Altogether Current

ISSUE 02
The Future of TV Advertising

We are experiencing a period of rapid change in the TV and advertising industries.

 New devices like smartphones and connected TVs are changing how and when consumers watch programming making advertisers’ measurement efforts more complex than ever before.

In addition, the viewing habits of younger consumers are rapidly evolving as they turn their attention to time-shifted programs, streaming video content and new types of TV-like viewing experiences on mobile devices.

All of this has created challenges, and opportunities, for TV advertisers and content creators. The urgency of the need for a new model was further underlined by the news coming out of the 2017 “upfront” presentations, where the networks made their pitches amidst growing competition from online platforms like YouTube and Facebook.

Just at the moment that TV is undergoing a profound adjustment, new technologies and techniques are emerging that will help advertisers adapt and thrive in this changed environment. New measurement standards for these new digital devices will help give TV content creators the proof they need to show that audiences are engaging like never before. Meanwhile, new media-buying strategies and new forms of interactive advertising creative will enable new types of ad experiences.

It’s truly an exciting time to work in the field of TV advertising. This document is designed to help you make sense of how your organization can be part of it.

You’ll find answers to these questions and more:

  • How are consumers’ TV viewing habits changing due to technology?
  • What technologies and strategies will help advertisers reach TV viewers in the future?
  • What kinds of innovations will make it easier for TV advertisers to make their campaigns more engaging and interactive?
  • How will TV advertising change as more viewers move toward digital video?
  • What changes are happening with TV audience measurement techniques to understand new digital viewing habits?
  • How will consumers’ “multi-screen” viewing habits impact the longstanding TV “upfront” process?

TV advertisers are understandably fuzzy about what will happen to this longstanding format in the future. But by examining the trend lines, we can begin to get a clearer picture of where this rapidly-evolving medium may be headed.

1

As TV Viewing Habits Evolve, What Does It Mean for Advertisers?

There’s a lot of talk in the advertising and media world about the decline of TV viewership. The recent decline in viewers for the NFL’s Sunday broadcasts, long the “gold standard” of live TV viewing, for example, generated a lot of coverage. But research by GfK, highlighted in MediaPost, reveals that what appears to be a decline in TV viewing is not as straightforward as it seems. A number of factors, from demographics to measurement, to a misunderstanding of consumer viewing choices as a “zero sum” game, all play into the confusion. Here’s what we know about consumers’ TV viewing habits:

TV is Still Very Important for Most Viewers

A quick glance at recent drops in TV audiences does seem to play into the narrative that “TV is in decline.” But making this kind of generalization oversimplifies the reality. While other methods of watching may be growing in popularity, TV remains a staple for consumers. 62% of GfK’s sample of US viewers said live TV is “very important” and is their favorite way to consume video content. GfK also notes that live sports and special events are a key factor in this response.

Millennials Are Skewing Overall TV Habits

Viewing habits of millennials are noticeably different from those of older generations. For instance, they’re watching a lot more streaming content and using more devices. But even as millennials adopt a variety of new devices and services to watch TV, the large screen TV remains popular for all generations. In fact, when GfK looked at viewing habits in aggregate across all age groups, 61% of total viewing time was spent watching traditional TV.

Streaming Viewers Are “Additive” to Total Audiences

Another misconception about the decline in TV viewership is that new online services are “cannibalizing” the audience for TV content. In other words, there is a set audience of TV viewers and they either choose to watch streaming content or to watch TV. Research suggests this simply is not the case. GfK found that 52% of consumers with a traditional TV subscription have also subscribed to at least one streaming service. And among those who stream, 75% said they also have a traditional TV subscription.

Measuring Non-Traditional TV Viewing Is Still Tough

Last but not least, TV advertising measurement is still struggling to catch up with the rapid shifts in audience habits. This makes it more difficult for companies like Nielsen to correctly estimate the audience that uses any given non-traditional viewing device. That should start to change as the company’s “Total Audience Measurement” solution officially rolls out, offering advertisers a more accurate look at how viewers are watching TV and why.

