Commentary

If Content Remains King Of TV Advertising, Will Audience Or Performance Be Queen?

  • by , Featured Contributor, April 13, 2017

Fifteen years ago, the online ad industry was at a critical point.

It was just starting to rebuild from the bursting of the dot-com bubble two years earlier. It was fighting for legitimacy among measured media like print, radio and TV. And its product set was just beginning to come together, being largely rebuilt from successful elements of initial ascension in the mid- and late 1990s: ads bought and sold by content adjacency, audience targets and CPM pricing.

But then the best-laid plans for the online ad industry to look like the print ad industry, from which much of it had been modeled, went terribly awry. Performance-based advertising, in the form of paid search and cost-per-click and cost-per-action banners, exploded on the market, led by companies like Google, Overture (later bought by Yahoo), advertising.com, and ValueClick. And those expecting that the future of online ads would be driven by precision targeting of data-defined, audience-based campaigns sold at premium CPMs learned a challenging truth: Marketers only buy data-driven audience-based ads as a proxy to what they really want — sales — and will ultimately only pay according to the results those ads can provably deliver.

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From 2004 to 2008, online ad spend more than doubled, from $12 billion to $25 billion, but it wasn’t driven by the sale of premium-audience-targeted campaigns. Neither was it driven by content campaigns. The digital ad growth in the mid ‘00s was driven by performance advertising — campaigns primarily bought or sold on the basis of the measured performance they delivered. The industry hasn’t looked back since.

Today, two companies are dominating digital marketing and all its growth for precisely one reason: They outperform the rest of the market in delivering measurable ad results at scale.

Why should the TV industry care about this look back into the online ad industry’s history? Because we’ve seen this movie before, and it’s probably going to end the same way.

The television ad industry knows that big change is afoot. Ratings are declining, audiences are fragmenting, digital competition is fierce, and agencies and advertisers are pushing back hard on their CPM increases. Fortunately, however, TV companies have recognized that the future of their ad business will  look a lot like digital’s, which is why many are working hard to develop digital-like, premium-priced, data-optimized ad products. It’s the right move, yet it may not be enough.

Marketers have been extremely willing to pay premium prices for ads placed within premium content when that content is scarce and when the audiences they reach are known and valuable, and no one ticks those boxes like TV. Conversely, however, marketers have only paid premiums for audience-targeted ads when those ads have proven to drive measurable performance: leads, conversions, sales, or other desired business outcomes. For most marketers, buying audiences is just a proxy for buying sales, and is priced accordingly.

Therefore, just as we’ve seen over the past 15 years in the digital ad marketplace, TV media companies who hope to build their futures on audience-targeted advertising had better be prepared to win in a world where it will be bought, sold and measured on performance. The TV ad market is in transition. Its future is going to look more like digital, and that means that king content’s queen will be performance, not audience.

What do you think?

14 comments about "If Content Remains King Of TV Advertising, Will Audience Or Performance Be Queen?".
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  1. Dave Morgan from Simulmedia replied, April 13, 2017 at 11:58 a.m.

    Yes Paula, the more change and the more data involved, the more potential for confustion. However, the more the focus is on the performance of ads - rather than the ingredients that are used to drive it, like targeting, data, etc - it could actually become simpler. In a performance-based TV ad world, it is sales that will be bought and sold, not a confusing mix of ingredients.

  2. Long Ellis from Longview Media Consulting, April 13, 2017 at 12:41 p.m.

    Great piece Dave. I do think that TV can continue to be the best "top of the funnel" advertsiing medium and be valued primarilty as a branding tool. Measuring performance is certainly important, but the reason the CPMs can stay flat or even go up when the ratings go down, is because of the power of big screen TV ads and the reach and efficiencies it can provide with just one spot. 

    Once the audience fragmentation hits a certain threshold and the reach advanatge of TV is significanty reduced, then perhaps the performance issue will become a challenge. The other thing that is somewhat counterintutive is the fact that the more TV audiences go to SVOD services, the less ad impressions advertsiers will have to buy, thus restricitng the supply of national TV inventory. This will cause significant CPM increases because of the lack of places to for advertisers to execute their all important, top of funnel branding campaigns.

    I agree with what you are saying. I just think it will be a long time before traditional TV is judged/evaulated in a completely different way than it is now.   

  3. Dave Morgan from Simulmedia replied, April 13, 2017 at 12:49 p.m.

    Thanks Long. Great points. I agree with you that TV will continue to stand out for its "top fo teh funnel" power both in scale and impact. What will be interesting to watch as data-driven optimizatoi platforms make it more and more attractive to performance advertisers is whether or not brand advertisers will be able to pay the increased prices that TV ads will command as its peformance ROI characteristics drive up TV ad prices, just as they have on platforms like Facebook. As you pont out, viewing shifts to SVOD services that don't carry ads will only excaserbate this issue as more and more marketers fight over a smaller and smaller ad load. Who knows, we may see an end result of consumers recieing fewer, more relevant ads that are better priced and more predictable in performance, just what Joe Marchese of FOX has been evangalizing as the future we should all build for.

