June 3 - 6, 2024
Commentary
OTT Is The Future But We Must Act Now To Avoid Digital Mistakes
- by Oleg Korenfeld , Columnist, July 17, 2018
About 40% of US households use OTT and it’s not just Millennials, according to eMarketer. They may have been the first to cut the cord, but Gen X closely followed. According to GfK MRI’s recent “Cord Evolution” study, the average age for a cord cutter is 43.
If you binge on Netflix, you know it’s an ad-free service. In fact, about half of the total OTT consumption — Netflix, Amazon and HBO — doesn’t have ads. But the good news for advertisers is that 4 out of the top 10 OTT services do provide advertising (Hulu, MLB.TV, CBS All Access, Sling TV).
So as OTT grows overall and linear TV declines, we must lay the foundation for how we engage with this quickly growing ecosystem, and try not to retrofit it into the old way of buying and selling TV. Sure, both connected and linear TV involve sitting on a couch and watching a flat screen. But for marketers, that’s where similarities end.
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Learning from our Mistakes
First, let’s review some ad tech history. Look at what happened with mobile. The year of mobile actually went on for quite a few years. As a buying community, we made a big mistake in assuming that mobile would work like desktop. The ad tech community was not very proactive in telling us that we were wrong because incentives were not there. Initially, we did not account for the lack of cookies as consumers chose apps over mobile web browsing. Since all ad tech at that point was built on only using cookies, it simply did not work.
Setting Expectations
Additionally, general engagement and purpose for a mobile device was completely different from a desktop. Shrinking desktop banner ads to thumbnail sizes to fit mobile screens was (and still is) a horrible user experience. This slowed down adoption because nothing was being measured in a way that a buyer could usefully understand. It took the industry years to catch up and start building more mobile focused platforms. Understanding the similarities and differences here will allow us to set appropriate expectations and speed up meaningful adoption of the OTT channel.
Accurate Targeting
Next thing to consider is the importance of audience targeting and how to apply it to OTT. TV may still be the most powerful advertising tool in the world, but accurate targeting is more cost effective.
When something more accurate is available, why ignore it? Linear TV allows targeting only by age and gender based on small sample panels. OTT is much more accurate because it uses the digital understanding of a user. Of course, we should not expect the micro-segmentation we get from desktop and mobile just yet. In an effort to convince the TV buyer, we need to first deliver on efficiency through audience accuracy in an apples-to-apples comparison (i.e., age and gender). Only then should we layer on additional data points.
Measurement
Since OTT uses the same tech as desktop and mobile, we should also expect to measure it in the same way. Why apply measurement methods that were wrong to begin with? Now that we have something more accurate, less media needs to be bought to get to the same KPI.
Taking Programmatic to the Next Level
Lastly, because of technological similarities between OTT and other digital channels, programmatic will play a huge role in OTT. It’s safe to say that anything that can be automated, will be automated. To paraphrase Jeff Green, CEO of The Trade Desk, everything we have done in programmatic up to this point is just a dress rehearsal for what’s to come as OTT adoption grows.
OTT is here and it’s the future of TV. It’s time we learn from our mistakes, set realistic expectations, evolve our method of planning and buying, and lay the foundation as adoption and scale grow.
4 comments about "OTT Is The Future But We Must Act Now To Avoid Digital Mistakes".
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Oleg, you make many very valid points. I should point out, however, that It is entirely possible to target viewers in linear TV buys using income, race, geography and other demos as well as factoring in product users and even brand buyers---in the latter two cases employing surveys like MRI or Simmons as refinements to the basic Nielsen demo ratings. This is not a limitation of measurements. Rather it is a function of too many advertisers pooling all of their brand budgets into "corporate buys" that strive for the lowest CPM, thereby making individual brand targheting virtually impossible.
Since sellers will not guarantee audience delivery on a per episode basis, but only in aggregate for an entire schedule---usually on a quarterly basis----the issue of Nielsen sample sizes is not nearly as important as people think. A panel of 100,000 people is more than adequate for measuring the quarterly audience delivery of a schedule that generates hundreds or thousands of GRPs. Moreover, at least Nielsen gets specific members of a household to signify that they are "watching" a particular episode of a show---if not any individual minute of content---which is a far better targeting indicator than knowing only that a device was activated.
I agree that OTT has great targeting potential---the problem is can it do a better job of identifying who is watching and will advertisers free more of their brands to go it alone and buy their own media---or, at least part of it?
Who do you target/allow to see real estate ads ? employment ads ? You narrowscope these categories and others and other more serious problems arise.
Ed,
You're correct that it's possible to inform linear TV ad buys using characteristics beyond the usual gender and age. However, so-called indexed linear buys are still program-based, unlike OTT buys which are audience-based. There's a huge difference in efficiency between the two.
For example if you're looking to target consumers in the market for a luxury car - a group with about a 2% incidence - you can make a linear TV buy that cobbles together a collection of shows disproportionately watched by luxury car intenders. Even if luxury car buyers are 10x more likely to tune in to those programs than the typical consumer, ~80% of impressions still miss the target. Better than an age/gender buy, but far less efficient than an OTT buy which can deliver 100% of impressions to the target spec.
David, I doubt that you would find any "linear TV" shows that index as high as in your luxury car example no matter what source you use for profiling. My guess is that if 2% is the target universe you might make a buy where 3% of the audience is the real target---maybe 4%, but that's about it. As for OTT, my question is simply this. Granted that you can direct ads to specific homes---unlike "linear TV"--- how do you determine that any individual home is "in the market" for a luxury car except by profiling by area stats like household income? Say the most likely buyers are in the $250,000 plus income group and a particular zip code or finer break has 20% of its homes in this category compared to only 5% nationally. In such a case aren't you assuming that every home in that area is a target? If so, you are misdirecting 80% of your weight to non targets---which is better than linear, but not 100%. Also, unlike "linear TV" where Nielsen's panel members indicate individually whether they are "watching", how does OTT know who in the househild is reached by a particular show---even if it indexes above par in household tune-in in a given area? By the way, I'm not against "addressable TV" and I believe that OTT has very good potential for brand by brand targeting---but I don't buy the "no waste" part of the proposition.