Commentary

Unpacking Omar Sheikh's $100B Call On Future Of Data-Targeted TV Ads

by Dave Morgan , Featured Contributor, May 11, 2017

Two weeks ago, Credit Suisse’s Omar Sheikh, one of the top media analysts on Wall Street, made a BIG call on the future of TV advertising. He believes that the introduction of data-driven targeting into conventional linear TV advertising -- where spots are bought and sold on the basis of the specific people viewing them and the measured business outcomes -- will generate an incremental $100 billion in annual TV advertising sales in the U.S. by the year 2030.

Since I spend a lot of time in the world of targeted linear TV advertising, a lot of folks have asked me for my views on this event, so I thought it would be fun to use this column to unpack the report for folks who haven’t had a chance to read its 100+ pages. Here are some of its highlights:

It’s a big call, well-researched and supported. While other analysts in the past have written about the potential of various advanced TV ad technologies to help TV companies better defend their market share in the face of growing competition from digital advertising, Sheikh’s report is the first to dig deeply into one of the techniques -- data-targeted linear TV ads -- and analyze its specific impact on the value that TV companies can potentially unlock from their audiences and ad inventory.

For support, he cites lots of respected industry sources as well as proprietary research fielded directly from the CMOs of close to 100 advertisers representing $21 billion in annual marketing spend.

Most of the $100 growth in TV ads comes from call-to-action advertising. The world of advertising is becoming increasingly performance-focused, as data-driven digital systems both make it now possible for all media to be performance-measured, and digital marketing channels like Google and Facebook make targeting and ROI reporting table stakes to grow budget from advertisers. For decades, industry visionaries like Jack Myers have predicted that media companies would eventually add better closed-loop capabilities and take share from “below the line” marketing channels like telemarketing and promotion. Sheikh says that time is now upon us.

Development of targeted TV ad platforms and OpenAP catalyzing the market. Sheikh’s report recognizes that very little is spent today on targeted linear TV ads, but many marketers are ready to jump in. He references interviews with CMOs who reveal that they spend virtually nothing on this today, but 40% intend to try it over the next year.

He points to the development of targeted TV ad platforms and the announcement of OpenAP, particularly, as critical catalysts for jump-starting the market now. OpenAP, announced several weeks ago, is a consortium created by Turner, Fox and Viacom to facilitate cross-network audience-based TV ad buys.

He didn’t use the word programmatic. This wasn’t about trying to shoe-horn a digital square peg into a round hole, which so many have tried to do by hoping that programmatic digital ad systems would suddenly open up TV inventory for last-minute buying at cheap rates.

Nope. This is all about applying deep data and predictive analytics to make TV ad buys as predictable, provable, performant and integrated into the marketer's enterprise as search and social ads are today.

Should be lots of mergers & acquisitions. It’s not surprising that a bank analyst would predict that technology disruption would drive more M&A, though it certainly makes sense here. Media owners will need to be part of companies that have lots of tech, data and ad insertion capabilities to be able to exploit this $100 billion annual opportunity. That certainly seems consistent with AT&T buying Time Warner. It certainly makes sense that we’ll see more deals like that.

What do you think? Want to decide for yourself whether there's a $100 billion annual opportunity in targeted TV ads in the U.S.? Read the report for yourself.

ad technology, audience targeting, data, data management, programmatic, tv

17 comments about "Unpacking Omar Sheikh's $100B Call On Future Of Data-Targeted TV Ads".

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Long Ellis from Tetra TV, May 11, 2017 at 6:40 p.m.
Great read Dave. Love this.
Reply

Dave Morgan from Simulmedia replied, May 11, 2017 at 7:08 p.m.

Thanks Long!

Ed Papazian from Media Dynamics Inc, May 11, 2017 at 7:11 p.m.

