Google's pending distribution of live TV naturally invites dreams of a TV ad model driven by deep data and technology that allows for one-to-one targeting. The company suggested as much last week when it revealed details about its upcoming YouTube TV service.
"Over time, YouTube TV will provide network partners with new dynamic advertising opportunities," a Google spokeswoman said.
Each one of the roughly half-dozen companies offering pay TV over the internet so far, moreover, have spoken to their respective services' ability to insert ads into programming, allowing marketers to show different ads to different households based on various criteria.
But despite the obvious abilities these virtual multi-network services wield to create a more consumer-friendly ad model, at least in the near-term, their ads will look a whole lot like those delivered through the normal pipes. That means marketers should hang their hopes for innovation in TV commercials less on live streaming TV -- and more on particular subsections such as video on demand.
Contrary to initial speculation by anlaysts, YouTube TV will not start out selling the two minutes of commercial time per hour that is sold by traditional cable and satellite carriers, a spokeswoman confirmed. Commercials that air during the programming watched through the $35-per-month service will mimic those that air on traditional cable and satellite operators.
Even on those virtual carriers that are selling or plan to sell commercial time for themselves, such as AT&T's DirecTV Now and Hulu's upcoming live TV service, the new opportunities for marketers are limited.
"I don't think we are going to see any kind of massive transformation to the core model," said Dave Morgan, CEO at Simulmedia, the TV ad targeting company. "This is about digital conforming to TV versus changing TV. There will be incremental changes, but not revolutionary."
Streaming pay-TV services will work within the confines of the traditional TV ad model for at least the next five years, Mr. Morgan predicted.
Where the action is right now
For Hulu, revamping the live TV ad model is less a focus than increasingly popular on-demand viewing, said Peter Naylor, senior VP-advertising sales, Hulu.
While Hulu's forthcoming sevice will sell the two minutes of commercial time that are also sold by traditional operators, Mr. Naylor said "the live stream itself won't be dramatically different."
Hulu's plan is to offer consumers one interface that pulls together the live, on-demand and recorded viewing that consumers currently spread across a variety of platforms and devices.
With ads, Hulu wants to improve the experience in delayed viewing. It will incorporate dynamic ad replacement in its cloud-DVR functionality, Mr. Naylor said, in an effort to make advertising in delayed viewing more relevant. As it stands, if you watch a program you recorded a week or months ago on your DVR, you see ads that are a week or months old.
There will also be advertising and sponsorship opportunities within Hulu's interface itself, Mr. Naylor said
There's no denying the potential for TV services delivered to individual internet addresses to reshape TV's ad model, which for decades has offered marketers the chance to buy audiences only in big demographic buckets. More data, from the likes of a Google no less, allows for greater targeting of audiences and more robust measurement than TV has seen in the past. It also opens the door to dynamically insert ads into live programming, similar to the way ads are served online.
AT&T expects to be able to dynamically insert ads into live programming on DirecTV Now by mid-2017, the company said when the product was first released in November. An AT&T spokesman declined to comment on this progress.
Dish Network's Sling TV already offers dynamic ad insertion, allowing ads to be geo-targeted and served only to specific platforms and devices, like smartphones or Roku boxes, according to Warren Schlichtine, exec VP-marketing, programming and media sales, Dish Network. Marketers can buy audiences by demographics, time of day, networks and program genre, among other factors. The capabilities vary by network.
Precisely drawn crowds
Expanding the reach of addressable advertising would certainly help speed demand from marketers, which want to hit the right consumers -- but in sufficient quantities to help their business. That isn't easy yet.
Virtual pay-TV companies could add about 5 million to 10 million addressable households by the end of the year, said Seth Walters, senior partner at Modi Media, the advanced TV arm of GroupM.
The ability to watch live TV on mobile will allow marketers to move from targeting at a household level to a personal level, Mr. Walters said. But as it stands, most of the viewing taking place on these platforms is occurring on TVs through connected devices rather than through mobile, he said.
While over-the-top services from traditional pay-TV operators like Dish and DirecTV may present an opportunity for these companies to act more like digital, the services from untraditional players like Google and Hulu allow those companies to infiltrate the lucrative business of TV advertising.
"Instead of selling something that is TV-like they are now selling TV," Mr. Morgan said. "This is less about making TV look more like digital than YouTube getting to sell TV to TV people."
For marketers at this very moment, the arrival of more streaming-TV services isn't much different than when Dish and DirecTV popularized satellite TV service in the '90s, said David Campanelli, senior VP-director of national broadcast, Horizon Media.
"It's just a different way to deliver a package of cable channels," Mr. Campanelli said. "It makes no difference to a marketer if people are watching their commercial through Comcast or YouTube TV."
The more immediate impact stems from the fact that some of these services, such as Hulu, blur the line between live and delayed viewing, Mr. Campanelli said. There's a significant difference between 1 million people watching a commercial live and 1 million viewers -- perhaps some of the same people being reached more than once -- watching an ad that's dynamically inserted in playback over a two-week period, he said.
"TV's value has been rooted in it live, unduplicated reach," Mr. Campanelli said. "When Hulu serves up recommendations to users there's no distinction between what is airing live, what is on-demand and what is a Hulu original. That's a fundamental change."
Ultimately, it will also come down to how big the virtual pay-TV marketplace gets. So far they count about 2 million subscribers combined. "At these levels, they are not a threat for any model," Modi's Mr. Walter said.
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CORRECTION: Based on information provided by YouTube, an earlier version of this story said TV networks on YouTube TV will sell the 2 minutes of commercial time that cable and satellite carriers sell in traditional pay-TV arrangements. YouTube TV will actually control that time, although it will not sell it at the beginning.