TV's Digital Age Will (Truly) Arrive In 2017
Today, 15% of U.S. Set-Top Boxes Are Measured Like The Web
Television is in an interesting place these days. More Americans are watching more television than ever before. As other mass media decline (except the Internet), TV keeps growing, solidifying its position as advertising's dominant media channel in spite of the fact that its audiences are fragmenting across an ever-growing lineup of new programs, channels, day-parts and devices. However, TV as we know it – and TV advertising – are in for a big digital disruption. Are you ready?
Television is fast becoming a digital, fully-measureable advertising medium. Today, more than 15% of TV set-top boxes in the US enable direct, second-by -second or minute-by -minute measurement of the TV activity that occurs in those homes including what programs are viewed; what ads are viewed; and when exactly channels are changed. Within five years, 50-75% of all operator set-top boxes will have this capacity and, by that time, those boxes will be joined by tens of millions of other TV-related connected data-capturing devices – smart TV's, web-enabled gaming devices, alternative set-top boxes – with brand names like Apple, LG, Samsung, Microsoft xBox, Sony Playstation, Tivo, Google, Roku, Boxee and many more.
Simply, by 2017, the vast majority of all television viewing in the US will be census-measured. Like it or not, virtually all TV advertising at that point will have the capacity to be bought, sold, measured, managed, targeted and optimized according to web-like digital ad and audience metrics in addition to traditional metrics as currently measured. This will be both a great thing and a hard thing for the TV ad industry.
What will be great?
Adding web-like targeting, measurement, accountability and interactivity to a media channel with massive scale and uniquely-impactful sight, sound and motion advertising makes will make a very good thing only better. TV's share of advertising dollars will continue to grow and the promise of personalized, on-demand TV shows, movies, games, etc. will finally be manifested on the biggest, most comfortable available screen, the TV. This could truly mean a new Golden Age for TV advertising.
What will be hard?
Many of the people, products and processes controlling TV advertising are not ready for a digital future, and many may not survive long in that world. In a future where audience data defines much of TV media's value, and relationships and bulk scale become less important, those media owners, distributors, buyers or intermediaries that own and can best leverage audience data will generate and capture outsize revenue and margins from TV advertising. Those who don't - or can't -won't. In other words, it won't be a Golden Age for all TV ad industry incumbents.
Television networks with large audiences or passionate, loyal niche audiences, will continue to garner significant ad dollars and command premium pricing. However, continued audience fragmentation will make it difficult for "tweener" networks and programmers to gain premium pricing. As audiences spread out among hundreds of networks and across all day-parts, becoming less predictable and more difficult to reach at scale on individual networks and programs, a unique opportunity arises for system operators.
For system operators, their ownerships of directly measured data and access to smart digital set-top boxes could transform their heretofore limited advertising businesses. With viewer data and household billing data, they will be key enablers and benefactors of TV's digital-driven Golden Age. "Tweener" networks – and those that sell or buy their inventory – will need deep data on their audiences to re-aggregate them into valuable buckets of audiences to efficiently deliver valuable target audiences to advertisers. System operators will be able to use their data and their spot inventory to package, sell and target specific, hard-to-reach audiences at scale – such as frequent, in-market moviegoers who regularly watch Tom Cruise action thrillers. And, they will be able to charge premium pricing for those campaigns, even if the ads are being delivered on Tier 2 networks late at night, on "under-appreciated" inventory which normally would have been handed over to direct response advertisers in bulk for low, single-digit CPMs.
Media agencies should do well.
New products, more data, new processes and cross-platform measurement and integration will mean more complexity and more disruption to the status quo of media. While that is likely to increase costs of TV media planning and buying in the short-term, it should make the role of media agencies even more important in the long-term. The more complexity in the system, the more marketers will need partners to get the most from their advertising. Agencies will be in a much better position than clients to invest in needed technology platforms by scaling them across many users. In the old days, scale was all about negotiating leverage. In the Digital Age, scale will be about technology and data. Creative agencies will do well too, if for no other reason than more targeting within campaigns means more creative units per campaign. Plus , as relevance and interactivity becomes more and more important, so will the strategy to create valuable conversations.
Viewers are certain to win.
Finally, viewers might get better and more relevant ads, particularly when they are watching smaller networks and during non-prime day-parts – all places and times where they have historically been bombarded with way too many incessant, redundant and irrelevant direct response spots. Imagine, a world where people get TV ads they want and not those they don't.
Advertisers will win too.
Their TV advertising will have more targeting, less waste, and measureable results. Plus , they will be able to integrate their newly-digital TV campaigns into all of their other digital media and marketing, from online display to search to mobile to tablet to e-commerce fulfillment to web video.
TV's Digital Age is coming fast. Are you ready?
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