Commentary
Where Will TV's Next $30B Come From?
- by Ian Ferreira , Op-Ed Contributor, May 30, 2017
This prediction at first appears to be optimistic. The prices that buyers are willing to pay for TV audiences are well-established, based on more than 75 years of trial, success and failure. Time spent with TV is declining. Most of TV’s current revenue still derives from sales of ads in formats established in the 1940s.
It’s increasingly apparent that TV will need to embrace innovations born from digital ad tech to find its next $30 billion. With measurement standards in flux and pressure on media companies to stretch ad campaigns across media channels, there’s never been a time so ripe for TV’s advertising leaders to embrace innovation.
Where will this growth come from? If we look at the rocket-like trajectory of the digital media industry, it’s obvious what has created more value: infusing campaigns with data to enhance their efficiency.
There are strong indications in the run-up to this year’s network upfronts that digital-fueled ad tech is starting to take a starring role in TV advertising. On the selling side, NBCUniversal, Google and a triumvirate of Turner, Viacom and Fox have announced a renewed focus on data-driven TV advertising innovation.
On the buy side, anecdotal evidence is also surfacing that ad buyers are eating up the new style. NBCU SVP of Advanced Advertising Products Denise Colella said in a recent podcast that its Audience Targeting Platform (ATP) has renewal rates upward of 70%, with many returning buyers doubling and tripling their spending.
For good reason, the TV industry wants to avoid the sins of programmatic digital. Nobody wants to be become ensnarled in controversies over fraudulent placements or mysterious middlemen ad networks taking vigs for nebulous services.
Players in the TV ecosystem are starting to cautiously place their bets. As they do, so it’s evident what they’re looking for from advanced advertising platforms:
1) Automation: Reducing transactional friction should be the technology’s number one goal, period, by eliminating manual steps and cutting out taxes paid to middlemen. A system where inventory is procured with phone calls and emails isn’t really delivering the benefits of automation.
2) Innovation
that generates value: The platform must offer tools and capabilities that make advertising more valuable. There’s no incentive to move to a new marketplace that simply replicates
today’s non-automated transactional processes.
3) Impartiality: Integrity and fairness must be paramount in the marketplace’s design, including ensuring that buyers and sellers can protect their first-party data behind firewalls.
4) Transparency: Buyers must be able to select exactly where and when their spots will run. Buyers are wary of packages of “TV Sausage” that dilute CPMs and ad effectiveness with undesirable blends of premium and less desirable inventory. On the other side of the fence, sellers have the right to know who they’re selling to so they can protect their pricing and avoid channel conflicts.
By standing relatively pat while digital went through the growth pains of its early years, TV had an opportunity to take only the best from digital media for its next stage of growth.
So what exactly is the best of digital media? How will we know it when we see it in a TV ad -ech solution? Two years into TV’s programmatic revolution, we’re starting to see the answer.
Ian, I must take issue with some of your key points. First, the traditional TV leaders---the broadcast TV networks--- are, increasingly, less reliant on ad dollars. In 1980, almost all of their incomes were generated by ad sales however, currently, they derive huge incomes via retransmission fees, profit-sharing deals with primetime show producers whose programs go into the highly profitable syndication rerun market, digital ad sales and, now they are moving into the SVOD/OTT field which can provide a double edged benefit---subscription incomes as well as higher ratings for their shows, thanks to reduced channel competition---which will mean more ad dollars. Also, the networks own very profitable TV stations and cable channels. So their outlook is quite good I would say---mainly because they are no longer so dependent on ratings-driven ad revenues.
Second, you referred to "data-driven" efforts by NBC, Viacom, Turner, Fox, etc.These single seller operations, which, by the way, will probably involve mostly cable not broadcast sales and not necessarily in primetime, utilize a set-top-box TV show rating system, coupled with a marketer's profile of a target group to create an show by show audience value index, which is then applied to the usual Nielsen ratings as the buying currency. However, the fly in the current "Big Data" ointment is the use of set usage as a surrogate for viewing. It's a very bad one and invariably favors the seller over the buyer---which is why the sellers are pushing it.
Third, regarding "transparency"and buyers cherry picking from the sellers' program inventory, this is simply not going to happen for several reasons. One, is the simple fact that the sellers can not allow half or more of their shows to run with almost no ads because they index low, while the other half---the "desirable" shows ---run twice as many ads as they now do---which leaves very little time for program content. So the sellers will continue to offer discounted CPM packages and the buyers, while making channel by channel or program type distinctions, where applicable, will continue to buy this way---even if the transactions are made by computers. Finally, until the bulk of national TV ad dollars are placed brand by brand, rather than corporately, all of this talk about better brand targeting at the buying stage is irrelevant. A corporate buy involving dozens of diverse brands needs a single currency to allow the seller to guarantte audience tonnage. By definition, this must be some sort of "umbrella" demo. There is no way that a seller can guarantee the GRPs for each brand, based on its particular target definition, in a corporate time purchase.
I should also add that on a theoretical basis, I'm in agreement with what you say, Ian,however the practical requirements of fairness to the seller as well as the buyer tend to negate the understandable desire to stack the deck in the buyers' favor.That said, there are ways that upfront and scatter TV time buying could be considerably improved---even under the current system.I have advocated such improvements for years, but can show little for my efforts as there is too much resistance---some might call it complacency----among the buyers, primarily. Scatter buying, in poarticular, which involves about 30% of all national TV ad dollars, is more succeptible to improved targeting methods and this is also true, on a somewhat limited basis, for "spot" or local TV time buying. But that's another story----to be continued----
The payTV business model is impaired. Younger audiences are on mobile and broadband subsidizes the payTV bundle today. Same for the traditional TV leaders. The upfront money is used to pay for content but Netflix and Amazon pay for their own contnet upfront using real-time and location based DATA, not LEGACY data looking back. The transformation for the legacy business models will be brutal. The transformation of legacy ratings without embracing digital technology and Data to drive the business model forward, will be brutal.