Data-Driven Advertising is Key to TV’s Survival, Part 2
Data-rich digital giants like Facebook and Google have done a better job than traditional TV providers at enabling advertisers to target precise audience segments and measure campaign performance. As a result, advertisers are expected to spend over $10 billion more in digital than on TV this year, according to eMarketer.
In part one of “Data-Driven Advertising is Key to TV’s Survival,” we asserted that TV providers can protect their revenues by better harnessing data to fuel ad sales. In part two of this series, we’ll discuss how data will affect the growth of TV advertising by looking at how it’s currently being used across four key TV advertising segments: traditional linear, audience indexed, addressable TV, and online TV.
Key segments within the U.S. TV advertising market.
Traditional linear advertising is advertising delivered against live/linear broadcast TV content by programming networks, syndicators, or pay-TV operators (cable, satellite, and telco). These ads are typically bought and sold on a program and daypart basis (as a proxy for reaching a particular audience), scheduled in advance, and may be reported on and guaranteed to deliver against a specific age and gender demographic as measured by a third party, most often Nielsen.
Audience indexed advertising is advertising that’s scheduled in advance and delivered just like traditional linear, except that these ads are planned and executed using audience data to find placements that index the highest within a particular target audience. For example, the target audience could be people in-market for a Ford automobile, with household income over $50k. Ads can be reported on and guaranteed to deliver against this specific segment.
Addressable TV advertising is advertising targeted to specific households, utilizing data from the pay-TV operator about the household. Addressable ads are delivered in real-time via dynamic ad insertion to live/linear or VOD (video-on demand) content available across cable, telco, and satellite set-top boxes (STBs).
Addressable TV is capable of providing the biggest lift in ad rates, in part, due to its targeting capabilities. All targeting in addressable TV ties back to anonymized household-level data, based on subscriber information that is accessible by the pay-TV operator. This means that advertisers can target specific audiences in real time, ensuring that only those households that fall within their targeting parameters are seeing the ad.
The fact that these ads are shown on the biggest screen in the house and that they aren’t hampered by fraud, bots, and viewability issues — like online TV advertising — increases the value of addressable TV even more. As a result, addressable TV advertising represents the most premium TV inventory on the planet.
Online TV advertising is advertising targeted to Internet-connected devices based on census-level data and delivered to viewers watching long-form, TV-quality streaming video within apps, or on websites. These viewers could be watching from a smartphone, tablet, PC, smart TV, or TV-connected device such as Apple TV or Roku.
Advantages of addressable TV and online TV.
Addressable TV and online TV have two main advantages over other TV advertising segments.
First, addressable TV and online TV have the advantage of census-based measurement, whereby advertisers and TV providers can measure reach, frequency, and engagement for every impression. This census-based measurement is more accurate than panel-based measurement (primarily used for traditional linear ads), especially when target audiences are narrowly defined. It would take a very large panel to reliably report on ads reaching a niche audience segment. Thus, the more targeted an advertiser wants to be with their campaigns, the greater the advantage of addressable TV and online TV.
Second, addressable TV and online TV allow inventory and yield to be optimized at the impression level. These automated optimization tools were initially created to serve the online TV segment, and now tools serving the addressable TV segment offer similar capabilities. A lot of innovation also is happening in the audience indexed segment, where new tools are making it easier for media companies to optimize a linear schedule.
Impact of each segment on the TV advertising landscape.
Historically, the traditional linear segment has captured the lion’s share of TV ad dollars, and will continue in its leadership position through at least 2020. In contrast, the audience indexed, addressable TV, and online TV advertising segments were each introduced over the last decade and are now seeing rapid growth in adoption.
Online TV advertising has risen alongside the recent proliferation of digital video sites and apps to take an early lead among the emerging TV ad segments. However, its leadership position may be in jeopardy due to weaknesses in viewability, fraud, reliable targeting, and measurement. These weaknesses have caused advertisers to reallocate some ad dollars back to the traditional linear segment, while increasing their willingness to invest in audience indexed and addressable TV advertising.
For media companies, the lure of all three of these new data-driven TV advertising capabilities is the ability to maximize the value of their TV ad inventory. By sending ads to only the viewers the advertiser wants to reach, the advertiser saves money by eliminating the wasted ads, and the media company can charge a higher CPM for the targeting capabilities. Meanwhile, consumers see ads that are relevant to them. Everyone wins. How much waste can these new TV advertising capabilities eliminate? Compared to traditional linear, audience indexed can provide an estimated 10-50 percent lift in ad efficiency, online TV can provide an estimated 100-200 percent lift in ad efficiency, and addressable TV — with it’s trusted MVDP data — can provide an estimated 200-400 percent lift in ad efficiency.
Data-driven TV ad segments are poised for rapid growth.
This year, Adobe estimates traditional linear will capture approximately 93 percent of TV ad spend. However, as ad spend begins to shift to more data-driven segments, traditional linear ad revenues are projected to decline by 2 percent annually over the next three years. Meanwhile, emerging TV advertising segments are estimated to grow at annual rates ranging from over 28 percent* (online TV) to 94 percent (audience indexed). By 2020, traditional linear will capture just 77 percent of TV ad spend, a 16 percentage point drop in just three years as ad dollars move to the more efficient forms of TV advertising. Thus, the growth opportunity in TV advertising centers around audience indexed, addressable TV, and online TV.
Figure 1. The market opportunity for data-driven TV advertising segments.
Data is the key to success for TV ad sales.
All future growth in TV advertising will happen in segments that depend heavily on data. Audience indexed, addressable TV, and online TV segments may apply different methods to different types of data, but one thing is clear: Across each of these segments, data is foundational to improved targeting, measurement, and inventory management — capabilities that digital platforms have historically delivered far better than TV providers. As a result, data can be TV’s saving grace.
This is why Adobe is committed to helping TV companies use audience data to increase the value of ad inventory and reduce media waste. Next month, in the final article of this three-part series, we’ll examine all the ways Adobe can help media companies leverage data and accelerate the growth of these emerging ad segments.
*Online TV estimate does not include Google or Facebook