Cross-platform campaigns are more important than ever for brands as viewers draw less of a distinction between TV and video viewing.

TV viewing habits are undergoing a profound shift with important consequences for advertisers. One thing that is growing abundantly clear is that cross-platform campaigns are more important than ever for brands as viewers draw less of a distinction between TV and video viewing. The two are increasingly complementary, working together to help advertisers reach their desired audiences.

2

What’s the Future of Advertising on Connected TV?

The 2017 Consumer Electronics Show in Las Vegas was host to a range of product announcements related to connected TV, including new types of devices and new user interfaces. In fact, it looks as though CTV may reach a “critical mass” in 2017, with some sources estimating 60% of US households now own a connected TV device like a smart TV, Roku or Apple TV. But despite these exciting new product launches and growing consumer penetration, ad spending on connected TVs has been low, accounting for just 1% of US ad spending. Why? Here are three factors that will need to be addressed in order for connected TV advertising to break into the mainstream.

A Standardized Audience Measurement

Given the similarity to traditional TV, it might seem like connected TV audiences could be easily measured much like their counterpart. But as it turns out, there’s currently no standardized audience measurement like the “GRP” for connected TV devices. On top of this, leading publishers for connected TV often don’t have the kind of data on audience psychographics and demographics that would encourage further media investment.

Better Targeting and Segmentation

Related to the point above, it’s also difficult for advertisers to keep track of individual users on connected TVs, which complicates campaign targeting and segmentation efforts. That’s because typical tracking technologies like cookies and device IDs simply aren’t set up for connected television. So far a number of sample-based measurement solutions have been proposed, though none of them offer the level of granularity that advertisers have come to expect from other digital ad formats.

A Means of Measuring Ad Effectiveness

Attribution is another critical component of today’s digital campaigns, and most digital ad formats allow buyers to track their “KPIs” in real-time as the campaign is live. But despite the fact that connected TV advertising is delivered digitally, advertisers today still can’t use many of these tools. Expect to see the measurement options improve as new technology like interactive TV makes headway, and as publishers figure out ways to better track individual connected TV devices.

CTV has finally reached the mainstream with consumers. But based on the current state of the connected TV ad ecosystem, it’s not quite there yet for advertisers. Expect to see a concerted effort by publishers and advertisers alike as the industry works to “crack the code” on measuring and identifying the audiences that are flocking to this emerging ad format.

US Connected TV Ownership

Ownership of connected TVs in the US has been steadily on the rise since 2014. It’s estimated that 64% of Americans (179 million) now own a connected TV.

2014
51%
2015
58%
2016
60%
2017
64%
Source: eMarketer March 2017
3

The Future of Advertising on Interactive TV

The success of digital advertising is a function of its interactivity. The understanding that consumers click a mouse or tap a finger to play a video, open a link or make a purchase, is now second-nature online. But this same model doesn’t apply for TV, where a “lean back” model of passive consumption has long prevailed. That may soon be changing. According to news from the UK, one of the country’s most popular broadcasters has unveiled plans to offer “interactive” TV ads to viewers. While this isn’t the first time a media company has tried an interactive TV ad (think about the red buttons that have long been on remotes) we may have finally reached a moment where advertisers and consumers are willing to engage.

The “lean back” model of passive consumption of TV content and ads may soon be changing. Here’s why:

Consumers Are More Comfortable With “Interactive” TV Than Ever Before

The continued success of devices like Apple TV and Roku, both of which now sit in millions of US households, is one sign of the growing success of connected TVs. These devices blend the passive “lean back” experience of a traditional TV set with the interaction more typically seen online. Yet the ads that show up within these connected devices still often look very much like TV ads, taking the form of a standard :15 or :30-second pre-roll unit. Advertisers who attempt interactive creative will likely have a “first-mover advantage” for experimenting with this novel medium.