Dave, we have to bear in mind that about a third of national TV ad dollars are placed by advertisers who care mainly about program environment and/or image, not finer or more efficient targeting. These are mainly found in news, sports and primetime shows and they are willing to pay much higher CPMs to be there. We are talking about beers, financials, techs, corporate image, travel, fashion, luxury cars and other categories.

We must also note that until the current upfront system is broken, brand by brand targeting is not going to happen at the buying level for 70% of the national TV ad spending.

Finally, it should be evident to anyone who studies the data that most---not all, but most---of the broadcast TV network shows are fairly similar in their demos----heavily older/low income. Thus, there is not the huge degree of selectivity in targeting capabilities that is assumed for much of this fare. Which leaves you mostly with cable, where program content is very diverse.

My point is that while better targeting can work to some degree---mainly in the scatter market and for cable----it may not be possible---or needed for many of the medium's ad spending----only some of it.

Dave Morgan from Simulmedia replied, May 11, 2017 at 7:31 p.m.

Very good points Ed. Given the fact that 75% of all TV viewing today occurs on episodes of shows with national ratings below 0.5, there is pently of diversity of spots to select from to build performance-focused TV ad campaigns. For example, no shows rated 0.5 or better today have an audience composition of Big Box Retail Shoppers indexing at 150 or better. However, 8% of shows rated below 0.5 have those shoppers at a 150 index or better. Systems that can find those needles in the haystack and aggregate them by the ton for marketers will drive this future.

Ted Mcconnell from Independent Consultant, May 11, 2017 at 11:40 p.m.

Nice Dave. And its not only not implausable, it seems likely, but the sensability does not take 400 pages.

All you have to do for an incremental 100 billion is roughly double the current average cpm. How could targeting do that? Its not complicated.

If you halve out-of-target impressions at the same cpm, you double the roi. But then, of course, you have more impressions than you can sell, all things being equal. However, targeting allows smaller buyers to buy just what they need, so you make up the difference with fill rate.

Think about a Walmart. There are 10's of thousands of Brands. Only a small portion can afford to advertise on TV ... because most brands know that their target is a person, not a demographic. Enabling all Brands to pay only for access to their target, and no others, will bring them to the TV media marketplace. As you know, that's exactly what happened with digital.

Data can halve waste, double ROI, and enable access to media for those who did not previously find it productive. It might come at the expense of digital to some extent. In any case, its no stretch to think that TV can double their cpm by introducing radical quality improvements. Even today, in addressable TV, pinpoint targeting gets triple the cpm, and advertisers happily pay. Why? I guess it works.

Dave Morgan from Simulmedia replied, May 12, 2017 at 4:59 a.m.

Thanks Ted. No one is better at making the seemingly complex simple. Well said!

Ed Papazian from Media Dynamics Inc, May 12, 2017 at 7:40 a.m.

I'm afraid that it's really a lot more complicated than the theorists recognize. Most TV shows target marketing undesirables---old adults and those with low incomes. Which leaves, perhaps, a third of TV impressions to carry the main weight of higher CPMs caused by better targeting. Even if the sellers coooperated----very, very unlikely---- they could not accomodate the huge influx of ad clutter on their relatively few desirable shows---nor would viewers tolerate it. Result: buyers would have to accept bundled schedules as before and the overall effect of better targeting would be greatly mitigated. As I noted, the idea makes sense for some advertisers and sellers---especially outside of the upfront, corporate buying scramble. But it cant be applied to most, let alone all, of "linear TV" until younger and affluent consumers greatly increase their viewing time, brand by brand buying replaces corporate buying and the sellers jump fully on the bandwagon.

Dave Morgan from Simulmedia replied, May 12, 2017 at 7:59 a.m.

