The video ad world will change more in the next three years than it has in the past 60. What was built originally as a brand-building channel is quickly evolving into one of the most important customer acquisition and performance channels available to marketers.
Some history. Video has been the number-one advertising channel since the 1960s, powered by the efforts of large brands like Coca-Cola, P&G and GM to use high-impact television ads to dominate share of voice and awareness among target customers for their mass products and brands.
With all of TV dominated by three or four networks, these companies and their few competitors could buy up virtually all the “prime” ad inventory in advance, locking out challenger brands and then jousting for market share among themselves with TV spend, celebrity endorsements, shelf slotting and price promotion as the steeds, lances and broadswords of their noble combat.
Brand dollars not going away. Sixty years later, that strategy is what still drives the video ad market in the U.S., with well under 200 companies representing the vast, vast majority of all national TV ad spend. That’s why Wall Street analyst Michael Nathanson believes that while linear television will certainly lose a significant portion of its audience over the next five years, its ad spend will decline by only a fraction of those losses. There just aren’t other media channels that can replicate TV’s scaled delivery of high-reaching ads for mass brands.
Agency model mirrored big-brand concentration. TV media owners reinforced this large-brand concentrated demand model by building high-touch service organizations around the few large ad agencies that had formed around serving those brands. They leveraged those agencies as their true sales channels, selling them the bulk of their inventory in annual upfronts supplemented by premium-priced scatter buys through the year.
DRTV was a dumping play. What wasn’t sold or used for internal promotions or “make goods” to cover ratings misses was largely sold on an as-available basis to direct-response marketers, typically preemptable, at low rates, in bulk and with creative restrictions, designed to ensure no secondary market access for the big brands.
Video is now more than TV, with performance marketing its growth path. TV is no longer the only play in video advertising. We have digital video on mobile and desktops, and we have a super-fast-growing connected TV ad market as more and more Americans adopt streaming services.
Automated, data-driven software platforms are now being used to power linear TV ad targeting, planning, trafficking, measurement and attribution, as well as their pure digital brethren. This means that video advertisers can now get full-funnel, closed loop measurements, running TV as they run search, social and programmatic banners.
New video ad leaderboard by 2024. With integrated performance marketing now emerging across digital video, TV and CTV, the market leaders’ advantages will be in data, science and software, not content production.
Already, Amazon is one of top two or three sellers of video advertising in the world. So is Google’s YouTube. As performance marketing ad yields exceed those generated by brand spend -- already happening today for a lot of inventory in the TV and video ad ecosystem -- those companies will end up controlling much of TV’s inventory. If big tech players can pay more for the spots, and still service the big brands, why won’t tomorrow’s TV ad companies sell them all of their inventory directly?
What do you think? Are we only a few short years away from a very different video ad marketplace?
Timing and execution are always the biggest challenges and the most difficult to predict. It's like death. We know it's going to happen, we just don't know when.
So true Jack! Like the Hemingway line in The Sun Also Rises when the English boyfriend/trust fund baby says when asked how he went bankrupt, "Two ways. Gradually. Then suddenly."
Dave, I'm sorry but part of your history lesson isn't correct. It's not true that the detroit car manufacturers, the soap companies and soft drink folks bought up most of the broadcast TV network's primetime GRP inventory in the 1960s. The car companies and P&G types were big spenders, though not the soft drink companies---but the cigarette companies accounted for 10% of all TV ad dollars in primetime and there were many more big spenders---food and cosmetic brands as an example. As for the current scene, the broadcast TV networks report that roughly 400 large companies---- and thousands of brands--- account for about 90% or a bit more of the primetime upfront, however that's only $10 billion out of a total for all of TV of $70 billion, including national cable and sysdication, unwired networks and local buys. There are plenty of smaller brands represented on TV, not just a relative few.
As for your basic point---or prediction---concerning "performance based buys"----that's going to be a very though one to bear fruition at scale for a variety of reasons. If, by performance, we mean sales results, few sellers---even if they are dealing with individual brands, not massive, upfront, corporate buyers----will be able to guaranteesales lifts of a meaningful nature without charging so much for it that any benefit is negated. And many simply won't play that game as they have no control over the brands' quality, distribution, pricing, packaging, etc. and certainly not whether its ad messages are saying anything compelling. I do agree, however, that there is a possibility that non sales or share- of -market "performance" metrics---like generting website visits, supplying information to consumers, etc. may be a more likely and palatable to the seller gambit. And I aslo feel that, under very controlled circumstances even more definitive "performance" indicators may be developed---though mainly for the digital part of the audience. But, here, too, it's not going to be free.
