Commentary
Universal Addressability: Not Easy, But 'Within Reach,' Concludes New White Paper
- by Karlene Lukovitz @KLmarketdaily, September 6, 2019
Advertisers are clamoring for a world in which it’s possible to target ads by household across all TV platforms and devices, including all live linear TV inventory.
But with so many players and differing platforms, technologies and standards, getting all of the pieces in sync can seem overwhelming.
The good news: One expert who recently spent a year studying what it would take to achieve universal addressability has concluded it’s not only possible, but “within reach" -- if the players involved agree to cooperate in a few critical areas.
That may sound like a big “if,” but “the promise of addressable TV advertising is so great that the hurdles are worth tackling,” says Tom Morgan, principal, Mediad.tv, a premium internet television services development consultancy that works with clients based in a variety of traditional and nontraditional TV platforms.
Morgan, whose experience in digital and next-gen TV includes having served as CEO of Net2tv and chief strategy officer of Move Networks, has summarized his analysis in a white paper called “The Three C’s of Addressable Broadcast TV.”
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Morgan is quick to stress that his study is focused exclusively on the front end of this issue, meaning the technology and standards.
“In my view, the business-related issues, such as inventory control, profiles and sales, may represent tougher challenges than the technology issues,” Morgan tells ATV Insider. “But I wouldn’t presume to get into those. What I’ve done is lay out what needs to happen on the front end to turn a bunch of walled gardens into a ‘federation of states’ capable of delivering addressable reach at scale.
“TV is all about scale, but right now, about 80% of the inventory isn’t addressable,” he adds. “Having the scale capability in place first is critical to realizing addressable’s revenue and growth potential.”
Morgan says that, given mounting advertiser demand, MVPDs already realize the need to cooperate on the systems, tech and standards end, and are showing increasing support for universal addressability. He also points out that smart TV OEMs are likewise moving to support such functionality.
“Suddenly, management of addressable TV has become an industrywide issue,” he notes.
Since addressable TV is already a reality for fixed one-minute local avail breaks in cable networks, “the technology associated with delivering addressability at the household level has already been proven,” Morgan points out.
“However, scaling this business to empower all types of TV ad inventory will involve some more advanced approaches to controlling which ads are enabled, how the insertion process is managed, and how the targeted ads are stored on the smart set-top box, smart TV or other TV device,” he sums up.
He identifies three core challenges that must be addressed (so to speak) to expand addressable to the full inventory:
*Establishing
business relationships among the broadcasters, cable networks, syndicated programmers and addressable smart TV distributors and smart STB-capable MVPDs.
*Establishing necessary signaling to enable the seamless replacement of the underlying broadcast ads.
* Establishing adequate reporting, measurement and audit capabilities, so that there is transparency and trust in the system.
“But most important, this emerging industry needs to coalesce around some open standards that allow for scale, cross-platform consistency, measurement and yes, increased ARPU (average revenue per unit),” Morgan stresses.
“The initiatives supporting ATSC3.0, the Nielsen/Sorenson ACR efforts, and Project OAR need to support a common approach to control, clock and cache — what I’ve dubbed ‘The Three C’s.’”
These groups are “all looking to tackle the exact same problems from a logistics standpoint, and if they want to compete in ad management or measurement, then fine. Just don’t logistically fragment the industry before it gets off the ground,” Morgan urges.
“The best bet is an open-standards approach based on full integration and signaling from the inventory owner to the smart device,” he writes. “How different vendors solve specific implementations is not the issue, and nothing here implies that any vendor cannot build a standards-based solution.”
It’s time for all parties to “start rowing in the right direction” he concludes — adding that he’s confident that once the technical scale capability is in place, media owners will come to agreement on business-side models that open up addressable’s potential for advertisers.
While it’s not feasible to get into all of the specifics that Morgan clearly lays out (in a way that non-techies can understand) in the paper, I would certainly recommend checking it out — and would hope that some of you will take a minute to comment here after you’ve given it a read.
The white paper can be downloaded here. A full report version is also available through analyst group TVRev.
Karlene Lukovitz is editor of MediaPost's "Digital News Daily" and writes the weekly "Video Insider" and "Advanced TV Insider" columns. You can reach her at karlene@mediapost.com.
