Netflix and Disney are merely the latest TV providers to introduce advertising in an attempt to shore up subscription revenue and improve profitability. Ad-funded business models are now predominant and addressable advertising the big promise to advertisers. However, to fight off the tech giants, TV Operators will have to deliver audience targeting on TV that matches the sophistication of digital media.
With the help of pervasive connected computing, the scope and scale of the TV industry has dramatically changed over the past decade. Consumers now have a wide variety of choice in TV consumption with the establishment of many providers and both subscription and advertising-funded services out-competing traditional public service broadcasters (PSBs). TV viewing via OTT and on-demand, whether TV set, mobile device, or computer, is becoming the dominant behaviour.
TV Operators are facing several challenges to future income streams. Competition is fierce and consumer research suggests that monthly subscription pricing becomes highly elastic once it reaches modest (by traditional Cable pricing) monthly amounts, leading to high churn.
In a converged telecoms and media market, the most popular TV business model is advertising-funded (either in part or in whole). Even Netflix and Disney have bent in the face of revenue growth challenges and have introduced advertising on their platforms.
Digital advertising has grown enormously, of course but so too has come the realisation that it is ripe for fraud and misattribution. The US ANA estimated that global companies lose around $19.5bn pa due to fraudulent techniques such as Traffic sourcing, Bots/non-human traffic, Domain spoofing, Cookie stuffing, Click injection, Ad stacking and Pixel stuffing. It’s therefore unsurprising that advertisers remain attracted to the high-quality experience offered by TV.
However, the experiences of digital marketing and a greater focus on return on investment are increasing demands from advertisers for better accuracy and accountability from TV advertising as well as the capability to buy consistent audiences across all the media they wish to use.
Addressable TV advertising is posited as the answer, but the revolution has been slow to come to the boil and investment remains modest. According to recent estimates, £6 billion was spent globally on addressable ads delivered via set-top boxes and OTT services, up 38% year on year, but representing only a 3.3 per cent share of the total TV ad market.
One of the big factors holding back growth is the massive disparity between targeting capability on digital compared to TV.
Targeting on TV is antiquated. Most TV advertising is still bought and sold using very crude demographic segments. As operators have moved into addressable advertising, most have initially sought to sell ad inventory using geo-targeting and by matching subscribers to purchased third party lifestyle data to offer Advertisers ‘off the shelf’ targeting attributes. However, this doesn’t address Advertisers demands for consistent digital-TV audience taxonomies (for cross-platform campaigns) or accuracy (ie based on actual consumer behaviour).
The business case for Addressable TV Advertising depends on accurate behavioural audience targeting
With the rise of Addressable Advertising capability, there is an accelerating demand from Advertisers for better targeting on TV using audiences that are consistent with media buying on digital. Digital has established the usefulness of the ‘Affinity attribute’ albeit the death of cookies is causing a lot of re-thinking about how to target. First party data has become more important and federating this data is crucial (ie a consistent way of using it). This has the advantage of allowing the Advertiser to design campaigns based on single, defined audiences that can then be addressed across any medium (cross-platform campaigning).
A key enabler for a TV Operator is to package its unique and advantageous 1st party viewer data asset to offer Advertisers valuable, behavioural-based target audiences that they recognise, value and can measure.
Empirical evidence suggests that more sophisticated targeting attributes make an Operator’s platform more attractive to existing TV Advertisers, by offering increased reach and enhancements such as better viewer ID, as well as pulling niche and premium Advertisers into TV by enabling them to buy only the audiences that are relevant to their offerings.
Many TV Operators that offer Addressable TV Advertising trade mainly geographical and generic 3rd-party attributes for targeting. Whilst this is a step forward from the old TV demographics, it is significantly behind both digital targeting offerings and the powerful propensity-based targeting capabilities used by those organisations with lots of their own customer data.
TV operators need to step up their targeting capabilities in order to make their investment in addressable advertising pay back. Some TV operators have recruited data science resources to do this. However, producing meaningful, predictive and (hence) valuable targeting attributes from 1st-party data can be slow, expensive, and uncertain for an operator using manual analytical resources and inadequate metadata. And it’s hardly compatible with the fast-changing dynamics of viewer behaviour.
In digital, companies can more easily collect behavioural data and create affinity segments. In TV it is much more difficult. Collecting raw viewing data and transforming it into meaningful viewing records is challenging and modelling those viewing records to create and operationally manage affinity targeting attributes is even more difficult, especially if content metadata is weak.
What is needed is a highly automated targeting attribute development and maintenance solution, capable of producing and adjusting a wide range of accurate, behavioural-based target audiences at the speed the advertising market demands. This is not a trivial thing to create. The essential components of such a solution are rich content metadata, access to a large scale and scope of viewing data from which to derive standardised attributes and an advanced AI platform to develop and maintain a suitable suite of target audiences that deliver proven ROI for advertisers.
That’s why I’m really enthusiastic about ThinkAdvertising, enabling TV operators to install an ‘out-of-the box’, sophisticated behavioural targeting solution to IAB standards that can be up-and-running in days. It means a TV operator can focus on maximising its Ad inventory, rather than becoming bogged down in data and analytics.