Response Advisors Forum: Parsing the Projections1 Dec, 2016 By: Thomas Haire Response
Members of the Response Advisory Board take a hard look at a number of researchers’ year-end predictions for 2017 — and beyond.
When the calendar gets short at the end of the year, one thing you can always count on are dozens of predictions and projections for the marketing industry in the coming year. The transition from 2016 to 2017 is no different.
Recently, Response collected some of the more interesting indicators from leading researchers and created questions around them for our final quarterly Response Advisors Forum of 2016.
Those predictions include:
- eMarketer says it’s already happened in 2016 — while PricewaterhouseCoopers (PwC) contends it will happen in 2017: spending on digital advertising will surpass TV ad spending.
- Most researchers show digital ad spending growing at a compound annual growth rate (CAGR) of 10 percent to 12 percent through 2020. Less widely reported: TV ad spending will continue to grow at a CAGR of 3 percent to 4 percent during the same timeframe.
- A WideOrbit survey finds that 93 percent of media buyers believe it is important to buy TV and digital video together.
- PwC contends ad spending on streaming video, whether to a digital device or a TV via over-the-top (OTT) providers, will grow from $6.4 billion in 2016 to $10.4 billion in 2020.
- eMarketer says that, by 2019, mobile ad spending will represent one-third of all media spend, and that mobile (particularly mobile video) spending is driving the expected expansion of programmatic display spending to $31.8 billion (78 percent of U.S. display ad spending) in 2017.
- PwC says mobile video spending will grow to $13.3 billion (a 30.3-percent CAGR) by 2020.
- eMarketer says programmatic TV spend will triple in size to $2.16 billion in 2017 (representing 3 percent of the U.S. TV market) and then double again to $4.43 billion in 2018.
- WideOrbit’s survey of buyers also notes that those who plan to spend more than 5 percent of their TV budgets on programmatic TV buying will jump from 22 percent this year to 64 percent in 2017.
Clearly, marketers are operating in changing times, where the consumer is more nimble, while also carrying increased expectations. “The old way of doing business in silos — where agencies only engage in one media type, such as DRTV — just isn’t going to cut it anymore,” says Peter Koeppel, founder and president of Dallas-based Koeppel Direct. “Consumers are hopscotching from screen to screen and we need to jump with them.”
Read on to find out what Koeppel and other members of the Response Advisory Board have to say about projections for 2017 and beyond.
Online and mobile video spending are key drivers to digital spending surpassing TV spending. How can those who have their roots in traditional TV media — whether marketers or agencies who buy or networks and stations who sell — best keep up with changing times?
Abed Abusaleh, Havas Edge: Traditional TV marketers can capitalize on this growing trend by managing online influencers and incorporating this strategy into their media mixes. Engaging these online influencers (celebrities, highly followed Instagram or Twitter personalities, etc.) will help them obtain a third-party endorsement for their product outside of their traditional TV commercials. It is also important that these companies manage and engage in their own social media campaigns and maintain consistent dialogue with their current customers in order to build brand loyalty, as well as to help prospective customers overcome their reservations.
Doug Garnett, Atomic Direct: This shift has been happening for years — officially passing that point doesn’t affect much today.
TV remains an incredibly powerful ad medium — even incredibly powerful in driving online business. One commercial break during the live World Series TV broadcast featured ads by Amazon, Google, and Facebook.
Strong digital spending also doesn’t change the fact that TV remains the best medium for reaching mass markets, whether for innovative products or building brands. And various types of digital work perform best when teamed with TV.
That said, data like this distracts businesses from the critical marketing fundamental: determining the mix of media most powerful for the business result they need.
Peter Koeppel, Koeppel Direct: It’s incumbent that agency partners have diversified media capabilities to best serve the client. That means not just placing TV, but being able to place online video — whether that is on a desktop, tablet, or mobile phone. With the right tools, media buyers can track the source of leads and sales and optimize the media across all platforms in an integrated and effective fashion.
Fern Lee, THOR Associates: Between cord cutting/cord cheating, as well as dual screening, it’s best to start testing these tactics now to learn and understand thresholds instead of falling behind the curve and having to play catch up — especially if your core segmentation is consuming these tactics or is a growth target. Consider testing during peak seasonality for the greatest potential for success and adjusting schedules in future quarters based on your learnings. It is also critical to get metrics set up properly to understand the true value and cross-channel/cross-device influence.
Rob Medved, Cannella Media: Content is king, and eyeballs shifting to digital is a result of where and how consumers are accessing that content. Hulu, Netflix, HBO Go — as well as platforms like Amazon Fire and Apple TV — are driving that spend shift. And they are heavily investing in original programming to draw and keep the consumer.
