Local television stations are at an intriguing crossroads right now.
Seeking advertisers that are putting more money in digital, rather than OTA, television needs to embrace data that will provide advertisers better decision-making tools to prove their value in reaching large audiences. This year, a lot is at stake.
It could be the watershed year when midterm election advertising migrates more to online and social channels, rather than traditional local television programming. That need not be the case. Viewership of local TV is not waning, if one considers multiplatform viewing.
However, it’s the cost and value proposition stations need to address in order to remain competitive in the enhanced digital environment.
The data speaks for itself. Verticals are increasing their ad spend on online/digital assets as they either hold steady or decrease their exposure with traditional media. Retail, financial services, telecom and the other biggest spenders are all shifting a portion of their advertising online, some more rapidly than others.
Advertising on linear TV in the important automotive sector is off a significant 2% to 5%, with dealers moving more of their dollars to lower CPM digital advertising, such as “real-time” mobile advertising, and less traditional media advertising. It’s a trend we’ve seen impact print and radio over the last several years — now it's slowly creeping to local television.
In general, the TV industry is struggling to grow linear advertising revenue and, in the absence of new political money, station and network owners are expressing increasing concern this heralds a longer-term trend.Online/digital advertising will grow at a 10.3% compound annual growth rate through 2022, based on our projections, with much of this growth related to mobile advertising (15.2% CAGR), as geo-targeted advertising offers, among other things, point-of-sale advantages. Mobile advertising will account for almost 20% of all local advertising by 2022.
Print media continues to contract and TRCO1 inches up by 1.5% annually.
NBC research also indicates that younger viewers are changing their Olympic (and overall) viewing habits. However, rather than abandon NBC programming in total, many were just watching preferred NBC programs on their schedules. The network has been gathering and combining statistics from their other viewing outlets, such as NBC.com, the NBC app, Hulu and other video on-demand services.
In our annual SMB advertiser-research survey, we track the shift to digital for small business TV advertisers. Those TV-advertising SMBs surveyed increased the percent of their budget going to digital to over half (52.4%) in 2017.
This move comes despite
their acknowledgement that TV advertising has one of the highest ROIs for those small businesses. An opportunity for TV broadcasters, as revealed in our research, is that over one-third of small
businesses that advertise on TV also say they purchase social and video advertising through their television rep, highlighting the potential growth from cross-platform selling and advantage of having
multiplatform-trained account execs.
The need to sell digital more aggressively becomes clearer when you examine TV’s over-the-air current share of local advertising — a 10% to 15% range in most markets, with a nationwide average of 13%. Just 0.7% is attributable to online/digital ad revenue for TV (compared to 2.9% for newspaper online), resulting in a combined share after rounding of 13.8%.
This means that more than 86% of local advertising is going to other media. In the absence of aggressive action by TV broadcasters, this will increase.
Where can advertising revenue growth come from?
Currently, online/digital advertising represents about one-third of all local advertising in the U.S., or about $50 billion. To grow, TV broadcasters must develop approaches to take share away from the approximately $80 billion being spent on traditional media, while expanding its small share of online/digital advertising.
Other traditional media may be more vulnerable in certain verticals and business categories and a targeted effort by TV broadcasters can result in increasing share of wallet.
To accomplish this effectively, TV broadcasters must have a keen understanding of the local spend by media in their market and in key verticals and business categories. With an increasing number of players looking to compete in this once-limited field, big data and data science is becoming a requisite, as opposed to a luxury.
Broadcasters need accessible, accurate information at their fingertips for forecasts, training, knowledge and success. Necessities in the ad world of TV operations in 2018 and beyond include an integrated marketing plan in a data-focused culture. It must include a commitment from the top, an engaged staff and the tools that provide essential data and analysis.