More Opportunity for Personalization

Car buyer BMW is experimenting with a new interactive ad that lets connected TV viewers customize the company’s new X1 model with various colors while viewing. “It allows audiences to begin their showroom experience without getting off the couch,” noted Robert Aksman, an advertising executive associated with the campaign.

Interactive TV Content Appears to Outperform Pre-Roll

Interactive TV isn’t just more novel for viewers. According to some early research, it may also outperform other similar TV ad units. One recent study of completion rates for video ads viewed on connected TVs and “over the top” (OTT) devices found that the interactive “custom” video ads were finished by viewers at rates five percentage points or higher than standard pre-roll.

There Will Likely Be More Opportunities to “Get Creative” In the Future

Even as more companies like BMW and the UK’s Channel 4 experiment with interactive TV, we’re still in the early days. In fact, we may eventually see fully interactive TV shows. Recent news suggests CBS is re-developing the famous “Twilight Zone” series for connected TV sets, allowing viewers to consume the content in a “choose your own adventure” format that lets users pick the ending. Just imagine what an ad campaign integrated with this type of show might look like in the future…

Why the TV Upfronts Should Become Multiplatform

Lyle Schwartz, president of investment for multi-billion-dollar ad-buying firm Group M, received considerable attention for making a call to reorganize the annual TV “upfront” event around new “multiplatform” audience criteria. One of the last holdouts of the traditional linear TV ad model, Upfronts are a throwback to the days when ad buyers made advertising commitments to TV networks in advance of the next season’s shows. As consumer media habits have changed, so too has the nature of this once-monumental event. Here’s why we may finally see Schwartz’s request become a reality.

As consumer media habits have changed, so too has the nature of the once-monumental TV Upfronts.

Younger Consumers’ Media Habits Are Changing

By now, it’s no surprise to anyone in the advertising or media industry that younger viewers are changing the way they watch TV. But all these new habits, from time-shifting content to watching streaming video using connected TV to watching content on “non-TV” devices like smartphones, aren’t often reflected in the current negotiating process for upfront TV deals. A new multiplatform model could help the industry better understand and measure these younger viewers’ habits while also earning more dollars for networks and more targeted audiences for marketers.

Media Companies Stand to Benefit From a New Model

TV networks are likely to earn more, not less, by taking on a more multiplatform audience approach to the Upfronts. Media companies like Viacom (MTV, Nickelodeon and Comedy Central) that cater to younger viewers would likely see their audience numbers jump. Meanwhile, companies like Disney and Comcast, both of which rely heavily on live sports, would also get a boost from including more non-TV viewers.

Measurement Tools for Multiplatform Viewing Are Getting Better

As Lyle Schwartz noted in his interview with Variety, “I don’t think the audience ever really went away from viewing this content. I think that our ability to measure it, aggregate it and monetize it has been the leading problem.” In fact, a lack of good multiplatform measurement has always been a key barrier to rethinking the TV upfront process. However, tools like Nielsen’s Total Audience, which takes into account multiplatform viewing, are likely to help change advertisers’ minds. “By the time we negotiate next year’s upfront,” said CBS Chairman-CEO Les Moonves, “we believe Nielsen’s new total audience ratings will be a big part of the negotiations.”

 

There’s no longer any doubt that consumers’ TV viewing habits are changing. For some time, that has caused problems for advertisers and media companies alike. But thanks to the tireless efforts of those in the advertising and media industries, we’re getting closer to an outcome that will help everyone involved thrive in the future.