Ed, thanks so much for the comments. Lots of great stuff.
Couple of points, my three brand rerferences were intended to be representative, not defnitive. Of course, there were cigarette manufacturers and so, so many more categories. As to concentratoin among brands and the relative portoin represented by the upfront, I don't believe that there is any reason to distingguish bewteen broadcast and cable networks. I used national TV ad spend because it aligns with national brand spend. How ever many hundreds of companies and their multiple brands each matters little when compared to Facebook and Google and their 5+ million US advertisers each.
Yes. We agree that performance metrics are growing in the TV world ... my thesis is that the core, underexploted performance opportunity in TV will really explode over these next few years - driven largely by digital companies - and that we are likely to see teh large tech players come in and take over big portions of the TV ad inventory pools for both their own use and to resell to both brands and performance marketers. TV nets have resisted deals like that for decades, but times have changed.
Dave your last point is interesting---the one about the tech folks taking over large parts of the "linear TV" GRP inventory and reselling it to advertisers via better targeting/programmatic-style metrics. My problem with that--aside from the fact that I don't see it happening in a big way--is that "linear TV's audience skew is prodominantly to less desirable consumers---with oldsters out viewing younger adults by three-to-one and low brows doing the same relative to upscale adults, albeit by a less dramatic margin. There simply aren't enough "good" GRPs to go around---even if they were all made available for computerized targeting and time selling. And this assumes that the upfront, corporate, low CPM buying concept will be almost totally abandoned over the next few years---I don't see that as a realistic possibility.
From where I sit, it seems more likely that the "linear TV" powers that be are invading the streaming space and taking with them huge amounts of already paid for programming of all types, not just primetime entertainment fare. Consequently, they will be well placed to attract millions of future cord cutters to their SVOD/AVOD services which will allow them to greatly increase their CPMs for TV eyeballs not only those attained via streaming but also those slowly shrinking numbers who remain "linear TV" viewers. If this happens, it will leave the sellers almost totally in control---not the buyers. It's possible that to appease advertisers that the TV sellers will incorporate "soft" non-sales versions of performance guarantees and offer improved targeting capabilities---mainly for their streaming audiences. But advertisers had better get it into their heads that they don't call the shots, nor are the TV networks dependent on them for their profits---as was true prior to 2010. That's all changed. It's time to sing a different tune.
Ed, very good points. My thesis is that the TV companies are now in harvest mode, and have no realistic chance to beat the tech companies at streaming. Amazon Prime is massively subsidized by its e-commerce and data storage busineses, YouTube by Google Search, and Apple's TV+ by its hardware business. TV companies have decided that they care most about video content production, not ad monetiziatinon, as evidenced by the massive cutbacks and consolidation of their ad sales teams. Three years ago, they would never have outsourced their video ad sales to companies like Amazon and Google. Three years from now, they will be happy to. Those companies data, commerce and search businesses, particularly as video becomes more of a performance marketing channel, mean that they can cut really big checks for massive inventory reselling with long-term tails to the TV companies and everyone wins.
Dave, I think that we will have to agree to disagree on this one. It will be most interesting to see how it all plays out.
Great debate Dave & Ed.
I'd like to veer off at a 180 degree tangent, and take a different perspective as to 'performance metrics'.
Dave used the phrase 'performance channels', but it seemed to primarily refer to video. Yes, video is the dominant medium, but it feels like letting other media off the hook somewhat. [Let's leave aside, at this stage, how we can meaningfully measure the confluence of multiple media being utilised in a campaign.]
I think we need to have a good hard look at 'marketing performance metrics' first. Some marketers have soft (and in some cases pretty meaningless) marketing performance metrics by which the determine 'success'.
We recently had an interesting legal case of an agency being sued for under-performance, When forensically analysed in a court of law, it became obvious that the way the brand measured 'sales' was flawed, and skewed towards the brand's sales-force performance which was only mildy correlated to consumer sales.
John, you hit on the most important issue in all of this, the confluence of the very channels in dirivng resutls. We know, for example, that TV ads running simultaneously have an enorous impact on conversions in search and social. At Simulmedia, we did a program last year for Harry & David's during Mother's Day, where they use EDO to measure the synergy effect on organiz and paid search during the campaign. It was enormous. For years, we ran a "clean room" with Facebook (TV & social spots anonymously matched at person/HH level) to measure the kicker effect between TV campaigns and social campaign conversions, and presented the results at at ARF. We saw kicker effects on social conversions of 6-7X.
This is a really big area, and I'm looking forward to great work in this area over the next few years that could totally redefine the notion of full-funnel measurements and integrated advetising & marketing programs.