Commentary

Juggling Moving Targets

Achieving cost-effective reach in the face of the sieve-like migration of audiences away from linear television is a core challenge for media buyers.

The quest for solutions that integrate and optimize the unsurpassed reach of linear TV and the growing but fragmented digital, video and OTT platforms — in the context of real campaigns driven by real marketer objectives — is a real balancing act. It requires tracking continually moving audience targets, as well as continually evolving audience data and metrics options. And it’s only going to get more complex as the shifting continues.

Consider some of the stats and insights presented for our digestion and analysis over the past few days alone.

In its latest “Global Entertainment and Media Outlook,” for 2016 to 2020, PwC projects that Internet advertising spending will overtake broadcast television spending for the first time next year, with the Internet projected at $75.3 billion and broadcast TV at $70.4 billion.

Still, the analysts stress that broadcast TV advertising “has responded fairly robustly to digital disruption” and projects a compound annual growth rate (CAGR) OF 3.2%, resulting in its ad revenue rising from $69.9 billion in 2015 to $81.7 billion by 2020. Internet advertising’s 9.4% projected CAGR would drive its revenue from $59.6 billion in 2015 to $93.5 billion in 2020.

The fastest-growing segments from the consumer spending side include Internet access (projected to grow from $140.7 billion this year to $181.7 billion in 2020 in the U.S.) and TV and video (projected to grow from $122.7 billion to $124.2 billion in the same period). Within TV and video, subscription streaming services’ growth is expected to be most robust, rising from $7.4 billion this year to $10.4 billion in 2020.

PwC sees relatively flat growth for pay TV. But with OTT and streaming via the Net bringing in new revenue, pay TV will still be the largest video segment, rising from $101.8 billion this year to $102.3 billion in 2020. In contrast to 0% growth projected for pay TV subscriptions (with demand for cheaper content bundles expected to continue), subscription video-on-demand and transactional VOD revenues are expected to grow by 10% and 8%, respectively. OTT/streaming subscription VOD revenue is expected to rise from $6.4 billion in 2015 to $10.4 billion in 2020.

But with all of that, PwC’s analysts still expect a “continued evolution” toward multichannel and digitally enabled viewing, rather than an abrupt shifting of audiences or advertising budgets.

Traditional TV Usage Flat
Meanwhile, during MediaPost’s TV Insider Summit this week, Luke Stillman, VP of digital intelligence at Magna Global, reported that overall media usage has topped out at about 90 hours per week; that traditional TV usage has been flat (32 to 33 hours per week) for years now; and that live TV consumption is expected to decline from 23.6 hours per week in 2014 to 18.9 by 2020.

OTT set-top units are expected to double, to 168 million, by 2020; and addressable TV households across cable, satellite and telco MVPDs will increase from 35 million to 70 million, projects Magna. And revenue from addressable TV buys, estimated at $300 last year, is projected to rise to $470 million, or 1% of TV spend, in 2016.

Turning to the results of the latest media agency executive polling by Strata, we learn that 71% are reporting increased interest, versus a year ago, in using video sites like Hulu and YouTube. But at the same time, more than a third are unsure about the ROI for online video advertising — and TV remains the top medium of choice among agencies.

And according to newly announced research from Standard Media Index (SMI) and RMT analyzing media spending shifts and sales results among 100 major advertisers from Q1 2014 to Q1 2016, those that had previously shifted spending to digital but then shifted spend back to TV, over a two-year period, saw “significant spikes” in sales. That included three CPG companies that saw a combined average sales gain 4.68 times the incremental TV ad spend after they switched dollars back to TV.

The results, say the researchers, build on recent reports that many advertisers that had reduced TV commitments in favor of digital are now reversing that strategy, citing declines in ROI.

On the flip side, Omnicom chief research officer Jonathan Steuer said during the TV Summit that if the traditional TV industry doesn’t catch up quickly to the OTT video services starting to offer solutions with targeting well beyond age and gender demographics, they will get “drowned out” by OTT over the next three to five years.

And in another panel, executives were bluntly asked if traditional television is going to die. Oscar Garza, global director of programmatic at Essence, noted that toddlers today are able to use their parents’ mobile phones to independently find and view videos online. Logically, he said, kids who are using YouTube, Netflix and other online options at such tender ages simply aren’t going to be inclined to watch traditional TV or pay $120 a month for pay TV as they grow older.

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