Ed, I completely disagree. Just because shows have small audiences doesn't make them undesirable. I think that one of the worst things the TV industry has done is to place undue influence on "average rating points." Certainly, English Premiere League draws relatively small audiences, but no luxury advertiser would come them undesirable. Further, there is no empircal evidence to suggest that small shows are watched by old people and those with low incomes. Actually, in many casees, it's quite the opposite. Large, prime-time shows tend to have the heaviest Tv viewers, which skew older and lower income. The smaller networks deeper into cable tend to have more lighter TV viewers in concentration (if you know where to find them), who are universally younger and higher income. Makes sense, since those channels and typically in premium tiers that add a lot to the monthly cable bill. What is hard is buildng optimial plans that can deliver cost-effficiently Erwin Ephron's 3 R's, Reach, Relevance and Recency. With 250,000 different TV ad spots to consider each day, the permutations of combinations available over a two month time period represent more potential outcomes than there are atoms in the universe (true, not an exaggeration).

Ed Papazian from Media Dynamics Inc, May 12, 2017 at 9:23 a.m.

Dave, I completely agree with you and was not referring to program audience size in my comments but, rather to the totality of TV's quality GRPs. There simply are not enough of them to support the idea that the medium could double or more its ad revenues by switching to better targeting, thereby garnering gigantic CPM increases on virtually an across-the-bosrd basis. That simply wont compute.

Dave Morgan from Simulmedia replied, May 12, 2017 at 10:08 a.m.

Ed, got it. The core thesis is that the total amount of GRP's accoss all of TV is still plenty and that convertising wasteful GRP's into predictable, highly-performant, much smaller TRP's allows media owners to chop up blocks of modestly priced GRP's into much higher priced TRP's. The prices for these TRP's will be much, much higher since not only will they deliver predictable ROI, but they will be accessible and of value to many, many more marketers, so the demand side of the overalll TV market will go up dramatically.

Ed Papazian from Media Dynamics Inc, May 12, 2017 at 10:18 a.m.

Agreed, Dave. My point simply was that the potential ad revenue and targeting efficiency benefits do not project to all of "linear TV" and certainly not the broadcast TV networks, because of the various factors cited. This does not preclude a more scientific approach by certain advertisers---or even genres of advertiserr---as well as certain sellers---from benefitting greatly. I just can't come close to buying the $100 billion claim. It sounds great but doesn't compute.

Leonard Zachary from T___n__, May 12, 2017 at 10:20 a.m.

Ed you make TV appear to be a dying medium with absolute helplessness in any integration of technology improvements. Perhaps video on demand and mobile platform are not within your grasp.

Ed Papazian from Media Dynamics Inc, May 12, 2017 at 11:07 a.m.

LZ, TV is far from dying, but it is evolving. What you fail to understand is that the current digital way of doing things---and it, too, is about to change radically--- is hardly a template for improving "linear TV" and, particularly, how time is bought and sold. What I'm poining out is that magic "solutions" and totally theoretical ideas, without any foundation in reality, will fall of their own dead weight, regardless of how tantalizing they sound at first blush. What Dave is doing---and he and I probably are in disagreement on some of the actual applications of the data---is a far more practical approach---for those advertisers and sellers who wish to break from the established and, in my opinion, increasingly outmoded practices that have us bogged down today, with"yesterday thinking".

Leonard Zachary from T___n__ replied, May 12, 2017 at 1:38 p.m.

Ed are you referring to traditional Nielsen ratings??? Finally we agree.

Ed Papazian from Media Dynamics Inc, May 12, 2017 at 3:07 p.m.

No, LZ, I'm not referring to Nielsen ratings, but to how they are indexed to indicate a show's targeting capabilities. In any event, I'm mostly with Dave on this one, as I said.

Dave Morgan from Simulmedia replied, May 12, 2017 at 3:52 p.m.

Also to be considered is that it's not just about target audience indexing, but unique share of voice. To maximize performance of TV campaigns, you need to index every target audience member by their medcia behaviors rather than indexing shows by their audience composition. Otherwise, you end up buying lots of high inex shows and ending up with lots of frequency against the same people rather than target audience reach maximization, which is what you really need to maximize performance.

Ed Papazian from Media Dynamics Inc, May 13, 2017 at 3:13 p.m.

Good point, Dave.