Response Advisors Forum: Far From Crystal Clear

From TV Everywhere and addressable advertising to the consolidation of media ownership and content investments by virtual multichannel video programming distributors (vMVPDs) like Netflix and Amazon, the landscape of the television and video advertising industry is undergoing constant change. 

Meanwhile, the expansion of marketer spending across all facets of digital advertising continues to undercut budgets for TV campaigns. Still, TV remains the only outlet that provides massive scale for new marketers and established brands alike.

What does the future of TV advertising hold? How about in two years? In five years? Ten?

“The future of advertising will be based on performance and the ability of a medium to most accurately identify, deliver, and track a target audience for an advertiser,” says Richard Stacey, president and CEO of Toronto-based Northern Response Intl. Ltd. “Today’s TV technology can’t do any of these things very efficiently. TV will likely always have a place in the marketer’s tool box but — in most cases — just an increasingly shrinking place.”

Suffice it to say, Stacey’s opinion has supporters and naysayers alike. The debate about the effectiveness of TV in today’s marketing climate is surpassed only by the debate about TV’s place in the future. Read on to find out what Stacey and other members of the Response Advisory Board have to say about the future of TV advertising. 

How are you or your clients using TV Everywhere marketing opportunities, such as addressability? What opportunities does the ongoing shift in video consumption create for performance-based marketers?

Abed Abusaleh, Havas Edge: Marketers are using it as an extension of linear TV, or as a way to hone in on the end user that fits their target demographic.

Tony Besasie, Cannella Media: Depending on who you talk to, TV Everywhere and addressability can cover different areas. From a carrier’s perspective, TV Everywhere enables subscribers to watch their favorite channels on any device in or away from home — so it helps retain reach for those network buys. Addressability is targeting specific subscriber households based on specific characteristics.

We think addressability and performance-based marketing may drive better media efficiency for the right type of client. For example, if we are placing media for a product targeting expecting mothers, we may find addressability to be more affordable than a national campaign that has significant spillover. However, if the national campaign is bought at lower DR rates that deliver the same media efficiency ratio (MER), then we would still opt for the national and spillover for the brand awareness factor.

Peter Feinstein, Higher Power Media: We’re not acting rashly, nor irrationally. Instead we’re testing, testing, testing. Thus far, the jury is decidedly out on addressability. Our experience demonstrates that the pricing premium and lack of scale make client ROIs an insurmountable challenge for addressable TV. We prefer using well-sourced data, and applying it against larger-scale, more linear-oriented media. Our methodology works, whereas addressable TV hasn’t yet proven itself a winning investment.

I’m quite sure that addressable TV sounds magically appealing to those who have mostly digital media experience, as well it should for all the pitfalls of digital. But for those of us who’ve been successfully leveraging TV for decades, addressable TV isn’t the holy grail, nor even necessarily a gift. It actually labels those people falling outside of a digitally-driven algorithm’s parameters as “waste” when — in fact — the way TV works, those “wasted” viewers may be the only thing that stands between the client and a positive ROI.

The very nature of digital media is the accumulation of waste; when confronted with garbage-in, the only option to prevent garbage-out is employing powerfully aggressive parsing. It’s the only thing that makes some forms of digital media viable. You may try to apply hyper-targeting to TV, but what you get — instead of powerful results — is a decidedly negative ROI picture. 

Doug Garnett, Atomic Direct: Clients aren’t yet seeing impact from TV Everywhere. While it’s captivated many industry watchers, it will take time to develop into a real truth. At this point, some clients are dabbling in the alternatives to traditional TV in order to learn about the other options. But that’s about it.

So, at this time there’s not much opportunity for performance-based marketers. Eventually, traditional advertisers will come to understand TV Everywhere better. At that point, a large amount of time will open up for low-cost purchase — which is always to the benefit of performance marketers.

