Addressable's Accelerating Push Into National Inventory

Today’s news of Clypd’s acquisition by AT&T’s Xandr is another notable development speaking to the inevitable — albeit complex — extension of addressable and dynamic insertion capabilities to national television advertising inventories.

“It’s exciting for national networks to be able to offer the addressable inventory that marketers are demanding,” says Jane Clarke, CEO of the Coalition for Innovative Media Measurement (CIMM). “Though there are still challenges with opening up national inventory, there’s no better time for our industry to be working toward a robust and diverse addressable TV data ecosystem.”

So what, exactly, is going to have to happen to take addressable beyond the two minutes per hour of TV ad inventory controlled by MVPD operators, to the 16 minutes of national inventory?

In July, CIMM held a members-only workshop on addressable. Speakers included Cadent, Xandr, Sling TV (Dish Media), NCC Media (now Ampersand), Publicis, Merkle, Nielsen and Inscape, among others.



There are complex, broader data standardization and data quality issues that must be dealt with across addressable, both local and national. 

But without getting too heavily into those for now, here are some key points about addressable inventory expansion and smart TV implementation that were discussed during the workshop, from a report by Gerard Broussard of Pre-Meditated Media. 

Requirements for Addressable Inventory Expansion

According to Mike Bologna, president of addressable at Cadent, about 75 million of the 120 million U.S. TV households are already capable of receiving dynamically inserted ads.

But enabling the commercial overlays on smart TVs within national TV network ad inventory needed for addressability will require tackling three operational issues, he pointed out.

None of these (intentional understatement alert) is a cinch to pull off. But Bologna says that they’re all achievable.  

First, since dynamically inserted ads happen through set-top boxes or smart TVs, TV networks don’t have the ability to “light up” their national addressable inventory on their own.

That means that the networks, MVPDs and smart TV manufacturers will have to fashion contractual agreements based on cooperation and compromise.

For example, TV networks and MVPDs would likely need to modify existing carriage agreements to accommodate execution of commercial overlays. Such contracts would, among other things, need to specify the revenue shares for each of the three participants, plus any caps or restrictions on the portion of ad inventory enabled for addressability.     

Second, TV networks will need to develop pricing models that make addressable profitable and thus worthwhile. Models will need to enable increased per-capita inventory revenue so that addressable yields more revenue than standard linear ad units, while also providing advertisers with a material discount from effective target CPMs.

Bologna says this is a matter of the networks doing the calculations to determine which programming is most suited for addressable insertion, and will generate the greatest yield.

The report offers this example: When a unit is divided across Brand A and Brand B, both brands would pay a higher CPM against the segment of women 18 to 49, but a lower effective CPM. The effective or ECPM might reflect medium/heavy buyers of organic shampoos, or buyers of high-end cosmetic products, for instance.

The third challenge is the previously noted need to standardize target segment definitions and consumer data sources across TV networks.

While the report doesn’t state this, the reality is that when it comes to the national scenario, the industry would do well to avoid the complications already in existence in employing addressable at the local level — complications that are being worked around, but are hardly ideal.

What the report does point out is that disparate definitions and data sources make it difficult to compare TV networks when developing ad schedules, establishing audience delivery counts and evaluating outcomes.  

It also points out a fourth challenge discussed during the workshop: uncoupling measurement and reporting of addressable spots from national C3/C7 ratings.

Sounds like a pretty full plate. But again, history tells us that what the market demands will come about sooner or later.

4 comments about "Addressable's Accelerating Push Into National Inventory".
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  1. Ed Papazian from Media Dynamics Inc, October 21, 2019 at 7:36 a.m.

    Ok, so let's assume that the national TV networks somehow determine that inserting "addressable TV" commercials in their regular in-program GRP inventory works for them. Firstly, would this require special in-program breaks or would portions of the audience for standard break commercials be blipped  out in certain homes to accomodate "addressable TV" advertisers? In that event, various configurations of targeting might be involved for the same commercial position, leaving the network with a varying amount of unsold audience---generally the least desirable older/lowbrow viewers---- to sell. Who would buy those eyeballs---and at what CPM?