What TV Bundles Tell Us About the State of the Ad Industry

A new study produced by entertainment intelligence firm Hub Research offers some interesting insights into the future of TV bundles, helping explain how and why consumers are shifting their viewing habits online. As traditional TV options become more “fragmented” in the digital space, there’s understandable concern from those in the ad industry about how this might impact media buying strategies. But based on a few key facts from Hub’s findings, today’s expanding range of viewing options seems like it will offer advertisers more, not fewer, options to reach consumers. Here are three statistics from the report that help explain why:

Interest in Digital “Live TV” Experiences Is High

There’s been plenty of hand wringing about the decline in audiences for live TV programming, one of traditional TV’s biggest sources of ad revenue. But according to Hub’s findings, there appears to be lots of opportunity to shift this advertising online with a digital-format live TV experience. When asked if they would be interested in a live TV service provided by Google, more than 80% of consumers in Hub’s research said they were either “somewhat” or “very” interested.

Most Viewers Still Want the Traditional Networks

Another telling sign of the popularity of traditional network TV is that many respondents in Hub’s report said they would include these stations in their “ideal” content bundle. When asked what stations they would include if they could build their ideal a la carte selection of channels for a TV package, NBC, ABC, FOX and CBS all made the top five. That’s great news for advertisers who have long relied on ad buys on these stations to reach the broadest possible base of consumers.

Younger Consumers are Heavy Viewers of Paid TV Services

One more promising signal for advertisers from the Hub Report is its discovery that those between the ages of 18-34 are heavy users of paid digital TV services. Whereas the average viewer across all ages subscribed to a mean of 2.8 paid services, those in this younger cohort subscribed to a mean of 3.7 paid TV channels. This is a promising statistic for advertisers, who have long worried about how they might reach this coveted demographic as their viewing habits evolve.

Digital Video Viewers vs. Pay TV Viewers

  • Adult Digital Video Viewers
  • Adult Pay TV Viewers
Source: eMarketer January 2017

At first glance, it’s easy to assume digital viewing habits are bad news for advertisers who look to TV for scale. But based on these content bundling results from Hub Research, it’s starting to look like the shift toward TV bundles still provides the powerful reach that brands are looking for.

Is Social Media Becoming the New Cable TV?

Over the past decade, we’ve witnessed a dramatic shift in how consumers watch TV and video. Viewers are increasingly turning toward new screens, new media properties and alternative programming. As viewing habits change, advertisers are watching the changes with interest. That’s why a recent opinion piece published by marketing executive Ian Schafer is worth a second look. Schafer argues that social media, which has long been the home for users to post personal photos, random thoughts and heated discussions, may be evolving into a new distribution channel for professional video content, with important implications for the ad industry.

As Schafer sees it, social media is already becoming an important platform for the distribution of video content. While much of this content comes from amateur sources right now, a growing portion of that content is evolving in a more professional direction, turning our own “newsfeeds” into something that more closely resembles specialty cable TV networks focused on sports, premium movies, food, travel or home improvement. Take a closer look at recent news and there are signs that this transformation is already well underway.

Consider the world of live sports as one example. While live broadcasts of sports were once the exclusive domain of linear TV, we’re seeing more and more examples of social media platforms and digital outlets streaming games. Twitter has organized a number of partnerships with sports leagues including the NFL, NHL and MLB to live-stream a selection of games and just this week they announced a plan to partner with other popular content creators. Add to this the recent news of layoffs by cable TV sports giant ESPN, which appears to be reevaluating its content approach as more of its audience moves online.

There are even more signs of this shift toward professionally-produced, cable-like, TV content beyond the realm of sports. Consider Snapchat’s popular “Discover” feature, a product that many ad industry observers increasingly suggest has the audience numbers and programming content to resemble a premium TV experience. On top of this, the May 2017 Digital Newfronts will include original content offerings from a number of social media platforms like YouTube and Twitter. Twitter plans to pitch original video content offerings to advertisers, and YouTube’s “Red Originals” continues to push further into original programming as well.

What does all this mean for advertisers? It’s certainly another signal that consumer viewing habits are changing at a rapid pace. New content opportunities, of course, bring new advertising opportunities. TV audiences may be changing, but as this profusion of new “cable-like” social video content suggests, brands have plenty of great options for reaching consumers in exciting new ways.

Keep tabs on the converging worlds of TV, Video and Talent. 

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