The one threat to this time opening up is that it may become available only through programmatic — which I believe networks will use to attempt to raise DR rates. Programmatic will be a middle-priced tier of TV advertising. How much performance marketers will benefit from TV Everywhere will depend on whether true remnant time becomes available.

Peter Koeppel, Koeppel Direct: Addressability allows us to get very granular in terms of reaching potential prospects, but we have to meet them wherever it is that they are turning to learn more about our advertised products and services. With viewers watching TV with their smartphones and other devices, we are making sure that — when a TV spot runs and viewers jump on their second screens to discover more — that we are there to provide that education. That way we can push them down our clients’ sales funnels versus serving them up to go online and be co-opted by a competitor.

Fern Lee, THOR Associates: Brands are using TV Everywhere marketing opportunities, such as addressability, to be more specific in delivery to segmentation specific goals. The idea of delivering different ads to different households within the same programming schedule is a strong marketing tactic. The tenet is to be able to attribute conversion based on these consumers, as well as capture their data for retargeting and future marketing. These ads are very costly, as only 13 percent of all households have addressable capabilities, and the technology varies with different operators, contributing to standardization issues. 

Richard Stacey, Northern Response Intl. Ltd.: Video has always been an integral part of our marketing. As new media opportunities have evolved, we have followed with video whenever the technology has allowed. Once Amazon is more fully able to enable video, it will be a game changer for many marketers. With the proliferation of video and user-generated content, we’ve also found the acceptable production level has been reduced — which has meant that we can produce video more quickly and cheaply than before. In fact, some of the demonstration videos that have worked well for us on social media were shot on an iPhone in our company’s kitchen. In the old days, that content would have taken months of planning and cost a fortune to have professionally filmed.

As major media ownership groups continue to consolidate, how will that impact availability and pricing for performance-based marketers? How will it affect combined offline/online planning with those groups?

Abusaleh: As these groups continue to consolidate, and sales groups find themselves with more inventory and new non-linear offerings to sell, there could be more packaging and bundling of the inventory being sold, which would then favor clients with larger budgets and broader audiences.

Besasie: That is difficult to say. The hope is these mergers strengthen the legacy TV base to enable them to compete more effectively against the new programming coming from Amazon, Netflix, and Hulu. The market will dictate pricing. 

Feinstein: We haven’t seen a huge shift one way or another. Much of what we project though is going to be dependent on how the entities that are left choose to sell their inventory. Bundling platforms for sale in packages will likely reduce some of the available inventory we’ve traditionally been able to secure at reasonable CPMs, but there will always be options and opportunities for us to establish win-win situations for both our media partners and our clients.

Garnett: With every new deal, the newly combined networks attempt to demand a premium with their combined might. And, then, that premium quickly disappears because there isn’t an increase in effectiveness for advertisers — mergers deliver other values to the companies merged but not in effectiveness for advertisers.

So, I expect no value from combined offline/online planning. Networks have spent years presenting “deals” that combine offline and online buys. I have yet to see one that was worth enough value to even consider seriously — mostly because network online opportunities are not very good yet.

Koeppel: More consolidation means there is more money to fund more programming, which ultimately creates more inventory and more audience fragmentation. That creates a situation ripe for performance-based marketing because as audiences become more micro, they may not be as appealing to traditional advertisers owing to their lack of scale. For direct response, however, the proof is in an ad’s ability to deliver an ROI based upon flexible pricing, regardless of the size of the audience. Therefore, we think the future is bright for the DR model.

Lee: The consolidation of media entities will take time and effort before pricing will be impacted, which will be modulated by supply and demand. Of greater concern, will be the effect of people power. Performance-based marketers have relied on relationships in the past, which will be severely affected by the merging of these corporate entities. The future looks to offer streamlined services with a need for stronger technology supporting marketing and advertising models. Integration, innovation, and creative strategies will be needed in partnership with media entities to deliver breakthrough campaigns.

