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Let’s Be Up Front About Advanced TV

David Dowhan
Blog Post01/29/2020
Business
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The possibilities of advanced TV — the use of advanced data to enable household-level targeting or smarter planning on television channels and devices — are blossoming, with investments in addressable channels continuing to grow. But much like a reality show, the story of advanced TV may be exaggerated to sell you on a vision. The truth is advertisers still invest the majority of TV budgets in linear TV — because the majority of consumers still watch linear TV.

While the industry hums with the potential of advanced TV, advertisers need careful consideration before getting too excited. It’s critical to collect and understand the facts about both advanced and linear TV in order to understand the present market — and plan for the future.

Scale by owner

Both advertisers and analysts agree that scale remains a challenge — and in a sense, all parties are right.

Over-the-top (OTT) channels like Hulu and Roku report annual subscriber growth of up to 50%, with each channel touting more than 25 million subscribers. In addition, leading multichannel video programming distributors (MVPDs) like Comcast Xfinity, Spectrum TV® by Charter Communications and AT&T DIRECTV are each plugged into 10 million or more addressable homes. But the scale of these disparate channels still pales in comparison to traditional linear TV, even when stitched together. So, with this information in mind, why are advertisers spending billions on advanced channels? A few reasons.

First, scale is set to grow a considerable amount through increased subscribers, as well as merger and acquisition activity. As reach increases over time, early adopters will reap the benefits. Secondly, traditional linear scale is on the decline. Thirty-nine million U.S. adults have already cut the cord. That number is set to hit Fifty-five million in the next 3 years. Finally, 30% of households with OTT capabilities don’t have a cable subscription, meaning OTT advertisers have the potential to reach incremental eyeballs they can’t get on traditional television alone.

Scale is critical in the war to drive a return on media investments, but it’s ultimately inconsequential if you don’t reach the right people. That’s why one of the most compelling reasons to embrace advanced TV is the data.

A quantum leap

Consumers have changed the way they watch TV (screen sharing, streaming, binging, etc.) and advertisers need to change their delivery and approach to fit these new viewer habits. As household-level targeting capabilities improve, perhaps television can no longer be singularly viewed as a mass-reach channel.

While advertisers can still use linear TV for mass branding campaigns, advanced TV channels should embrace a more targeted approach that adjusts reach goals, frequency caps and cost per thousand impressions (CPM) targets accordingly. Advertisers should expect that CPMs may increase, but engagements will also improve as you reach more of the right people and stop targeting those who aren’t a good fit.

A data-first approach

With traditional linear TV, advertisers can only access a handful of data points to make decisions about what inventory to buy, looking for shows that over-index against a few demographics like age and gender. With advanced TV, including data-driven linear planning, advertisers can — and should — leverage thousands of new, people-based data points to power decisions tied to the advertiser and the campaign to drive better returns.

Advertisers need to keep pace with consumers who are still largely invested in linear but are flocking to more advanced channels at a quickening pace. This presents a unique opportunity for advertisers to balance data-driven and mass-reach approaches for omnichannel success.

However, before the advanced TV industry reaches mass adoption, it’s crucial that data and technology providers step up to help increase scale, improve interoperability and make data activation easier across the existing complex infrastructure.

As the infrastructure becomes more manageable, expect to see the number of brands investing in advanced TV increase.

We’ll continue to see large, innovative brands take the plunge first, in part as an attempt to use their weight to influence the development of the nascent industry’s setup to their advantage. Smaller, more nimble brands (especially in the direct-to-consumer space) will also continue to move into this space as many have no qualms in trading scale for smarter targeting.

These early innovators are already seeing the payoff. As the word spreads, it will be up to other brands and mid-sized companies to either fall in line — or fall behind.

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