Month: March 2021

The TV ad market needs fixing

For years, fewer and fewer people have tuned into traditional TV, while TV networks have asked for more and more money from advertisers who continue to crave the big screen’s broad reach. These conditions match the law of supply and demand. But heading into this year’s annual upfront negotiations, agency executives plan to demand that TV networks — as well as advertisers — take a harder, more realistic look at the supply of ad inventory.

“This year, there’s a stark reality to what the marketplace is and the fact that there are significantly less impressions. There needs to be some forced change this year,” said one agency executive.

The key hits:

• The TV ad industry needs to reckon with the years-long linear viewership declines, according to agency executives.
• TV networks need to offer advertisers more realistic viewership guarantees.
• TV advertisers need to be more open to TV networks’ non-linear inventory, especially the videos they post to platforms like YouTube.
• These changes will be a focal point for this year’s upfront talks, although changes are unlikely to happen overnight.

The primary shift that agency executives are angling for in this year’s upfront talks is a recognition that the erosion of linear TV viewership is not going to reverse. Six million U.S. households canceled their pay-TV subscriptions in 2020, shrinking the overall pay-TV subscriber base to the smallest it has been in nearly three decades, according to research firm MoffettNathanson.

In light of that erosion, TV networks need to lower the viewership guarantees they make to advertisers, particularly for programming that is not live sports or broadcast networks’ prime-time shows but also for that more prized programming that has also suffered viewership declines in the past year. By that same token, advertisers need to be more open to TV networks’ digital inventory, not only the TV shows they stream on their connected TV apps but also the videos they post to platforms like YouTube.

“It starts with an acceptance on both sides that this is where the world needs to work toward, and it’s a retraining of everyone’s thought process to start with,” said a second agency executive.

For both TV networks and advertisers, the foundation of that retraining is financial in nature. TV networks have erred on the side of overestimating viewership when making guarantees to advertisers because they didn’t want to leave money on the table if viewership surpassed expectations and they ended up effectively giving away impressions for free. But for the most part, viewership isn’t going up anymore. 

“We have definitely seen a buildup of under-delivery. Networks are continuing to face struggles with the ratings, and fluidity [redirecting linear campaigns to streaming and digital inventory sources] is definitely a big push in terms of making up for linear under-delivery,” said a third agency executive.

Meanwhile, advertisers have bucked against the higher prices that networks charge for streaming impressions versus linear impressions as well as the digital videos, like late-night show clips, that networks try to use to make up for linear viewership shortfalls. However, advertisers’ steadfast demand for linear TV inventory above all else has contributed to an ever-tightening TV ad market and the continued pileup of network debts to advertisers for the viewership shortfalls, given that there is less available linear inventory to quickly wipe those debts clean.

However, just because the TV ad market appears primed for a correction, that doesn’t mean that this year’s upfront negotiations will immediately trigger a sweeping overhaul. “A correction sounds great in theory,” said the second agency executive. This person doesn’t believe the current situation of relying on incorrect viewership estimates and trying to make up for the shortfalls is sustainable. “But there’s not an easy fix,” they said.

For starters, as much as networks may know that linear viewership isn’t going to grow anytime soon, they are likely reticent to lower their viewership estimates for the fear of leaving money on the table. And connected to that, as much as advertisers don’t want to keep accumulating owed impressions, they also don’t want ad prices to go up if supply goes down, which agency executives expect would happen if the networks lower their viewership estimates.

“It will be a difficult upfront, but I think that both sides are equally incentivized to make some of these changes,” said the first agency executive.

Confessional

“The dirty word in linear TV is cash back. We would look for cash back, and for networks, that was not an option. That’s changing.”

— Agency executive on TV networks’ willingness to give advertisers money back for viewership shortfalls

Stay tuned: Addressable TV’s big break

The addressable TV advertising market is like California’s earthquake outlook. So many people have been saying for so long that The Big One is coming, but it still hasn’t (as a California resident, this is perfectly fine with me). But unlike the Golden State — fingers crossed — the addressable TV ad market is ready to rumble.