    Regarding CPMs, obviously the intent would be to charge advertisers much higher "addressable TV " CPMs in order to make the deal worthwhile to the negworks as well as the "addressable TV" sellers. As a guess, we are probably talking double the current CPM ---maybe more. But is it logical to assume that "addressable TV" advertisers will consistently get better than that in sales lifts? Are network programs so attractive to the most desired younger-middle aged and affluent viewers that constitute the typical dream target that they can be reached on a massive basis in this manner? That doesn't seem to be what the rating surveys are telling us ---certainly not for ABC, CBS and NBC. So is this mainly a cable deal? And how will the ROI of "addressable TV" buys for in-program breaks be measured? Will the sellers guarantee ROI lifts? LOL on that one.

  2. John Grono from GAP Research, October 21, 2019 at 4:44 p.m.

    As incisive as ever Ed.

    And what happens to the rate for 'regular in-program GRP inventory?   I plan to put and ad into a programme that has a P2+ audience of 2m, and for my target audience of 1m.

    The broadcaster than inserts the "addressable ad" into the linear programme.   The total programme audience still remains 2m & 1m target, but if they don't see my ad it could be 1.8m P2+ and 0.9m for my target.

    First, how do we determine the 'currency' for linear-minus-addressable?   Second, how do we plan for the unknown reduction in the ad-audience due to the addressable?   Third, how do we get the rate reduced to account for the loss of ad-audience to the addressable ad?

    Do we flip the whole model on its head, and buy 'the residual' at an agreed CPM rather than cost.   That is, we budget/plan high, but deliver lower audience but cheaper - the advertiser invoice would be lower than the plan.   But what impact is there on campaign reach, does the campaign have enough effective weight and reach?

  3. Ronan Higgins from TVadSync, November 4, 2019 at 7:42 a.m.

    @Ed, addressable TV ads overwrite linear TV ads.  That should mean there is no "unsold" audience.  What it does mean is that the advertiser who bought the linear TV placement is getting less eyeballs than predicted, becasue a certain portion of households have been presented an addressable ad instead of their linear ad.  How the linear TV ad buyer is reimbursed or made good on that underdelivery is the reconciliation question that is holding things up.

    The stop gap solution is to only provide addressable TV advertising on a SASO basis (single advertiser spot optimization), where the addressable TV ads are coming from the same advertiser who owns the linear TV ad spot that is being swapped out.  This way there is no need for a makegood.  But there is a need for the advertiser to understand the effect of each type of TV ad delivery, linear and addressable, at driving business results.

  4. Ed Papazian from Media Dynamics Inc, November 4, 2019 at 8:44 a.m.

    Ronan, when I mentioned the problem of the "unsold audience" I was referring to those viewers who did not get the "addressable" commercials. These would, in most cases, be older and lowbrow adults which many advertisers who get the "linear TV" residue would not be happy about as they already reach these viewers to excess now. I doubt that the sellers would be able to incorporate such "impressions" into their regular audience guarantee deals with any degree of confidence but even if buyers were willing to take "pot luck"on such audiences they would demand very low ad rates as compensation. Meanwhile, in order to generate the kind of revenue that their business model requires and still be able to buy the required time from "linear TV" sellers at rates that make such deals worthwhile to the "linear TV" networks, the addressable folks would need to charge CPMs that are so high as to make the promised  results----better sales lifts----very hard to attain relative to the added cost per viewer. This would be especially so once the "linear TV" sales teams noted which of their shows were in demand and raised their asking prices on said shows. This in turn would force the addressable TV sellers to dilute their offerings by placing more weight on less desirable content as this could be bought at cheaper CPMs. In other words, while it sounds nice, in theory, one must take into account the likely trade-offs as well as the probable actions---and reactions---of the various parties.

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