Addressable TV advertising reached $56 billion globally in 2022 and is forecast to grow more than 50%, to $87 billion, by 2027, according to a new report from Ampere Analysis.
Artificial intelligence (AI) and other technology is expected to help drive that growth, but lingering misconceptions do present challenges, says the research, conducted in partnership with GroupM Nexus’s addressable TV solution Finecast and Microsoft Advertising.
The report is based on more than 100 interviews with advertisers, streamers and agencies, as well as market modeling and quantitative consumer research.
On average, addressable TV accounts for one-sixth of video advertising budgets globally, and as much as one-fifth in the U.S. and other mature markets, the research finds.
All major product/service categories use addressable TV. Both B2C and B2B marketers are using it to support performance marketing and brand-building objectives and to target audience segments and geographies.
Addressable’s ability to extend campaign reach beyond broadcast TV is a core benefit. This is particularly true for targeting younger consumers. In developed markets, addressable delivers a nearly 25% incremental reach increase to those audiences compared to total monthly broadcast TV.
Addressable TV typically commands higher pricing. Brands using it report that it is as cost-effective as other formats, but among those not yet using it, there is a “widespread” perception that it is expensive, confirms the report.
While advertisers of all sizes use addressable, the cost perception and other factors have contributed to smaller advertisers investing less of their budgets in it than larger advertisers. The analysis concludes that addressable TV service providers need to work to remove non-cost barriers to using the technology, and simplify the purchase and planning process, to attract more uptake by smaller advertisers.
Education about addressable is also needed to advance its growth. In emerging markets, lack of clarity about its capabilities, including the targeting possible in specific regions, has caused some brands to spend on alternative media rather than addressable. Even in developed markets, some marketers mistakenly believe that addressable’s reach is limited compared to broadcast media.
“The extent to which addressable TV advertising is now being used by nontraditional TV advertisers, including smaller companies and B2B brands, is illustrative of how the medium can support TV service providers in their push to reach beyond traditional broadcast TV budgets and to open entirely new revenue streams,” said Richard Broughton, executive director at Ampere Analysis. “But it’s clear that there is still work to be done by the industry in challenging entrenched opinions and in countering common misconceptions.”
Factors driving growth will include dissemination of successful use case studies and the positive impacts of new technology.
The researchers note that connected cars are already being used as an addressable TV advertising channel in some markets. Some brands are using geotargeting to deliver messages to passengers, and some are interested in using QR code-based formats for follow-through and sales attribution.
Going forward, generative AI will be used for applications including enabling fast, cost-effective production of the multiple creative formats that currently impede full use of addressable’s capabilities.
“Addressable creatives already allow media buyers to adapt messaging by audience group and in response to events, keeping commercial messages fresh and relevant,” said Dave Osborn, general manager, sales for Microsoft Advertising. “However, many of the most exciting developments in the addressable TV market have yet to be fully explored by brands. As many advertisers now see addressable TV as a core part of their media mix, their focus will shift to take full advantage of its capabilities and innovations such as generative AI and emerging technologies.”