Thank you to those who attended our webinar yesterday, 4C Primer: Audience-Driven Planning for Linear TV Advertising. There were a lot of great questions from the webinar attendees. Since we were unable to get through every question, our guest speaker, Forrester Research Principal Analyst Jim Nail has addressed them to shine additional light on the evolving TV advertising landscape confronting media planners and buyers. As there were many areas of interest, they have been combined into a handful of key questions.
TV ratings have been declining for years. What does this mean for the television industry?
The issue is not that TV viewing is declining. Long-form video that television programming represents is as popular as ever, if not more popular. But consumers have a plethora of choice when it comes to how they view these programs, and Nielsen’s ratings methodology hasn’t kept pace with consumers’ multiscreen reality. Nielsen’s stronghold on the television industry is starting to loosen, albeit slower than some would like to see — which means the former gold standard of audience measurement no longer matches reality.
In 2015, 36% of US online adults told us that in a typical month, they watch video via a paid streaming service. Just one year later, the percentage of US online adults who use a paid streaming service increased to 41%, with over half of Millennials saying they use services such as Netflix, Hulu Plus, and Amazon Instant Video. Additionally, about 40% of Millennials say they watch 10 or more hours of TV and video online in a typical week, which would account for most of their viewing.[i]
Consumers have long adopted viewing on devices other than a television set — hence AT&T and DirecTV’s unlimited data offer, whereby AT&T customers can stream live and on-demand television, including programs for the customer’s DVR, on their mobile phones without incurring data usage fees. As more consumers consume TV programming on the alternate screens, Nielsen ratings will continue to decline until its new Total Content Ratings product— which is just beginning to enter the market — is fully developed, rolled out, and accepted by both buyers and sellers.
Addressability seems to be the end state for television, in which every set-top box receives its own commercial experience. When will that happen? And what should marketers do in the meantime?
Today, addressability is available only from a limited number of multichannel video programming distributors (MVPDs) who have invested in the enabling technologies: Comcast, Cablevision, Dish Network, and DirecTV. These MVPDs have about 45 to 50 million homes enabled for addressability. Further limiting addressability is the fact that these MVPDs can only insert ads into advertising slots they have the rights to sell, roughly 2 minutes per hour, while the programmer/network retains the rights to the other 12 to 15 minutes. For addressability to become common, two things must happen:
- More MVPDs must upgrade the set-top boxes they use, as well as their back-end infrastructure. This is an expensive, long-term proposition.
- The programmers/networks and the MVPDs must negotiate terms and compensation for that would allow the MVPDs to insert ads in the network-owned time. This is a contentious issue that is unlikely to be resolved soon.
In the meantime, marketers should begin to test different strategies for using addressability with the inventory currently available. Marketers will learn how to structure internal teams and how to apply third-party data in new ways. Some marketers Forrester speaks with are building closer connections with their demand-side platforms (DSPs) and data management platforms (DMPs), while others are restructuring to reduce friction between the marketing and analytics teams. More than two-thirds of survey respondents said their organizations have organized to develop closer collaboration between marketing and analytics to incorporate programmatic media buying.[ii]
Audience-driven TV buying is a hot topic in the industry. How is it evolving this year and over the next couple of years?
In the 2016 TV Upfront selling season, NBC Universal piloted audience-driven buying and recently announced its decision to sell more than $1 billion in inventory based on data aside from traditional Nielsen demographics in this year’s Upfront.[iii] Fox, Viacom, and Turner announced a collaboration last month on OpenAP, an “advanced audience platform” that allows advertisers to use a single audience definition across all three networks.[iv] Expect more of these types of announcements, building on work the networks have done over the past three years to build sophisticated audience data platforms.
It’s clear the TV industry is moving toward making audience-driven TV buying a reality. Marketers must keep pace by ensuring they are familiar with non-Nielsen-defined audience segments and consequently shifting benchmarks. For example, they may pay a slightly higher CPM than in the past, but the higher composition of the desired target audience should make the buy more efficient, despite the higher price.
To successfully execute audience-driven TV buying, what new knowledge or skills do media planners and buyers need?
Media planners and buyers must prepare for the new data-driven reality of TV buying by bolstering their data and analytical capabilities. They must be comfortable with interpreting, analyzing, and acting on data on viewership, demographics, and behaviors — and know when data isn’t telling the full story. Keeping in mind the data reality of “garbage in, garbage out,” media planners and buyers must be able to identify dirty or mediocre data, and give data providers clear, detailed instructions about the datasets used in defining their audience.
If that weren’t a significant enough ask, media planners and buyers must also break from their old mindsets of buying spots on broadly popular shows and instead focus on the data to make educated inferences on which programs the target audience is most likely to watch. Fortunately, this is similar to the practice commonly used for prioritizing markets for spot TV buys: calculating indices such as category development index or brand development index. Media planners and buyers must extend this thinking to the network, daypart, and program level.
There have been a lot of announcements of over-the-top TV services recently: YouTube Live TV, DirecTV Now, etc. How are these driving cord-cutting?
Forrester does not consider these to be true cord-cutting services, but rather cord swapping. Like traditional cable and satellite pay TV services, these OTT services offer a fixed bundle of channels at a fixed monthly price, with live TV on the major broadcast networks as the anchor content offering. The bundles have fewer channels and are less expensive than the typical traditional pay TV package and offer greater flexibility in cancelling service, but otherwise are quite similar.
These new services aren’t necessarily being accompanied with huge spikes in people canceling their traditional cable packages. For example, Hulu has 12 million subscribers, while Sling TV surpassed the one-million users mark just before its second birthday.[v] Live television has proven to be a stalwart that prevents some consumers from cutting the cord, and in some cases, traditional TV providers are creating OTT services to attract the emerging generation of “Cord-Nevers,” who, having grown up in the age of Netflix and Hulu, are deciding to bypass traditional TV providers entirely, unlike cord-cutters, who generally have a contract but then cut it.
Rather than driving cord-cutting, emerging OTT services should be used as a proof point of the convergence of linear TV and digital video. In a 2015 Forrester survey, three-quarters of respondents said TV and digital video planning strategies will merge.[vi] To keep pace with this coming convergence, marketers must build out their video adtech ecosystems and be prepared to adjust measurement programs from focusing on campaign metrics to instead focusing on broader business impact.
As the TV industry continues to adopt innovative approaches to audience-driven TV buying, media planners and buyers now find themselves acclimating to this more data centric model. Fortunately, companies like 4C are uniquely positioned to meet the demand for these new data sources.
[i] Source: Forrester Data Consumer Technographics North American Online Benchmark Survey (Part 1), 2016.
[ii] Source: Forrester’s ANA/Forrester Q1 2016 US Programmatic Media Buying Online Survey.
[iii] Source: Jeanine Poggi, NBCU Commits to $1 Billion in Ad Deals That Move Beyond Nielsen Guarantees, Advertising Age, March 2, 2017.
[iv] Source: Michael O’Connell, Fox, Turner and Viacom Join Forces for New Audience Measurement Platform, The Hollywood Reporter, March 15, 2017.
[v] Sources: Jacob Kastrenakes, Hulu now has 12 million subscribers, but growth is slowing , The Verge, May 4, 2016; Scott Moritz, Dish’s Sling Seen Passing 1 Million Users in Cord-Cutting Race, Bloomberg Technology, October 26, 2016.
[vi] Source: Forrester’s Global Q3 2015 Video Advertising Demand-Side Platform Wave™ Online Customer Reference Survey.