Advertiser and publisher interest in addressable TV continues to grow. Spending on the format, which allows TV advertisers to precisely target specific households, is expected to reach $1.2 billion by the end of 2017. While this number represents just a small share of overall TV ad spending, increased advertiser adoption suggests that addressable is becoming an important component of their ad campaigns. 62% of advertisers in a study commissioned by AT&T and DirecTV said addressable TV is already a valuable part of their media buys. Why are more advertisers drawn to this emerging format? And how might its growth shape the future of TV advertising?

Perhaps the greatest potential benefit of addressable TV is that it is a hybrid ad format, blurring the distinction between traditional TV and digital ad campaigns. Advertisers can tap into the sizable audiences they’ve come to expect from TV. One forecast estimates that as many as 50 million US households now have a set top cable box capable of delivering addressable campaigns. In addition to this scalability, addressable TV also offers advertisers more data-driven decision making and targeting, capabilities that have historically been associated with digital ad campaigns.

There are also significant performance advantages with addressable TV ad inventory. Advertisers are able to buy more in-target impressions that will reach consumers likely to be interested in their brands and products. Addressable TV is able to offer this capability due to its highly granular targeting options. Whereas traditional TV targeting is often limited to details like age range or gender, addressable TV can go much deeper, targeting consumers based on psychographics or even by household. Ultimately this leads to fewer “wasted” impressions – those delivered to consumers who are unlikely to respond to that advertiser’s message.

Addressable TV also gets props for being more cost-effective and measureable. Though inventory generally costs more on a CPM basis than traditional age- or gender-targeted media, advertisers should weigh this extra cost against the ability to better target their customer base. Addressable TV can produce a higher ROI than traditional campaigns. It also offers the added benefit of more measurable campaigns making it easier for brands and their agencies to conduct post-campaign analysis and adapt their strategy as necessary.

Addressable TV is still a small segment of today’s TV ad landscape. eMarketer predicts it will attract less than 2% of US TV ad spending in 2017. But the benefits it offers have real potential. Expect more advertisers to invest in addressable TV as they seek to identify media that combines the benefits of both TV and video.