Stacey: We’ll go where the audience goes. As media continues to proliferate, it creates more opportunities for marketers. Pricing is going to be increasingly performance-based depending on the variables being measured. The loss of net neutrality (if finalized) is more likely to have an impact on media pricing models than media consolidation.

What does the investment in content by the likes of Netflix, Alphabet, Amazon, and others portend for traditional television — and television advertisers?

Abusaleh: The investment signals that there are big bets being made by large cap companies in the over-the-top (OTT) and vMVPD world. The risk could lead to further fragmentation and time-shifted viewing but could also bring new opportunities to marketers. It will also allow for more efficient audience targeting.

Besasie: There is no disputing the fact that these companies are drawing viewership away from legacy TV. If the largest among them, Netflix, begins to take advertising, media spend will flow away from other platforms. This will lower demand on legacy platforms which will be good for performance-based marketers. 

Feinstein: In the near-term — one-to-three years — the decline in traditional TV viewing will likely accelerate. The content delivered by these platforms won’t be the sole reason for this acceleration. They are instead a small component of an over-arching trend in delivery technologies, and human expectations of how, where and when to find entertainment, plus the unstoppable force of advancing demographics. Behind the millennials are two younger generations, who are exerting their influence on how, where, and when entertainment is being consumed today — and, far more importantly, in the coming five-to-10 years and beyond.

There are so many legitimate question -marks that speculating on exactly what it means for TV advertisers is really a fruitless venture, other than to say it will look quite different from today. The biggest concerns will fall under scale and data-integration: will the advances in technology be able to integrate into TV, and the human psyche, enough to make small-scale use of TV affordable for advertisers to use, while being profitable for those who sell it? 

Garnett: This area is one of my areas of concern. If primary viewer habits were to shift to viewing without advertising, then our businesses and our clients would all suffer. The truth is, I think the U.S. economy would suffer.

That said, there are serious questions about whether Netflix can build the profits necessary to fund their extraordinarily high levels of program development without recourse to advertising. It’s the same with all the digital “let’s make programming” players like Amazon and Apple, as well.

What they never paid attention to is the reality that great programming is quite costly. So far, only Netflix, HBO, Showtime, and more traditional players show they understand what it takes to make a great show. What about Amazon? The viewing numbers I’ve seen are exceptionally low — suggesting that fewer than 10 percent of possible Amazon Prime viewers actually choose to view anything on Amazon Prime.

Koeppel: On-demand content that is not ad supported will likely dilute viewership for content that is ad supported, but it is entirely possible that once the likes of Netflix, Alphabet, Amazon, etc., have viewers hooked on their water-cooler content, that ads may enter the mix. Recall that the beauty of the cable model is that it replaced a single revenue-based business model — broadcast television supported by advertising — with a dual-revenue-stream model whereby subscribers paid for content that also generated a secondary revenue stream in the form of advertising.

That suggests that the public is willing to both pay to subscribe to content and put up with advertising. So, for example, if Amazon were to win the rights to the NFL, which has contracts coming up for renewal, it may very well sell advertising in addition to charging for access to the content, which may or may not remain a benefit of Prime membership. Similarly, many satellite radio stations started on a subscription basis and then added advertising to increase revenue once they had built a loyal following. What’s to say that cannot happen again?

Lee: The Marvelous Mrs. Maisel. Enough said. Seriously, content is king, but traditional TV is far from dead.

Stacey: I wouldn’t want to be an owner of a television station right now. TV is getting attacked from all sides, with both audiences and advertisers shifting their habits as the media landscape changes around them.

How can digital marketing options hope to match the scale that TV offers marketers? Or is that merely a pipe-dream? If so, why?

Abusaleh: Currently, it is a bit of a pipe dream. The only way that digital marketing can match the scale of TV is if the industry goes through a massive consolidation so that there are major hubs that agencies can go to and reach massive audiences. 

Feinstein: Today? It’s a pipe-dream. Five years from now, it may be less so. And in 20 years, scale in digital will be real, but it won’t be easy to come by, even when dramatic consolidation happens online… beyond Google and Facebook.