  4. Bob Gordon from The Auto Channel, April 13, 2017 at 2:30 p.m.

    Bob Gordon from The Auto Channel, April 13, 2017 at 2:29 p.m.

    when ad professionals gave responsibility for internet advertising to geeks the result has poisened what could have been a wonderful future... 20 years ago I proposed the cot of digital advertising should be analogous to direct mail...at the time a direct mail drop that resulted in positive results would be indexed at around 20-50 cents a response... some car companies were investing as much as 20 bucks in a generated test drive...so what happened? the know nothings pegged digital at a percentage of TV with billions of impressions daily as low as 5 cent CPM...no editorial producer can stay in biz at those rates...when all of the content disappears what will google index?  


  5. Henry Blaufox from Dragon360, April 13, 2017 at 4:05 p.m.

    Dave, Perhaps the key driving factor is your point about scarcity. The excess of demand over supply should keep a floor under TV ad prices. Measurable targeting and results will alter relative value among providers on that framework, especially if metrics reveal large discrepancies between what buyers thought was being delivered and what actually is. But overall demand will remain for the ad time.

  6. Dave Morgan from Simulmedia replied, April 13, 2017 at 4:44 p.m.

    Henry, exactly. The scarcity of TV inventory, which is fundamentally limited by audience and ad viewing time, is why I expect to see the growth of performance marketing on TV to drive up TV ad prices overall. As Bob Gordon points out, cheap performance digital had a different impact on the marketplace, but that's because inventory supply in digital dramatically exceeds supply. It is almost infinite since digital publishers keep adding more and more ad units to each page view. TV doesn't have that issue. Demand for TV ads not only exceeds supply today, but will continue to for the forseeable future, I believe.

  7. Henry Blaufox from Dragon360, April 13, 2017 at 4:55 p.m.

    Thanks for getting back on this, Dave. Always pleased when an industry leader agrees with me. Let's also consider who is responsible for ad performance. An ad can be delivered to the best targeted audience segment, using our defined parameters. But doesn't performance depend on the quality of the ad? If the creative doesn't lead to the deisred reaction, don't blame the targeting. Compare it to other ads in the category delivered to the same audience segment.

  8. Bob Gordon from The Auto Channel replied, April 13, 2017 at 4:56 p.m.

    You are absolutly correct 24 hours can only be 24 hours ... but billions of web pages can become 2 billion overnight...demand for inventory is what it is all about and why the TV guys are now and will always be in the drivers seat, plus of course TV works..

  9. Dave Morgan from Simulmedia replied, April 13, 2017 at 5 p.m.

    Important point Henry. Without question, the creative probably has more impact on ultimate performance of an ad than the media placement or targeting ever can, as does the product or service that is being sold. However, with that as a given - and largely out of control of the media owners - those media owners who are able to maximize placements and targeting for optimal performance will make a lot more money than those that don't, and probably have happier audiences as a bonus.

  10. Ed Papazian from Media Dynamics Inc, April 13, 2017 at 5:08 p.m.

    If the new skinny bundles---YouTube TV, Hulu, etc----succeed, the result will be much higher ratings for the broadcast TV networks, their stations and owned cable channels, which will create more "linear TV" GRPs to buy, not less. Instead of 200 channels competing for average minute ratings the figure could drop to  130-150 nationally and only 35-40 in unbundled homes.

  11. Dave Morgan from Simulmedia replied, April 13, 2017 at 5:13 p.m.

    Ed, I like how that future sounds! It will certainly be interesting to see how the diveristy of new bundles could potentially drive up usage. Certainly, the introduction of more channels and cheaper better TV displays created a lot of incremental TV viewing over the past 10-15 years.

  12. Bob Gordon from The Auto Channel replied, April 14, 2017 at 10:08 a.m.

    do the ad agencies get paid on results, do the producers get paid on performance?...back in the day as a broadcast salesman i always got a kick from protential advertisers who wanted to pay on results by "testing" my station ...the only thing that has changes is that the ad sellers have dropped their pants and are doing whatever a potential advertiser wants...no balls and too much inventory out there... 

  13. Ed Papazian from Media Dynamics Inc, April 14, 2017 at 10:30 a.m.

    Bob, it's the sellers who rule in national TV, not the advertisers. Nobody is "dropping their pants". These "targeting refinements" ,which are based on set usage ratings melded with product purchase stats, stack the deck heavily in the sellers' favor and make their shows seem much more attractive to buyers than would be the case if viewer ratings were utilized. That's why the sellers are encouraging such "audience based" targeting---on a selective basis. They stand to gain larger revrenues.

  14. John Grono from GAP Research replied, April 17, 2017 at 8 p.m.

    Totally agree Henry.

    The first thing I learned when I moved into the media department of one of Australia's largest advertising agencies some 20 years ago was ...

    ... great media strategy and execution can never make a bad ad good, but but media strategy and execution can kill a great ad.

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