The foreshocks have already started. Nielsen and Vizio have spent the past couple years developing technology to enable traditional TV networks to run ads targeted to individual households, which is typically limited to the two minutes of local TV ad inventory on linear. Meanwhile, pay-TV providers like Comcast have similarly been striking deals with TV networks to make the networks’ national ad inventory addressable.

But the addressable TV market seems poised for a seismic step-up.

• Roku announced on March 1 that the connected TV platform owner is acquiring Nielsen’s advanced video advertising business, including its technology to deliver household-targeted ads on linear TV. The technology will enable Roku to sell household-targeted ads that can run across its CTV platform as well as linear TV networks (so long as it has the networks’ approval), according to a Roku spokesperson.
• Roku’s news follows NBCUniversal’s announcement on Feb. 25 that the Comcast-owned media conglomerate has struck a deal with Charter to enable NBCUniversal to convert its linear TV inventory into addressable TV ad impressions when ads are served to Charter’s pay-TV subscribers.

Because addressable TV advertising mirrors the targeted advertising that companies are accustomed to on digital platforms like Facebook and Google, as more traditional TV ad inventory becomes addressable, “the more you’ll see digital-first clients turning to the television screen,” said one agency executive.

Given the limited supply of TV inventory with linear viewership dropping, though, that potential influx of demand could further constrain the TV market, shooting up ad prices and putting more pressure on advertisers to secure that inventory in the upfront market.

Numbers don’t lie

34%: Percentage of linear TV and streaming show episodes that were directed by women during the 2019-20 TV season.

6 million: Number of paying subscribers that AMC Networks has for its streaming services.

30%: The percentage increase that Disney is reportedly expected to pay to retain the rights to Monday Night Football.

$1.8 billion: How much money TPG is paying AT&T for a 30% stake in DirecTV.

12.2 million: Number of active accounts for Vizio’s smart TV platform at the end of 2020.

What we’ve covered

Bleacher Report’s House of Highlights wants its creator-led challenges to rival live sports:

• House of Highlights’ live online competition series pits social influencers against one another.
• The publisher has not yet sold ads against the show.

Read more about House of Highlights here.

Why Re/Max is leaning into addressable TV:

• The real estate brand started buying addressable TV ads after noticing a drop in cable TV subscriptions and cord cutting-driven rise in audience fragmentation.
• TV and video account for 35% of Re/Max’s current media budget.

Read more about addressable TV here.

How eko’s partnership with Walmart is making interactive video more mainstream:

• Walmart-backed eko and the big-box retailer are expanding their interactive cooking video program.
• Walmart said the program’s beta version had an 8.7% click-through rate.

Read more about eko here.

Why direct-to-consumer brands eye Snapchat as they diversify from Facebook:

• Advertisers’ spending on Snapchat has grown to account for 10% to 25% of media budgets now.
• The rising interest stems from a need by DTC brands to broaden beyond Facebook and get ahead of the potential fallout from Apple’s forthcoming IDFA change.

Read more about Snapchat here.

AC Milan’s endgame for content:

• The Italian football club has formed its own production arm to develop, produce and distribute programming, including commercials and social videos.
• The new 40-person unit is overseen by AC Milan’s marketing and digital director.

Read more about AC Milan here.

What we’re reading

Discovery+’s strong start:
Discovery is showing up skeptics who dismissed the cable TV conglomerate’s prospects of competing in the streaming wars, according to The New York Times. Discovery+ has also accrued 12 million paid subscribers. An unknown share of those subscribers are people who receive a six-month-long free trial of Discovery+’s ad-free tier via their Verizon wireless accounts, though, but the fact that however many people have taken advantage of the offer suggests that there is a sizable appetite for Discovery+ and that Discovery’s claim that its focus on factual programming (reality TV shows and documentary programming) differentiates meaningfully enough from general-interest streamers like Netflix.

