Making It Count1 Oct, 2015 By: Nicole Urso Response
DR experts weigh in on spending trends, time shifting, and a new wave of advertisers from the digital space.
With every round of Response’s Media Buying & Planning guide, a semi-annual perspective on DRTV business trends and quarterly performance, the first question to industry experts is always the same: Are billings up or down? Before digging into new products and categories, or a discussion on emerging technology, seasonality, and other influences, the most straightforward measure of success leans on this answer.
Lately, though, the numbers haven’t exactly added up, in a figurative sense at least. While the economy appears to be on the mend (the recession was the primary culprit when earnings started to slip) and media buyers report healthy business and tight inventory, both long- and short-form billings continue to underwhelm. So, where’s the disconnect? In this round of the buying guide, media experts among top DR agencies tackle the conundrum.
Media Billings Lowdown
After a tepid 2014, with short-form delivering moderate spikes, thanks in large part to its top advertisers, and long-form billings continuing to slide, 2015 still started with an optimistic outlook. DR experts within cable and broadcast networks described a strong marketplace due to heavy spending from existing advertisers as well as emerging business from e-commerce brands and other newcomers.
As results rolled in, however, first-quarter billings painted another picture. Short-form spending showed a 12.8-percent dip compared to the same time a year earlier, according to Kantar Media, totaling $832,675,900. It was the lowest first-quarter since 2006, and during this same period, only six of 17 categories showed gains.
Spending across various distribution platforms was also down across the board. During 1Q 2015, short-form DR spending on cable TV dropped $26.9 million; network TV lost $5 million; and $12.4 million slipped away in syndication. U.S. Hispanic TV was also down $82.6 million (33.7 percent).
On the long-form side, the same story continued with the 10th consecutive quarterly drop in 1Q 2015, according to Response (July 2015). With a $17.6 million loss (7.3 percent) compared to the same period last year, it marked the lowest spend in a first quarter since 2001. And the news isn’t much better for second-quarter results, which can be found in this issue by clicking here.
“Lead-gen campaigns continue their growth as the share of the overall market size grows for the Latino demo and more and more financial, legal, and education services are targeting this segment for growth,” says Alex Agurcia, president of Omni Direct in Miami Beach, Fla. “Most all other categories seem to be expanding for the same reasons. Beauty, health, fitness, housewares, and entertainment are always the best performers for us and have remained so this year.”
Though media billings offer a general outlook on DRTV spending, there’s always more to the story. No one understands this better than leaders in the long-form space who’ve grown their business despite a quarter-after-quarter tumble in the reports. A decrease in spending could be due to lack of inventory, including the ongoing shift from 30-minute slots to the five-minute “mid-form” spot. The longer formats are more affordable, with programming flexibility, and offer ample time for lead-generation without the production cost of a 30-minute infomercial.
It appears now that a similar situation may be happening on the short-form side. Not only is the shortage of inventory driving up DR rates, it’s pushing out some buyers, and with political spending ramping up, it’s likely to become even more challenging heading into 2016.
“What’s interesting about the short-form market is that it’s a pretty tight inventory because of a domino effect,” says Tony Besasie, president at Cannella Response Television in Burlington, Wis. “There’s an under-delivery of ratings and impressions to [brand] advertisers when they’re buying in the upfronts, so the networks have to supply inventory to achieve those goals, and that inventory comes out of the DR supply.”
Another possible explanation for the decrease in short-form billings may be in the reporting itself. As the world becomes more digitally connected, most advertising includes some call-to-action, and perhaps this has led to inconsistencies over what constitutes a direct response campaign versus a general campaign. There is, of course, a distinction between DR and general advertising based on how the media is planned and purchased, but it still gets murky depending on who’s doing the buying.
“If an advertiser comes from a general advertising background, they may continue to have their media planned and bought on a general basis,” says Peter Koeppel, president at Koeppel Direct in Dallas and a member of the Response Advisory Board. “What that means is that they pay a significant premium for an audience guarantee and typically get fixed, non-preemptible positions in specific programs. If more airtime inventory is bought on this basis, it leads to less inventory being available for DRTV advertisers, and that can have a direct impact on billings.”
If advertisers were open to the idea of running their spots as DRTV, says Koeppel, they’d spend about half of what they would normally pay on general advertising, sometimes even less than that.
“As general advertisers move into longer commercial lengths — 60 and 120 seconds versus 30 and 15 seconds that are prevalent in image-based advertising — they would be wise to take a look at DR as an option, because the traditional way of buying media may be cost prohibitive. By giving the station or network more latitude to place their commercials, they can get more frequency and create significant awareness for far less money,” Koeppel says.
As Besasie described, there may also be a domino effect at play. DR buyers are pushed out of the game when inventory shrinks. Inventory shrinks when general advertisers need to hit a certain number of impressions. And impressions are harder to achieve when there’s not enough audience.
“I think what we’re seeing a greater effect from is in live television viewership,” says Besasie. “I think more people are time shifting and binge watching, and you’re seeing companies like Amazon Prime and Netflix producing some pretty high-quality episodic programs that are attracting an audience. A younger generation of millennials are consuming that, and the way they’re consuming that is more on a binge basis, so that affects the television advertising landscape.”
