Ratings declines, cord-cutting, consumer tolerance for advertising plummeting, the rise of on-demand viewing and the explosion of mobile video all point to another lackluster TV upfronts this year, but despite the dire conditions for linear TV, there are a few indications that this year’s upfronts will experience a second surprise lift after last year’s.
The TV networks will certainly benefit (at least a little bit) from YouTube’s second big brush with brand safety, as brands continue their boycott of YouTube after learning that some ads were found running against hate speech videos – including those posted by YouTube mega star PewDiePie. According to some reports, the backlash could cost YouTube some $750 million in advertising revenue.
By comparison, TV inventory is some of the safest available. And networks could benefit from another industry opinion that’s emerged over the last year or so: that despite all of digital advertising’s data-driven advantages, it doesn’t quite deliver the same results, in terms of sales lift, that linear TV buys can.
One of the problems with linear TV advertising – beyond the fact that less and less people are watching it each quarter – is that audience-targeting data tools have been slow to gain traction among TV networks, compared to digital advertising. That’s partly why we saw big brands moving TV ad dollars into digital advertising a few years ago.
“There is a desire from a brand or agency perspective to be able to maximize the advertising return relative to a specific target,” said Josh Summers, founder and CEO of ad tech firm Clypd. “For a period of time that was easier to do in channels outside of linear.”
But there’s a growing perception among marketers that TV can deliver a more significant and measurable return on investment than digital video advertising can. “Taking dollars out of TV ultimately was not returning what they were hoping, so some of those dollars are flowing back,” Summers said. In other words, TV advertising has an efficacy to which digital doesn’t compete.
“You lost some of the compelling reach by going digital, you’ve lost the engagement that happens on television that’s hard to replicate on digital, and some of the benefits that exist in terms of an ability to convert,” Summers said. “You give that up in the interest of a finer grained target that you can deliver.”
Those dynamics could shift as TV networks begin selling ad inventory using more granular audience targeting that was once only available in the digital advertising space. “We’re seeing a very significant opportunity shift back into that market,” Summers said, now that data-driven tools are being brought to the TV advertising market. “I think there’s an opportunity for even more flow, as you look at the advancements that happen in targeting capabilities in television,” he said.
The TV networks are hoping to drive this shift by putting more audience data into its advertising guarantees, and expanding those guarantees across linear and on-demand programming formats. NBCUniversal announced a few weeks ago it would commit $1 billion of ad inventory to audience-based guarantees, a brave move among TV networks. “NBCU is pioneering,” said Jay Prasad, chief business officer at VideoAmp. “It’s making some big bets on being able to guarantee audience delivery against different types of inventory, whether it’s their VoD, their linear, their digital.”
NBCU is attempting to give marketers the ability to reach their target demographics across screens, on all platforms where viewers consume NBC content, as a means to combat audience fragmentation which plagues the entertainment industries, and help continue to secure important ad commitments upfront.
“Everybody is moving towards this, and for good reason,” Prasad said. “As more and more content is being consumed in on-demand ways through other applications and screens, it’s going to be harder and harder to structure upfronts the way they have.”
NBCU isn’t the only one making data moves for the upfronts this year. Fox, Turner and Viacom recently announced OpenAP, claiming it to be the industry’s “first open platform for cross-publisher audience targeting and independent measurement.” The three media owners released an open letter describing the new platform a few weeks ago.
“The evolution of television has brought new advances in audience targeting across premium publishers, which is enabling advertisers and agencies to drive more efficiency and more effectiveness with their TV budgets,” the letter said.
OpenAP – backed by a “consortium” of television publishers – is something of a TV network-backed open market for advanced audience targeting across publishers. Advertisers are able to integrate their own media planning systems into the platform in order to take full advantage of the cross-publisher audience targeting. “This means consistently defined audience targets can be activated across any OpenAP member publisher,” the letter said.
“This consortium is a necessity to move our industry forward,” Fox, Viacom and Turner said. “While demand for audience targeting has grown significantly, adoption has been limited by the fact that audience buying is not as transparent, as consistent and as easy as traditional guarantees. It doesn’t need to be that complicated. That changes today.”
The networks have placed a strong emphasis on measurement and verification – another touchy subject in the realm of digital advertising. The platform will be operated by a neutral third-party and will offer independent measurement and verification, though the letter didn’t say who that’d be. “It means an open platform that supports industry-standard measurement sources and data, not just proprietary, walled-garden, self-governed reporting,” the letter said.
“The models that have been brought to market to date have been these black box, opaque, ad network models for TV,” said Prasad. “That model will only work for the most undesirable inventory, because no programmer is going to give up their valuable inventory and let it get sold opaquely.”
Modernizing the TV upfronts will benefit both the TV networks and the brands and agencies that want to advertise there. Content owners can charge more for inventory that can be guaranteed for reaching more granular audiences, while advertisers can maximize the bang for their buck by targeting audiences more precisely.
Not like the networks have much choice. Linear TV ratings continue to drop, cord-cutting in the US continues to grow at about a million subscribers a year, and broadband-only households are on the rise – growing to 13% of all US households according to The Diffusion Group.
TV networks have found themselves in an “adapt or die” paradigm. “They have to do this because, otherwise you’ll just be giving more leverage to Google and Facebook,” Prasad said. “If the TV industry wants to keep pace, they can’t just stay with what has worked with the past, or they risk losing more budget to the digital kings.”
Both Magna and Zenith have released reports in recent weeks that show digital advertising will outpace linear TV advertising in 2017 – and the gap is widening. In 2017, linear TV ad spend will hit $192 billion, according to Zenith’s forecasts; digital advertising will reach $205 billion in 2017.
This’ll be the second upfronts for the US in which data-driven audience targeting is available. “I think this year’s upfront is a scaling upfront for the industry,” Summers said. “It’s no longer a ‘test and prove’ upfront, it’s more about moving dollars specifically into this method of targeting.”