PBS’s streaming pivot:
Like every other TV network, PBS is having to figure out how to shift its business to streaming, and that includes developing a revenue stream from digital donations, according to Protocol. The public broadcaster started accepting donations on Amazon’s Fire TV platform last fall. PBS is also kicking the tires on the free, ad-supported streaming TV market in addition to distributing its programming on platforms like YouTube.

Advertisers’ ad-free streaming strategies:
The popularity of ad-free streaming services like Netflix and Amazon Prime Video means that advertisers risk missing out on a large chunk of audience attention. As a result, marketers like Pepsi and KFC are increasingly pushing into producing their own programming, according to Variety. Brand-sponsored shows are nowhere near new, but they continue to be a hard sell. In addition to the difficulty of creating a show that would win audiences’ interest — let alone one that’s also designed to sell product — there’s the added challenge, in the era of results-minded performance marketing, of evaluating whether those eyeballs led to product sales. After all, Netflix isn’t exactly known for sharing viewership information.

Personalized marketing has never been more important to advertisers. Platforms need to become highly effective at not only identifying target audiences but also optimizing content delivery. More importantly, how do platforms adjust from third-party cookie identifiers to the cookieless world?

Privacy concerns and regulations

Before May of 2018, programmatic platforms used cookies as a way to identify users. It was also how a vast majority of brands performed targeting until the European Union’s General Data Protection Regulation, the United States’ California Consumer Privacy Act and cookie-use limitations within browsers (i.e., Apple’s ITP) took hold. These regulations, along with Google’s move to eliminate third-party cookies within the next year, have placed severe restrictions on many platforms’ abilities to easily track customer behavior and information to deliver relevant ads and content accordingly.

Many advertisers, faced with these restrictive privacy laws and regulations domestically and globally, are returning to contextual targeting to find customers and expand their reach. But aside from these regulatory effects on many platforms’ ability to use cookies, many advertisers have been less than enthused with cookies’ overall performance in determining behavioral intent, viewability and fraud.

This leads the way for contextual targeting, along with its privacy benefits, to return to the forefront of performance advertising.

The return of contextual targeting

Contextual targeting works like this:

• Content around ad inventory on a webpage, or the entities and themes present within a video, are extracted and passed to an optimization engine.
• The content is then evaluated on multiple criteria: safety, suitability, relevance and context. 
• Advanced targeting solutions layer-in additional real-time data related to the viewer’s context when the ad is viewed, such as time of day and location.
• If it is brand safe and meets sentiment priorities, DSPs continue with the auction (i.e., the media buy). 

By removing the need for cookies, the platform uses other real-time context-based signals to make a bidding decision. Sophisticated platforms analyze text, video and imagery to create contextual targeting segments in real-time, which are then matched to advertiser requirements. As a result, the delivered advertisement appears in the most relevant and appropriate environment. 

For example, an ad for accounting software may appear in the Wall Street Journal’s markets section. In this instance, the environment is relevant to the product. 

This also ensures that the context is not negatively associated with a product and that the ad does not appear if the article was negative or contained financial misinformation. The ad for accounting software would not appear if the adjacent article is about how accounting software can be misused to embezzle funds easily, for example.

Driving efficiencies with contextual optimization

While contextual targeting places ads relative to the page’s content using page category, keyword and semantics, contextual optimization — or context-driven optimization — goes a step further: Machine learning algorithms optimize bidding and delivery of ads based on the contextual relevance and past performance at the placement level. 

Information from a recent Dentsu study —  ‘Understanding Contextual Relevance and Efficiency’ — revealed platforms that have developed intelligence through machine learning and AI have distinct advantages. Contextual optimization enables the programmatic buying of inventory based on the appropriate categories of relevance, and it can significantly outperform traditional audience targeting based on the user.  

For example, that same Wall Street Journal accounting software advertiser might place ads on the publication’s markets page, paying higher cost-per-click or cost-per-thousand impressions. Or, they might utilize contextual optimization to find other high-performing sites and placements across many other websites and pay much lower CPCs or CPMs with the same results. Contextual optimization also ensures relevancy to the target buyer and brand messaging while finding sites and placements that still deliver the expected return on ad spend at lower costs.