Until the platforms and streaming services open up opportunities for direct marketers to interrupt the search and discovery of content, our industry remains cut off from how we traditionally reach those eyeballs. For other digital opportunities, marketers need to fully embrace a cross-media approach that includes social and native as complimentary spend to their short- or long-form traditional TV spend. Our clients that have done so continue to thrive.
Richard Stacey, Northern Response Intl. Ltd.: Jack Welch famously said that when the rate of change outside an organization exceeds the rate of change inside then the end is near. All companies today — in every industry — need to develop the capacity to continuously evolve with the rapidly changing marketplace or risk being left behind, or even going out of business.
DRTV marketers and agencies, as well as TV networks and stations, will need to revisit their business models, value propositions, and strategies and begin to transition their businesses to keep up with the changing media environment. This could mean embracing new media — or it could mean doubling down on old media by consolidating with other remaining players. Either way, in the current environment, if you’re standing still, you’re dead.
Researchers say both digital and TV ad spending will continue to grow at healthy rates during the next four years, while media agencies seem to believe in the growing importance of buying TV and digital video in conjunction with each other. What does this say about the future of TV as part of a video content/ad ecosystem?
Abusaleh: The growth of digital does not equate to the slow death of television advertising. TV advertising has a bright future, but marketers must adapt their approaches to spend as much time and resources on perfecting and testing their online strategies as they do perfecting and testing their TV creative and media efforts. Customers consume content on multiple screens simultaneously and, as a result, the impression they get from the TV spot needs to be replicated on their websites, their digital ads, and their online targeting.
Garnett: I resist seeing TV as part of a video content/ad ecosystem. TV (traditional, time-delayed, or streamed with advertising) remains so much larger than the video ad ecosystem. The question should be the other way around: for a smart agency, what is the role for video content since it can’t substitute for TV?
Most major advertisers are dabbling in the video content ecosystem. Some might quibble with the word “dabbling” because almost every company is putting large amounts of video online. But while video is posted for many reasons, relying on it to do the work of advertising is quite tough because it’s very hard to generate viewership that equates to what’s done with TV.
At this point, on a scale of 1 to 10 with 10 being highly important to their marketing, some smaller direct marketers have created ways for video content to be a 6 to 8 in importance to their advertising mix. For larger direct marketers, it’s probably a 4 or 5. And for mass marketers, it remains stuck in the 1-2 range relative to their other advertising efforts.
Koeppel: TV is still the biggest megaphone for advertisers: it creates awareness, curiosity, and purchase intent. However, with so much on-demand content and cord cutting, advertisers are going to have to adapt. It’s likely we’ll have to aggregate smaller audiences to create critical mass. But, with that, there may be the opportunity to be more selective and targeted. The rates simply have to reflect those realities so that media buys can be efficient.
Lee: TV will be one of the many devices to consume “video.” The content providers are facilitating this by expanding their programming across all devices, which will make the ad experience organic and seamless to the consumer. The percent of dollars will breakout based on where and when your consumer is consuming the video content.
Medved: TV viewership and ad spend will continue to stay relevant for event-based programming — news, reality, sports, anything live. It’s underreported because TV isn’t sexy anymore. The story — for many years, now — is that TV is dead. Mobile video, Snapchat, Instagram, Facebook Live, and streaming services are the buzz — and rightfully so, as they have stolen eyeballs and, in turn, ad dollars from traditional TV viewership. In addition, they offer a much better attribution model and audience-targeting opportunity. However, TV will keep share as a way to reach the mass aggregated audience.
Stacey: It’s better to follow what works rather than what all these surveys say. You can’t push on a piece of string. Go where the market is pulling you — not where you wish it was. TV is still part of the media cocktail, but we are all building the boat while we are rowing it out to sea. It can be tricky to embrace new media while still hanging on to old media. You need to know what game you’re playing and what it takes to win. That will be the solution going forward: learning to play two or more games simultaneously.
With spending on streaming video expected to grow more than 60 percent by 2020 — while traditional pay-TV ad spending remains flat — what are the best opportunities for marketers to capitalize on this growing slice of the pie?
Bill McAlister, Top Dog Direct: To reach a younger demographic, streaming video is great option for new categories of goods that we traditionally would not pursue. Spray Perfect spray-on nail polish is a perfect example. If it makes dollars, it makes sense to us.
Garnett: I watched the early development of OTT/digital streams with amazement as all kinds of crazy ad units were offered — and wondered why no one was using the tried-and-true TV advertising approach.
In fact, the critical limiting factor to ads in streaming video is the search for a standard ad unit. Pre-roll? Skippable? Embedded ad pods? Unique ads for digital/OTT? Same ads everywhere? These ads suffer today because impact can’t be determined when each new streaming option creates its own ad unit.
