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12 September 2019

Addressable advertising leads IBC catwalk

A recent spate of deployments and trials coupled with coming of age for hybrid TV platforms has pushed addressable advertising to front stage in time for this year’s IBC in Amsterdam, both in conference and on the floor. Last week we covered the formal entry by ThinkAnalytics, of content recommendation fame, into the fray and in a separate story this week we discuss the role of HbbTV and ATSC 3.0 on the hybrid front by facilitating greater data aggregation and ability to insert ads from the broadband side.

While a few pioneering broadcasters and operators, such as Comcast’s Sky with Adsmart, are already expert in the field, many others will find IBC a good forum for expelling false myths and identifying the key drivers bringing addressable advertising towards a tipping point of widespread full commercial deployment. Such drivers include scalability of both data to enable adequate insights for effective addressability and audience to present brands with sufficiently large and compelling targets.

Perhaps the first point to clarify is the distinction between addressing and targeting. Addressability refers to the mechanism of delivery to a given target, a household in the context of TV advertising or an individual device for online. Targeting refers to the identification of the traits that determine which ads should be shown and where they should then be sent, which could be on the basis of age, sex, ethnic background, economic status, interests, lifestyle or even postcode. This is then correlated with the available ads to determine the households at which each one should be addressed. That in turn of course requires knowledge of preferences and other data pertaining to each household in order to decide which category it belongs to. In the case of Sky’s AdSmart, there are 1,500 different audience attributes attributed to households yielding an astronomical number of possible combinations for targeting.

There will be conference sessions at IBC focused not just on the technology but also the economics or business cases, where scale is important. Almost invariably, addressable advertising will be more cost effective than blanket spots aimed at all viewers, even for promoting brand awareness never mind individual products or services, but only if the overall audience is big enough to be carved up into sufficiently large target segments.

One concern has been over the number of households that are actually addressable on the basis of the data known about them, as well as incompatibility between various data sets. There is a lot of data about some households such as buying habits and income levels, while on others there is different data and yet others very little. The US is most advanced in efforts to tackle such deficiencies, with the likes of LiveRamp, a California-based provider of identity management technology, working on cleaning disparate household data sets so that they can be balanced across different operators’ subscriber bases. By a similar token, content owners and broadcasters such as NBCUniversal, Viacom and Turner are collaborating inside the OpenAP consortium to standardize their audience data for addressable advertising. There is more work to do though because such groups only represent a subset of the broader TV ecosystem, even just in the US, and also do not embrace all the datasets that might be useful for addressable advertising.

The good news, at least for the US, is that despite such caveats, the national addressable audience is sufficiently large to ensure significant gains for brands. According to AT&T’s advertising company Xandr, which will be in evidence at IBC, over 60 million US households can now be served addressable ads over traditional cable and satellite TV networks. The next question is then what proportion of current TV ad inventory is available for addressable advertising and that is about 13% according to Xandr. Clearly as addressable advertising takes off that figure will rise rapidly as more ads are made with that in mind.

The underlying economics will be raised in various sessions at IBC, given that there is still misunderstanding on that front. A typical spot ad delivered to all recipients might work out at $10 for every thousand impressions while an addressable campaign might attract five times that. But when the total cost is divided by the actual impressions served to yield the effective CPM, then the cost of addressability will often come down to about half as much or even less.

Even so, those operators or broadcasters already offering addressability are aware of the need to provide evidence that effective CPMs are indeed lower. Accordingly, Sky in August 2019 ahead of IBC released findings of a five-year study showing that addressable TV cuts channel switching by 48% and boosts ad recall by 49%. This was based on interviews with 300,000 UK subscribers across 130 campaigns and 52,000 ad breaks. This also showed that when an ad was targeted towards viewers, they were 10% more likely to remember it compared to an ad broadcast on traditional TV. Significantly though it was found that addressable ads were most effective when combined with traditional commercials, especially for brand awareness.