Garnett: It’s a pipe dream. When people are online, they are on a mission — seeking something, reading something, browsing a specific area, watching something. Because the web ad formats are so incredibly invasive and easily avoidable, the person’s “mission focus” makes it extraordinarily difficult to break through with a message about a new idea, product, or service. That means only a tiny number of attempts actually reach consumer consciousness. 

So, the inherent nature of online activity makes it a poor “reach out” medium (and a brilliant medium if people know your product well and are searching for it). That means it is impossible to scale advertising that brings a new product or idea to market. By contrast, TV is a brilliant reach out medium because of format, viewer habits, and the openness people have while viewing traditional TV.

Koeppel: If you examine the shift in generational media usage habits, eventually it is likely that what we consider a “TV audience” will simply be migrating to other devices creating a blur and a new definition of what such an audience is. Aggregating an audience of scale will therefore likely require buying eyeballs across multiple platforms that include both TV and digital to reach a sufficient critical mass of viewers.

Lee: Digital marketing options, such as streaming video, have a chance to deliver mass audience appeal. All other digital-designed initiatives need TV, radio, print, and other channels as a halo to drive to the web.

Stacey: Digital marketing offers scale already and is growing daily. Many marketers are skipping TV altogether. Differentiating between all these new media technologies and methodologies really depends on what it is you are marketing and what your campaign objectives are.

How can the two leading “must-see-live” TV sectors — news and sports — help linear TV maintain its importance in this era of shifting consumer consumption of video programming?

Besasie: The desirability of the content supersedes the method of delivery. Live sports, whether it is on TV or via digital streaming, will drive a concentration of viewers. Beyond sports, however, viewership will continue to diffuse and exacerbate media fragmentation. Delivering scale at the same level of efficiency will require automation and programmatic buying.

With the exception of sports and broadcast rights, we are heading toward a curated VOD world that includes auto-play cued video with options to choose alternatives … like YouTube. Linear TV, as we know it, will remain important to a large part of the population, but 10 years from now, TV as we know it will look different.

As Bill Gates said, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10.”

Koeppel: Now that they are providing content to viewers to watch anywhere and on any device that they prefer, it just means that broadcasters need to offer advertisers the ability to reach those viewers in a bundled fashion so that eyeballs are aggregated, regardless of device or whether the audience is watching live or on a delayed basis. News and sports are really the last two remaining anchors to stave off time-shifting, but where the public turns to access the content is going to change as the FAANG (Facebook, Amazon, Apple, Netflix, and Google/Alphabet) group of companies take over what has traditionally been the domain of broadcast and cable networks.

Lee: While news and sports are the two top areas for live viewing, the percent of time-shifted viewers for linear TV is not as great as you might expect. When an evaluation was done on a brand’s Q4 schedule to determine the percentage of time-shifted impressions (live vs. C7 ratings from Nielsen), only 10 percent of all viewing was time shifted. C7 Ratings/IMPs incorporate time-shifted DVR and VOD viewing for live plus 7 days

Please also keep in mind that VOD is in only 55 million homes, and each cable provider could differ in terms of networks and amount of content they offer. There are many networks that do not accept VOD advertising.

From a DR perspective, sports do not traditionally provide desirable ROI. However, it is a great branding play as long as immediate ROI is not expected. News is cyclical. During political seasons, and high interest events, news networks see spikes in viewership that marketers can take advantage of — though we also tend to see inventory tighten up and rates increase. 

The larger shift is between linear TV and OTT options. This is an area of continued growth — particularly with millennials — and is an area that advertisers should be incorporating into their marketing plans for audience expansion and reach.

Stacey: People want to watch programs at a time they desire. I am not sure live sports or news will necessarily save TV any more than broadcasting a live concert saved radio. There is so much content — and so many ways to view it and so many technologies for recording and time shifting — it is hard to predict who the winners and losers will be five years from now.