Karlene, I waded through this highly theoretical tome and I must say that the prospects for implementing such a plan seem ----to put it mildly---are dim. Sure, one can speculate about the technical process of sending specific commercials only to targeted households---sounds fine, doesn't it----but how would such an operation work? Say that a broadcast TV network normally sells 10 mminutes of commercial time in one of its one-hour episodes. Under the proposed system, advertisers would not buy this time nationally, but on a home by home basis. And, most likely, most advertisers would prefer to target younger and/or more affluent homes---certain product categories excepted. So there would be a very high demand for, maybe, 35-40%%of the network's viewership, but little or none for the remainder. How would the network's prices be adjusted to account for this? That's easy. They would be far higher for the more desirable homes and much lower for the older/lowbrow homes. As a result, advertisers who, we are told, are clamoring for this "addressable" option to become "universal" would be charged so much more for their "addressable" exposures that this would probably outweigh any sales lift benefit. Moreover, by ignoring the large blocks of older and lowbrow homes---the "waste" coverage---the advertisers would, in effect, cease to advertise to such homes. Is that a smart idea? Such homes may index below par---like 85, rather than 100---but they still buy and use products. Currently, a TV brand hits such homes more often than might be desirable, but under the proposed ideal system, they would be chronically "underdelivered" in terms of reach and frequency---or not reached at all.
I'm not even going to bother to make a big fuss about the fallacy of targeting homes rather than viewers, nor will I belabor the point about major national advertisers buying 75% of their national TV time on a corporate, not a brand by brand basis. Until that changes, you can forget about finely tuned targeting---and, by the way, how does an advertiser determine which specific homes are really the prime prospects anyway---by profiling? Is that an ideal method? I realize that these and other issues are usually ignored by the theoreticians-----but that's what wrong with their theories. As a rule, they simply can't be implemented and are impractical.
Ed: The reality is that what is being discussed here is not theoretical, but rather involve major efforts by the broadcast & cable networks to open up addressable for more than the existing MVPD Inventory. The point of the article is how to minimize the silos that are appearing, and help the TV buyer buy addressable with scale and minimal "friction." I tried to write the article in English for the non-technical reader... but the reality is that this already in the market and will be scaling aggressively.
Some of your points are very valid... and those are the business issues of how addressable relates to traditonal GRP-based ad campaigns, inventory yield management, and how big national advertisers use addressable to target attractive demos with high-value creative.
But the big opportunity for both national network inventory and local station / syndicated inventory is the ability to reach into new advertisers that heretofore have not been able to buy television. Keep in mind that the big national networks typically have 300-500 active accounts... while Google has an estimated 4 million. (Love to verify that latter number... anyone?) There is still much direct response and scatter inventory that can be applied to addressable that will substantially increase its value. I had one client that was looking at the theoretical upside of shifting all their DR ad inventory to addressable, and their upside was nearly $1.4 billion. Now that is theoretical... but the reality is that the market is demanding addressable and the broadcast/cable nets are scrambling to meet that demand.
Tom, thanks for your reply. However I am sticking to my basic point which is that the "business" considerations will prevail and limit the march to the application of universal "addressability"---even assuming that, as you point out, it is probably feasible from a technical standpoint. The main stumbling block is the seller's need to not only control the "GRP" inventory but also to maximize the ad revenue yield associated with said GRP inventory. Advertisers may be clamoring for universal "addressability"--well some of them, anyway---but not if the costs of reaching targeted homes in this manner rises so much that it offsets any gain in sales or share-of-market "lift". And this is exactly what would happen---you can count on it.
By the way, it's true that roughly 400-500 corporations account for 95% of national TV ad spending, but these corporations have many individual brands, each with their own campaigns---probably 7,000+ of them. They---the brands---are the real TV advertisers. As for the millions of advertisers in digital media, this is probably so--but many are purely local---they'd never buy national TV----and a large proportion are small advertisers, many using only banners and search or other types of non-TV activity. I doubt that the national TV networks will be swayed to completely overhaul their selling systems and give up control of their GRPs because of the possibility that a number of small advertisers might convert some of their digital media spend to "addressable TV".