A good approach has finally emerged. Comcast lets me stream programming live to my iPad, and it includes same commercials as if I were watching on the TV. This is the sanest approach for all involved — consumer, advertiser, producer, and cable/satellite system.
But until this becomes more commonplace, we’ll continue to see streaming video include ads from big brands just putting a toe in the water and trying to build a marketing story for the agency.
Koeppel: The majority of our digital buys are programmatic. When we see pockets of opportunity with certain programmatic placements, we will reach out and engage in direct buys. We are also running programmatic TV campaigns. Our goal with our programmatic TV and connected TV efforts is to reach audiences that are incremental to our linear TV buys.
Lee: Streaming video should be a part of all media plans by now, either on a linear basis or traditional streaming basis. The proliferation of usage/consumption and variety of content provide significant opportunity to reach your target. Also, the environment is typically less cluttered, ensuring the ad stands out. Again, testing your way into the various opportunities with the proper metrics in place will determine the value and how it is used moving forward.
Medved: The main attraction for marketers with streaming video via OTT providers is the enhanced ability to target the viewer. This advancement in digital asset distribution and unique device addressability empowers marketers and their agencies to mirror what they’ve been doing with traditional digital media advertising and expand it to a much broader scope of content — and, with that, a better environment in which to reach their consumers with ad units that are known to work well.
It’s not solely a reach-and-frequency model. With these changes in the market, they can also engage interactively with these consumers — and do it much more simply than ever before, with handheld remote controls that can interact with a myriad of ad unit formats. An additional benefit is the OTT viewing audiences are primarily millennials. As they shifted from linear TV to digital streaming, they were becoming increasingly difficult to reach — but now marketers can get to them in scale and distribute unique ad messages. These messages are no longer based just on demographics and other third-party data, but overlaid with real-time viewing behaviors — in effect, dynamically serving ad creative based on who they are and what they’re watching at that moment.
Stacey: As with all new areas, marketers need to be constantly testing and experimenting with new media and platforms to find which ones work and which ones don’t based on each marketers own specific objectives. It’s a process of continuous trial and error.
Exponential growth in mobile ad spending is the key driver of digital spend growth, particularly programmatic display advertising. Video is mobile’s fastest growing outlet. How dialed in should advertisers be to shifting spend to or increasing spend on mobile outlets?
Kevin Lyons, Opportunity Media: Mobile has been and will continue to be a huge force in the marketing mix. Advertisers need to be fully dialed into this segment. However, the shifting sands of the media landscape continue to evolve, so marketers, in general, need to capitalize on opportunities in all segments — new and established — to find their optimal mix for success.
Abusaleh: They should be incredibly focused on improving their mobile strategy. Content should be developed specifically geared towards the mobile viewer — including adjusting lengths to meet those viewing habits — which means breaking away from traditional 30-second, 60-second, 120-second, or 28:30 lengths. They should also make sure that they optimize their sites to be compatible with mobile devices, as well as incorporate one-touch ordering and mobile apps that can act as shopping places to buy multiple products.
Garnett: I continue to struggle to see why mobile is separated from other digital. Yes, it can be bought separately. But after extensive stories extolling its virtues, mobile turns out to be basically an extension of digital advertising, viewed on a mobile device.
This doesn’t ignore theory about reaching people while they’re on the move. Reality has shown the times when that advertising is useful are far fewer than the incredible hype about mobile has suggested.
That said, agencies need to be aware of mobile in the same way TV buyers are aware of satellite TV — it’s a way to place media. But it needs to be treated as simply another tool in the marketing mix that is used when it makes sense — not because of the hype suggesting it has some kind of magical properties.
Koeppel: Mobile is critical because it is becoming a primary tool for consumer research, which includes opinions and price shopping. According to Nielsen, 51 percent of consumers engage in “showrooming,” which is the process of browsing for something in a store and then buying it online. They are also doing essentially the opposite: “webrooming,” where they research online and then buy at a brick-and-mortar store. Given these trends alone, marketers have to be focused on mobile because their competition most certainly is.
Lee: We are seeing more and more of our clients’ engagement driven by mobile devices: search, site traffic, leads/orders, and social. Most vendors offer cross-device targeting, serving impressions based on the device your target uses. This will naturally increase the number of mobile impressions, given the proliferation of mobile. It is also very important to have mobile-friendly creative and site experience, gain learnings, and optimize schedules as well as partnering with your vendor to continually uncover and optimize new opportunities to stay ahead of the curve and maximize results from this source.
McAlister: If it pays, it stays. If we have the opportunity to run TV and mobile ads, and they both are doing well, there is no reason why we limit a channel of advertising. Why limit our success? Mobile ads have the potential to make direct response great again.
