Audience-Based TV Is On The Horizon

In 10 years, TV will be bought through audiences, not ratings.  It’s an inevitable fact, but one that is only delayed because the infrastructure of TV runs at a snail’s pace.

There are billions of dollars running through TV advertising, but there are billions more to be made if the audience can be segmented and advertisers can pick and choose who sees their ads.  Its not a difficult concept – a TV can become addressable by recognizing the viewer and making a selection in the set-top-box.  The commercials loaded during the national or local pods can be targeted based on who is in the room.  There will still be some “waste” since more than one person is likely to be in the room, but by adding a simple addressable element to TV you could likely see an increase of 10-15% as a premium for pricing and that translates to hundreds of millions, if not billions, of dollars. 

Of course for this to happen, the set-top-box needs to be updated and the system for queuing up and delivering commercials needs to be updated as well.  It could be as simple as ad-serving (which I admit may not be that simple for you or I, but is simple compared to much of the rest of the web) in that an ad would be matched to an audience and delivered.  There could still be a roadblock option whereby an advertiser could purchase an entire audience, but that could be offered at a discounted price, though still a higher out of pocket cost.  Networks could easily place minimum orders for audience segmentation, maintaining volume of advertisers and ensuring they’re not slicing up the audience too much.  It would also make it possible to institute a true exchange model for the spot market, potentially making it a more automated, higher margin portion of the business.  Automated system for buying TV can scale infinitely and it would even enable the networks and cable channels to package their online with their traditional TV into “surround” packages across devices and platforms.  Sounds cool, doesn’t it?



As a former buyer of both TV and online, I would applaud this kind of move.  The MSO’s are certainly interested in it as well, but it requires two things they don’t like; investment and standardization.  There would be an investment in the infrastructure required to make this work and there would be a need to standardize that infrastructure, which could make it easier for the viewers to switch cable companies.  The single largest challenge for the MSO’s is fighting churn and ensuring their customers don’t switch.  Each time the set-top-box needs to be changed is a chance for a switch to occur, so they try to limit the number of changes.

At some point the lure of money will overcome the fear of change though, and TV will become addressable.  My prediction is the catalyst for this change will occur sometime in the next 4 years and it will be triggered by a flat or decreased upfront.  As soon as TV advertising shows the sign of a revenue plateau, the powers that be will become interested in finding ways to make more money and audience buying could enable that.  TV is still the most powerful medium and I am confident in saying the Internet will not overcome that, but it’s only because within the next 10 years the line will blur between Internet and TV.  If both models are programmatic and addressable, then whom do you approach to purchase the media?  The networks may end up as the most powerful “network” of all.

9 comments about "Audience-Based TV Is On The Horizon".
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  1. Tom Cunniff from Tom Cunniff, September 18, 2013 at 12:24 p.m.

    Cory, I agree audience-based TV is coming. However, I believe that what will actually happen is that TV will escape its traditional box and just become "video on every screen". I predict that when this happens, the traditional supply-and-demand ratio will flip on its head and push CPMs sharply downward. That downward push will accelerate existing audience fragmentation trends and over time will seriously erode TV's ability to deliver mass audiences at scale. TV won't go away (in the history of media, no medium ever really dies), but it stands to shrink significantly in importance. This will be incredibly problematic for major advertisers who rely on TV to drive sales. I predict that in short order we will be faced with a fascinating question: when TV's ability to drive mass reach begins to collapse, what combination of technologies and publishers will be able to create an workable alternative?" (P.S. I'm not rooting for this to happen to TV, nor do I think it's necessarily a good thing. But I find it increasingly difficult to envision a scenario in which this shift does not happen.)

  2. Tom Kuhr from Frequency, September 18, 2013 at 1:47 p.m.

    This is the future, for sure. But I don't agree that TV won't be overcome by the internet, as Tom C points out. The internet is already setup to deliver both contextual and targeted advertising, and if this is really what networks will move toward, the fastest, easiest and least expensive thing to do is harness that, not create a separate TV-only adserving system. Networks will still have an ad sales force to sell that inventory, but the underlying technology is already shifting.

  3. Christopher Sanders from The Ingredients Group, September 18, 2013 at 2:41 p.m.

    Great article Corey (as always).