I'm not against the concept of improving our media targeting mechanisms and buying---why would I be? But what I'd really like to see is a serious attempt by the "addressable TV" sellers and advocates to deal with their over reliance on household audiences and find a way to determine who, in the home, is likely to be watching---at least on a program by program basis. Doing just that would reduce the inherent error margin in these set usage profiling systems by a significant degree. Next, I would hope that we might move to an improved way to determine who is really a prospect for a given campaign---and see if we can find a way to implement this in "addressable TV" buys. For example, most TV campaigns are not only targeting product users or even specific brand buyers---or likely buyers---but within those broad parameters, they are targeting mindsets---those who are fashion conscious, those who are price conscious, those who are health conscious, etc. or various combinations, thereof. I believe that there are solutions to be found to deal with both issues. If we could get these nailed down, then "addressable TV" in a more refined form would be far more appealing. Instead, we are rushing, pell mell, to kickstart a system with flaws, often claiming that it does far more than it really can. Why not take it a bit slower and get the basics right, first.Just my opinion, of course.
An interesting debate gentlemen.
Following on from Ed's example of a one-hour programme having 10-minutes of ad-load. Let's also say that it runs it as 4 x 2.5 minute pods.
Let's also accept Thomas' addressability eco-system as a given mode of buying and selling airtime.
The 'bedrock' of linear TV is the 'top-and bottom-of-the hour' programme scheduling. In the linear TV world people like the certainty of programmes starting at known times. It would be a massive call to change that.
The 'enemy' of linear TV is 'going-to-black'. So what happens with addressable TV (which I am sure is, on an individual basis is perfectly possible) when the addressable ad supply and demand do not equate?
So let's also say that in the 2.5 minute pod there is 2 minutes of 'linear ads' (i.e. booked network wide) leaving 0.5 minutes for 'addressable ads'.
In some highly desirable homes there might be four addressable ads as candidates to fill the 30-seconds, and they may be a mix of 15s and 30s. Does the network run the 30 or two of the 15s? Either way there will be two or three ads that won't be shown. Of course, the load can be caught up in following pods. But what if the gross load exceeds the available load? The answer will be some form of automated biddable rates. Either way, once demand exceeds supply, rates and CPMs will go up, which is the exact opposite of what the advertiser is seeking to do.
In less desirable homes there may be just one, or even none, addressable ads. What does the broadcaster do? Do they just leave a 30-second black-screen? Under no circumstance would they do that. Do they fill it with promos and CSAs (which earn $0). Most likely they would try to sell it at distress rates or use it for make-goods - which of course is both devaluing TV and reducing revenue at the same time.
Given the pressure broadcast TV is under I suspect thet they would protect themselves from the downside and maybe open up small windows or addressability as a trial.
John,
While Black Screeens are never an issue... the Network goes out with all sots filled... you are right that he real issues relate to Yield Curve management... meaning will advertisers cherry pick the desireable sectors and ignore the fringe? Most big broadcast nets are initially focused on what is called SASO (An Invidi term for Same Advertisers, Spot Optimization) that allows National brands to better target their product messages... and is compliant with Nielsen C3/C7.
But there is stong interest in MASO (Multiple Advertisers, Spot Optimzation) which looks more like traditional Digital Dynamic Insertion. OTT Services like Hulu, YouTube TV and even Pluto have substantially larger pool of advertisers. Maybe not 4 Million (god forbid.... too many Russians and Bot Farms involved there) but the trick is opening up all forms of TV to the next 2,000 to 10,000 advertisers. Where will MASO first appear... probably in the un-rated nets and spot markets like DigiNets and other programming which are dominated by low cpm based direct response ads.
These are the business issues that I alluded to in the article. The point being is that in order to attract sufficient advertiser interest the Addressable TV Market has to scale... and unless the whole US Market immediately moves over to IP based Television, the retrofitting the rest of the 80% of the market is required.