Medved: Mobile devices as media outlets are becoming increasingly important to marketers — especially those looking for scale. The advancements in location-targeting capabilities, larger screens and better resolution, and ease in interactivity enable advertisers to hyper-target consumers while they’re on the go — while also providing them with immediate messaging that can be readily engaged with and immediately measured.
Stacey: There are many new media options and alternatives available to marketers today. Marketers need to keep abreast of these new opportunities, learn about them and experiment with them in an effort to discover which media options may work best for their particular goals. These need not to be expensive tests but small “minimum viable information” tests to both learn and also to begin building an organizational competency in these new areas.
Programmatic TV spending is expected to triple in 2017 and double again in 2018, while media buyers say they’re seeing a clear expansion in programmatic budgets. What are the pros and cons of programmatic TV buying — and do you believe it will become a major force in the TV ad sales universe by the end of 2017?
Garnett: Today, there’s nothing programmatic about programmatic on TV. None of the targeted options available online have executed effectively with TV. Programmatic TV is mostly a way for advertisers to buy low-cost local cable inserts or satellite inserts.
DRTV buyers, in particular, need to be cautious about programmatic. Several systems appear to be trying to use it to raise DRTV rates. These remove inventory from the DRTV pool, increase rates, and attempt to sell it to low-ball brand marketers. This would be a loss for DRTV if it became common practice.
Some claim programmatic TV should get a premium price because it will eventually offer a highly targeted media buying opportunity similar to the behavioral targeting available online. Our work doesn’t show increased results across all channels that justify the added cost.
We need to be cautious for a second reason: TV has always delivered excellent reach to a large audience while delivering sales. This has created powerful and large markets for our products because TV develops the next generation of customers while moving today’s customers to buy.
That doesn’t happen with programmatic. Narrowly focusing on a “target” based on behavior might sometimes increase short-term sales, but it always loses long-term impact, making it a pyrrhic victory for any larger marketer.
Koeppel: Programmatic TV buys increase efficiency through automation, but the flip side is that the advertiser loses control of the context: that is, the programming environment in which their advertising appears. These trade-offs increase risk for advertisers who may wind up in programming not suitable for the themes of their ads. On the other hand, in a campaign driven by response — where there is less concern about such sensitivities — you can pursue an MER (media efficiency ratio) that is less constrained and driven purely by performance.
Lee: Programmatic TV will increase targeted impression delivery. However, we have seen CPMs that are more than 20-percent higher than other direct response TV tactics, as programmatic is currently catering to a general buyer/client. Based on our discussions with sales teams, most programmatic TV is purchased via unwired cable inventory, which we purchase directly at a more efficient CPM, skipping the middleman. The challenge that will happen in the near future as programmatic TV buying increases is that traditional unwired inventory will become scarcer and more costly when buying direct, forcing the buys to go through a programmatic vendor. One note to take into consideration: we have heard from some of our partners that programmatic is working very well for local retail clients whose needs are extremely targeted based on their brick-and-mortar locations. Thus, programmatic might be more appropriate based on your business model.
Lyons: Programmatic TV buying will not be a dominant part of the mix in 2017. This is not to downplay its importance, but it is still nascent and filled with considerable inefficiencies — which is ironic in that its focus is erasing targeting inefficiency. Frequency of the targeted ad remains a major weakness for this platform. In 2017, we will see continued improvement for programmatic TV buying, but traditional TV and video buying will dominate the landscape and will continue to allow marketers to be successful.
Medved: Programmatic TV enables national brand marketers and their agencies to more efficiently and effectively reach their viewing audiences. The efficiencies are gained with better workflows — from planning campaigns to buying media to measuring results to billing and invoicing. A full transaction cycle can now be conducted much more quickly and with fewer resources.
In addition, the automated workflows enable marketers to overlay data to their process and therefore make more intelligent decisions as they move through the cycle. The smarter the plan, the savvier the buy, the more accurate the monitoring, the measurably better yield management coming through — this benefits both buyers and sellers of media. There is now a greater sense of transparency on what’s happening with media transactions, and with that comes a greater sense of comfort in knowing that both sides of the transaction have benefitted — making the renewal and growth opportunities ahead all the more tangible and accessible.
In the next few years, “programmatic” as a term will no longer be called out specifically. It will just become how media is managed, and managed better than ever before.
Stacey: Programmatic TV typically refers to the use of software to purchase digital advertising and automate the decision — making and ordering process of media buying by targeting specific audiences and demographics as opposed to the traditional media processes that involve more human interventions such as requests for proposal (RFPs), personal negotiations, booking and trafficking orders, and analyzing data.
Programmatic advertising is a valuable tool for certain digital platforms, including TV, but although it implies no human intervention it has limitations and still requires human experience and judgment in setting input parameters and interpreting overall results. Programmatic TV doesn’t necessarily replace the human element — it just makes us more efficient.