    Your main point about the existing TV infrastructure is very true. In 1996-2001 I worked at companies like Sony and Philips where we were the component suppliers or "OEMs" for companies like TiVo and DirecTV. We had ideas then for similar ad infrastructure, targeting capabilities and features that are just now being seriously considered or implemented into the market. Your 10 year horizon may be aggressive.

    "Cord Cutting" I think is an important consideration in this discussion. For the time being, HBO Go, Showtimes app, Hulu, Netflix are all presenting great reasons to not have classic connections to TV content. Sports I believe carries the biggest inflection point. Once sports provides al of of access through "IP solutions" (and some models are already being tested), then I think you'll see more shifts and changes in the TV infrastructure.

  4. Claudio Marcus from FreeWheel, September 18, 2013 at 3:41 p.m.

    I respect Tom Cunniff's experience, but his scenario of a collapse of the TV market is not likely to happen for as long as TV remains the most dominant form of video viewing. According to Nielsen's latest Cross-Platform report, the top Quintile (20%) of US TV households that stream online video, watch 14 times more online video than all US TV households, but even this Top Quinitle still watchs 9 times more traditional TV. Consumption of video on Smartphones and tablets is rapidly groing but still remains tiny relative to TV viewing. The combination of TV's popularity with all sorts of audiences (even the digirati), addressability and audience based targeting, have the potential to strengthen the power and value of TV advertising.

  5. Tom Cunniff from Tom Cunniff, September 18, 2013 at 4:16 p.m.

    Claudio, I'm a long-time fan of you and of Visible World. For a long time now, I held the exact same POV as you about TV. But I am now seeing signs of a coming shift that I think will be unstoppable. Major factors are fragmentation (shrinking audiences, even for the most successful shows); declining quality in ad-supported TV (Kardashians) as non-ad-supported quality rises (HBO, Netflix); the increasing ubiquity of affordable tablets; and the inexorable rise of programmatic. All the current data absolutely and inarguably supports your POV. But I think the longer-term trends are aligning in ways that will make the changes we've seen to date look trivial. Of course, I could be wrong -- or premature. In any case, I'd love to get a cup of coffee (or something stronger) and debate this :-)

  6. Darrin Stephens from McMann & Tate, September 18, 2013 at 4:51 p.m.

    Hey, sounds like the bold prediction years ago that the 30 second spot is dead. Whatever happened to that guy? Oh yeah, he went to a company that tried to sell audiences, not ratings and it failed. It wasn't that it was ahead of its time, it's that it was a cure for which there is no known disease. It's hard enough to get a single advertiser to agree to what programs to buy, let alone a herd of them try to share the audiences to these spots (still a logistical and in some cases a legal nightmare). Check with me in ten years, not only will the 30 second ad still be around, but so will the current method of buying GRPs.

  7. Tom Cunniff from Tom Cunniff, September 18, 2013 at 5:41 p.m.

    Darrin, the challenge I had in seeing this differently was that I had two core assumptions that I now see are flawed. The first was that TV simply could not weaken because marketers are so reliant on it. And second, that digital would have to be better than TV for marketers to switch. I now see that TV can weaken, even if we desperately want and need it *not* to do so. If that happens, marketers will turn to whatever the next best tool is -- whether it is objectively "better" or not. If TV's ability to deliver mass audiences at scale is undiminished in 10 years and digital has not made progress, your predictions will be correct and mine will look foolish. On balance, my opinion is that change is more likely than stasis. Time will tell.

  8. Ameer Youssef from R/GA, September 20, 2013 at 1:48 a.m.

    My struggle has always been in understanding why this hasn't happened yet. Is it really primarily because MSO's don't want to give people the opportunity to switch cable providers? Somehow that reason doesn't quite feel strong enough. I know inertia is powerful, and being the first to try something like this is perhaps risky. But it feels like such a no-brainer.

    Sometimes I wonder if marketers really want this capability. I don't quite understand the forces at play in TV media buying, but I wonder if there isn't some constituency that would see this as a bad thing.

  9. Christopher Sanders from The Ingredients Group, September 20, 2013 at 1:48 p.m.

    sorry this is from a competing media outlet but pertinent to this debate:

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