The latest version of Apple TV will continue to fuel the trend when it hits stores this month. When it was unveiled in September, Apple CEO Tim Cook said, “We believe the future of television is apps,” and proceeded to demonstrate the redesigned interfaces for TV-centric apps including Netflix, HBO Go/Now, Showtime, and Hulu. The new Apple TV also has a dedicated app store, so users can add and delete apps directly from their TV. With Siri’s voice-recognition integration, the world is also one step closer to ditching the remote control.
Meanwhile, digital content producers are pumping out programming directly aimed at that highly sought after millennial set. Tastemade, for instance, is known as a modern-day Food Network with original series filmed in its Santa Monica, Calif., studios, in addition to user-generated, one-minute “appisodes” featuring restaurants around the globe, shot and published with the free Tastemade app. The company is one of several digital content producers featured on Apple TV.
Discovering new content may be easier than ever, but measuring it and tracking audience behavior is a whole new frontier that Nielsen is trying to navigate with its quarterly “Total Audience Report.”
“As Nielsen continues to move toward total audience measurement, it is vital to find a way to compare platforms by using common metrics that allow the industry to equate and analyze users and usage of these different platforms in a fair, standard, and appropriate way,” Dounia Turrill, senior vice president of insights at Nielsen, stated in the report. “After all, consumers have a pretty simple choice they make routinely: finding the content — be it music, entertainment or information — that best fits their needs whenever and wherever they are. This simplicity does not hold true for measurement, especially when different media firms all use a different yardstick by which to gauge performance.”
According to Nielsen’s 1Q 2015 Total Audience Report, adults are indeed spending more time watching time-shifted TV on DVRs or over-the-top services like Netflix, but the majority of time is still spent watching live TV.
Still the One
For certain categories of programming, at least, Koeppel believes that live viewing will remain the preferred experience.
“Two categories of content really stand out that run counter to the idea of video-on-demand (VOD): news and sports,” he says. “Viewers simply don’t want to watch these genres of content on a time-delayed basis. Therefore, given the number of news and sports networks available via cable or satellite, DR advertisers still have opportunities to run schedules that counteract the trend to avoid commercials.”
What about other ad opportunities within the new digital environment? “Advertisers can also take advantage of banner advertising at the bottom of interactive program guides while a viewer is searching for something to watch,” says Koeppel. “Another way to adapt is to connect the dots between television content and second-screen behavior. Nielsen and other sources estimate that eight to nine out of 10 viewers are watching television with a second screen, and there isn’t anything to say that is not true for over-the-top content. For example, in the aforementioned program guide advertisement, an advertiser can track the online leads such ads generate and remarket to consumers. Also, programmatic TV advertising allows advertisers to pinpoint relevant households in this and other scenarios.”
Despite the anticipation of how over-the-top and other nonlinear forms of TV will affect the DRTV media buying business, Peter Feinstein, founder and CEO of Phoenix-based Higher Power Marketing, doesn’t think the shift in audience should cause marketers to lose their focus from the most important medium — TV. In fact, Feinstein points to examples of emerging categories within DRTV advertising from online brands such as FanDuel and DraftKings.
“They’re buying a staggering amount of time on radio and TV,” says Feinstein. “It’s not widespread on radio as much as it is on TV, but they’ve got a presence in both, so anything that has to do with fantasy football or fantasy sports leagues, there is definitely a front-and-center mentality to that.”
Shopping sites such as Wayfair and Zulily are getting into the mix too, along with even more online business services and Web publishing platforms, including Wix (Response, April) and Squarespace.
If viewing habits are trending toward apps and more digital consumption, why would these brands invest so heavily on TV? The answer is simple, explains Feinstein.
“The difference between conversions driven by online media versus offline media is staggering,” he says. “With offline media that drives to online properties — and this is our personal experience with clients — conversions can run as high as 8- to 13-percent, compared to 2 percent or less for online.”
The same holds true within the U.S. Hispanic market.
“DRTV is still the best primary channel for maximum reach and lowest CPM,” says Agurcia. “A digital component is absolutely necessary, as well, but not as a standalone. Without TV or other surround sound media, digital usually falls flat in Hispanic. Most big retailers have Hispanic sales goals that they also have to meet, so making sure your retail sales force includes the Spanish media investment in their pitches and discussions is key to fully leveraging retail placement.”
Another important consideration is that the U.S. Hispanic market provides new opportunities to reach a mass audience.
“Special events, particularly soccer and other sports events, are driving a larger Hispanic share to the marketplace,” says Agurcia. “For example, in July, the height of the soccer playoff season, Univision won the rating sweeps for 18-24 male segment in the U.S. — that is above ABC, NBC, and CBS. It turns out the general market was watching the playoff coverage on Univision so marketers who invested in Spanish-language TV during this time received hugely discounted reach.”
Make It Count
DRTV media experts make every dollar matter and optimize every level of the purchase funnel, so even if there’s less spending up front, says Besasie, marketers are still growing the business in other ways.
“A lot more work is being done on the back end in the long-form space, and I suppose in short-form as well,” he says. “If we just look at long-form, the marketers in general have become much better at their back-end monetization. Their conversions are up in general. Their call conversions are up. Their Web conversions are up. Their average order value is up. So marketers’ operations are better and therefore they’re able to sustain. But from a media buying perspective, we’re just being much more diligent about rates. We’re buying smarter and taking less major risks with expensive inventory.” ■