Tom, the "fringe", as you put it, is actually the"majority" since TV's most frequent viewers are overwhelmingly the older and lowbrow segments, not the younger/upscale groupings. So, under a universally available "addressable TV" option, with each home for sale, the most likely scenario will be very heavy demand for the more desirable homes and very limited demand for the majority of households that are tuned in on an average minute basis. This, in turn, will force the sellers to greatly hike their ad rates for reaching younger/upscale homes in order to compensate for the lack of sales against most of their audience. Worse, by overtargeting the "desirable" homes advertisers will not only pay much more than it is probably worth---compared to what they have now----but also generate excessive and redundant frequencies against those targeted households---which will work against, not for---the effectiveness of their campaigns and the resulting ROI.
I have heard this argument often... the death of Television is proven by the average age of say CBS... which is somewhere in the high 50's. But have you looked at Bob Bakish's "Video Dial Tone Strategy?" Not only are the developing new free to net channels for Pluto (while upselling into CBS All Access, Noggin, and Philo) but they also quietly launched a new linear channel called DABL... which is a Broadcast DigiNet with 70% US Household broadcast coverage. Yes, DABL is a lifestyle based DigiNet.... I suspect that it is not Nielsen rated and besides using SubChannel Broadcast as an initial strategy, that is also looking for large scale free to net distribuition....and perfect for Addressable targeted inventory that is more mainstream in market.
If I have learned one lesson in my 36 years of Media Disruption is that one should never extrapolate the status quo....
Tom, the evidence about TV's heavily slanted audience tonnage---time spent--- skew toward older adults and lowbrows of all ages is so fully documented by every survey using responsible sampling and research methodologies that I'm surprised that you question it. Even if there weren't any surveys---unlikely---common sense would tell you that people who are home most of the day---mainly older adults plus some others who are unemployed would watch much more TV content of all types than younger/upscale adults---who are off at work or school or socializing---much of the day. As for low brows, again, even without any surveys, much of TV's content , let's be frank, is not geared to suit the tastes of better educated people who, preumably have other things to do but watching silly programs or reruns ---even when at home. Sorry, I'm not using CBS as my prototype for all TV viewing. Why pick on CBS, by the way? I'm using the readily available factual evidence which tells me that a majority of TV's ad GRPs---not all, but a majority----would probably be classified as non-desirable by a majority--not all, but many---of advertisers. As a result, those advertisers would find themselves trying to place all of their TV impression weight against their best prospects via "addressableTV" only to find that the CPMs for such households rise to the point where they defeat the purpose of obtaining better sales or other "outcome" results.
Also, once they realize that they are no longer advertising to less desirable homes---who may account for 30-40% of their sales but 60% of TV's audience tonnage---these brands will have to re-allocate a fair amount of their "addressable TV" spending to reach the less desirable homes. This, in turn, will lead to CPM hikes for such households. Net, net: "addressable TV"on a universal basis could be great for the time sellers---but a losing ---or a break even---proposition for the advertisers.
Tom, I might add a few comments about the future profile of TV viewing, which you alluded to in your last reply. There are some people who think that the younger/affluent people of today will greatly increase their total TV consumption off in the future when they age---as they have been weaned on digital media and that's where "the eyeballs" are supposedly headed. Nice theory. But it is difficult to see this happening unless the quality of TV content overall---not just a few exceptions---greatly improves. Also, unless automation frees lots of younger/affluent as well as middle aged adults from working outside their homes---where will they get the time to devote an average of 5-7 hours per day to TV compared to only 3-4 now? It might be assumed that this increase in digital viewing will occur away from home---via smartphones and other, yet-to-be- invented devices----but it's hard for me to imagine people under the age of fifty spending hour after hour ---before 7PM---watching while commuting to their workplace----or at the workplace. And, one might ask---watching what?--talk shows, game shows, "Judge Judy"shows, reality fare?, etc. Or are we to assume that digital media ---streaming/OTT----programmers will create such engaging and compelling "original" fare for non-primetime viewing that this, in and of itself, will produce a huge upsurge in total all-daypartTV consumption by the more desirable groups, thereby creating more GRPs for sale by the "addressable TV" folks.
At this point, it's not a given that TV's future audience-wise will continue to be dominated by older/lowbrow viewership---even if more of it is done via digital means. So I, and many others, may be totally wrong on this. Indeed, there may come a time when the most attractive marketing prospects are also TV's heaviest viewers---or close to it. But I wouldn't bet on it.