunsche, said that on the surface, advanced ads seem pricier – they can garner CPMs of $30 compared to $10 for linear TV – but when you take into account that only 25% of a typical linear audience is seeing an ad, addressable advertising is more efficient.
“The effective CPM [for a linear ad] is $40, and addressable is $30 and is more efficient,” Dunsche said. “We need to look at the net effective CPM, not just the straight linear.”
AT&T has made a strong commitment to addressable advertising – about 14 million of its 25 million TV homes are addressable, up from 12 million last year. Dunsche predicted that overall, addressable ads will reach about 80% of the country in the next five years.
Bokor added that clients want proof that paying that higher price is more effective, something that isn’t as easy to do as it seems.
“We’re still not there in terms of coming up with a standard calculation of CPMs,” Bokor said. “That’s why results are important, to convey to the client that it’s worth the premium to pay. If you can eliminate waste and reach a target audience more likely to buy your product or service, that makes sense.”