Why Is the TV Ad World So Hard for Silicon Valley to Understand?

TV Hasn't Been Broken Enough That It Needed Fixing

By Published on .

Dave Morgan
Dave Morgan

For decades, the TV industry has shown an uncanny ability to resist change, dodge disruptions and maintain its status quo position as the workhorse, show horse and year-over-year grand champion of the media industry.

Over the past 15 or so years, the internet has grown to more than 25% of American's media consumption, more than 15% of US marketers' ad spend and created hundreds of billions of dollars in new commerce activity in the US. The newspaper industry has been decimated; same for the music industry; same for the book industry. Magazines are shells of their former selves. Radio is in the tank. Yellow page directories are largely gone. Print coupons and direct mail are on the watch list. Not TV.

TV viewership is still strong, having grown considerably over those 15 years and withstood extraordinary competition from the internet. TV advertising is still strong too, despite increased audience fragmentation, internet competition and a reliance on decades-old buying, selling and measurement models. TV subscriber fees are up, despite more competition for their time, a wealth of free video programming on the internet and tough competition for discretionary subscription spending from consumers who now shell out big bucks monthly for broadband internet and mobile telephony.

As a fully electronic medium, many have thought that television advertising was ripe for digital democratization. Silicon Valley, and Silicon Valley-inspired technology companies have taken a lot of shots at bringing digital disruption to the industry, particularly over the past half-dozen or so years, only to be repelled again and again.

In 2007, we saw the launch of Google TV Ads, the search behemoth's effort to making buying TV ads as simple and automated as buying online search. The service was shut down this past August. In 2008, Microsoft acquired TV ad technology company Navic, rebranded its Admira data-driven ad buying marketplace as the Microsoft TV Ad Network, and put considerable muscle behind bringing digital ad approaches to TV advertising. It was quietly shut down this past Spring. Also in 2008, the six largest cable companies in the US launched Canoe Ventures, a consortia-led effort to make cable TV advertising interactive, addressable and nationally integrated. It was largely shut down at the beginning of this year.

Lets not forget SpotRunner, a high-flying TV ad start-up launched in 2006 to automate local TV ad buying and which fell back to earth four years later. And, only five years ago, eBay both launched and abandoned its TV Ad Exchange, a high profile effort supported by a large number of major national TV advertisers to bring transparent, auction-based bidding to cable television advertising. It never conducted an auction, having been boycotted by all of the major cable TV networks.

What gives? What is it about the TV ad business that has so baffled, befuddled and stumped Silicon Valley? Here are my thoughts, some of which are pretty obvious:

TV advertising hasn't been broken enough to fix. Yes. Web-like technology could make TV ads more effective. Viewers get too many irrelevant and redundant ads. Two-thirds of advertisers spots miss their mark. Media owners dump tons of their spots to remnant buyers. But, as we all know, when the overall market is healthy and folks are pretty comfortable -- which they are in TV today -- they don't tend to embrace change.

TV is a closed market. While the TV ad market is characterized by intense competition within its spheres -- among networks, agencies and distributors -- that competition is limited to a small number of very powerful players. Thus, change happens very slowly and is easily resisted unless most or all embrace change at the same time.

It takes more than electrical engineering. Many of the failed services had superior electrical engineering, but weren't as good at "social engineering." People, not interfaces, run the TV ad business. You can't do business in TV until you touch, talk, listen -- and pay a lot of respect -- to a lot of people. Tech-centric companies don't always operate that way.

TV's core market elements still work well. Many of the disruptive solutions tried to directly displace foundational elements of the TV ad market that were working pretty well, like its "futures market" (the Upfront), its buying and selling interfaces (people) and its currency (Nielsen). Sometimes it's better to pick your spots and embrace and extend existing elements, not just throw them out.

It's probably better to not be Google or Microsoft. It probably didn't help that some of the companies trying to disrupt the TV ad market had market capitalizations many times larger than the companies they were trying to work with, and that their ultimate intentions were to siphon ad dollars out of television into online. Sometimes it's better to be "Anyone But Google" and "Anyone But Microsoft."

Don't automate or "auctionize" just because you can. Most of the failed solutions introduced online interfaces, automation and auctions to optimize the TV ad industry's processes. However, most folks in TV advertising don't think they have a process problem. The process of buying, selling and trafficking TV ads is surprisingly efficient, certainly when compared with online ads. TV's problems are more related to audience fragmentation, time-shifted viewing and wasteful ad packaging.

Does this mean that TV advertising's "citadel" will never be breached by Silicon Valley? No. Every day, TV's ad problems become more pronounced and every day technology and solutions get better and folks get wiser. It's just a matter of time, perseverance and will.

Dave Morgan is CEO and founder of New York-based Simulmedia, a TV ad targeting company. Simulmedia uses data-driven technology to help improve the relevance and results of TV advertising. Follow him on Twitter at twitter.com/davemorgannyc.
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