As other user targeting methods based on user ID are phased out thanks to growing privacy regulations, contextual targeting and contextual optimization will be the new standard for advertisers seeking performance outcomes, compliance and better brand safety. 

The ability to place relevant content in front of the right audience at the right time is of utmost value to advertisers. It is not just the ability to target contextually but the intelligence of the platform’s contextual optimization solution that will help ease the concerns of the new cookieless world. 

Forecasting a future for CPMs

Some believe that CPMs will “normalize” when third-party cookies are removed from Chrome. But marketing budgets are not fixed, as evidenced by the shift toward walled gardens and CTV. Therefore, most marketers will always buy where there is addressability rather than paying the same CPM for worse outcomes, when more performant channels are available.

The way forward for the open internet is through people-based, not device-based, authenticated identity solutions that are durable, scalable and perform better than what they will replace. Most importantly, any solution must ensure marketers are progressing toward a better-democratized internet and ecosystem — one that prioritizes customer trust. 

Most marketers already know how people-based identity works. It is why 70% of all new digital ad dollars were expected to go into walled gardens in 2020. A key factor in having addressability is that walled gardens have done a good job of demonstrating the value exchange with users. Namely, users are willing to share their email or phone number because they are confident that their data is worth sharing for the experience and content on the platform. This makes the walled garden inventory nearly 100% addressable. 

Meanwhile, open internet inventory is cookie-based and, when targeting on cookies, marketers can often only reach a fraction of their audience. With people-based identifiers, marketers can achieve the same addressable reach they are used to with walled gardens. Through this approach, marketing teams can bring the people-based addressability of the walled gardens to the open web while preserving transparency and control. 

People-based identifiers in a multichannel world

Today’s consumers move in and out of channels multiple times a day. Marketers must prioritize an identity solution that can reach them wherever they are, whether through display, mobile, CTV or other mediums. 

To accomplish this effectively, advertisers require an identity or addressability solution that performs in diverse environments. They can also be used to personalize and measure the customer journey across touchpoints — considering most people have multiple email addresses, a phone number and a history of addresses. People-based technology helps marketers create a connected view of the customer by interpreting various pieces of identity that individuals share with different publishers and marketers into a common, interoperable identity that works across all channels. 

Marketers can start buying addressable inventory today and set clear KPIs that they want to achieve: better reach, more measurable impressions and better return on ad spend. Not every campaign will overachieve those KPIs, but many marketers are seeing campaigns consistently meet or exceed their KPIs.

For example, a B2B international supplier of maintenance, repair and operating products wanted to compare reaching their B2B audience on a third-party cookie against LiveRamp’s people-based identifier. The supplier ran A/B testing campaigns, which resulted in a 3x increase in ROAS, a 54% decrease in cost per acquisition, and a 12% decrease in CPMs when buying on people-based identity. 

A Goodway Group and Index Exchange campaign for a national retail client similarly saw a 3x higher reach with consistent performance when transacting on LiveRamp’s people-based identifier compared to third-party cookies. Further, Goodway Group is now in the process of migrating all of their first-party LiveRamp audiences to bid on the same people-based identifier. 

Given that 40% of the internet is cookieless and can now be reached via people-based identity, it’s a compelling option. Further, people-based inventory incorporates cookie-able inventory and represents the best of both worlds — cookie-able plus cookieless scale, ensuring that campaigns will work when the cookie is long gone.

“Goodway Group aims to future-proof buying and measurement strategies for our advertisers,” said Amanda Martin, vice president of enterprise partnerships at Goodway Group. “We seek to act now versus wait, and we see addressability as an immediate opportunity to implement a buying strategy that works with or without cookies — part of a multi-solution effort to replace third-party cookies and device IDs.” 

It is clear that 2021 is the year for action. The future of the open internet is at an inflection point. If marketers and publishers are to maintain an open, healthy and competitive ecosystem, they need to act swiftly to adopt solutions that maintain critical marketing workflows, support publisher revenues and deliver a better customer experience.