Given the sophistication of marketing planning these days, it should be more of a surprise that heavy TV viewers still see many ads far more often than marketers ever desired. Ads shown to heavy TV viewers account for most TV ad impressions, but they yield far less value -- or even ad revenue -- than the sheer repetition would suggest. But a solution is actually close at hand, offering the potential of major benefits to advertisers, television networks and video service providers.
The third of the audience that watches the most TV accounts for about two-thirds of all ad impressions, and they frequently see ads far more often than advertisers need or want them to. My analysis shows that for a typical ad campaign with an effective reach of 60%, the top third of TV viewers is shown ads at an average rate over three times greater than the advertiser's targeted ad frequency.
Major TV networks and other sellers of ad time pay a steep price for this. The rates that they can charge for an ad placement are capped by the resulting ad impressions' marginal value to advertisers, since any higher price would dissuade advertisers from buying the ad time. Ad impressions for heavy TV viewers offer limited marginal value, since most such viewers see the ad so often that the marginal value of an additional impression is effectively zero.
Ad impressions for the top third of TV viewers may account for only 10% to 20% of an ad placement's valuation. The bottom two-thirds of viewers, by contrast, can account for 80% to 90% of an ad placement's valuation, thus effectively determining the price at which ad time can be sold. Ad impressions shown to heavy viewers actually reduce CPM prices by diluting this value across a larger base.
The key to unlocking the potential value of ad exposures for heavy TV viewers is to disentangle them from those of lighter viewers. Cable companies and other video service providers should use their advanced advertising infrastuctures to enable one set of ads to be shown to their heavy viewers and another set of ads to appear before lighter viewers. Sellers of TV ad time could then market the two audience segments separately, enabling major advertisers to better balance ad impressions across viewers. This will make ad campaigns more efficient, freeing up ad time that can then be sold to other advertisers whose reach requirements are consistent with an emphasis on TV-intensive households.
In contrast with other types of targeted TV advertising, this bifurcation of ad time poses few operational or technical complexities. Distinct subscriber populations, demonstrably relevant to virtually any television ad campaign, could be assigned explicit ad schedules based on defined time slots within specific programs. Advertisers and agencies would be able to use conventional media planning techniques, and sellers of ad time could use their existing ad sales and inventory management tools. With each subscriber assignable to one of only two audience segments, video service providers could readily partition their own ad inventory and then, for a fee or other compensation, that of cable and broadcast television networks. As the new approach is rolled out, and even before it is universally available, ad campaigns would be able to seamlessly combine traditional and segment-specific ad placements to derive some or all of the potential efficiency gains.
Ultimately, bifurcated ad time has the potential to expand opportunities for advertisers to reach viewers, and thus increase TV advertising revenue, by a hefty 40% or more. Its ability to do this based on existing programming, processes, and infrastructure could make it unique, and uniquely valuable, among emerging opportunities to grow TV advertising.