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Advertisers Are Warming Up to Smart TV in a Big Way

With laser-precision targeting, addressable advertising is beginning to take-off.

To me, as a strategic management consultant and professor, cord cutting has been a learning opportunity. I must admit that at various times, I have felt both like alternately the leader—and the follower—in a post-apocalyptic "follow me to freedom" scenario. 

However, like tens of millions of other Americans, I have made the move away from the "cable industrial complex" and live "on the grid" in a way that seems a tad "off the grid." Rather than simply turning our television on and choosing from the thousand or so channels being pumped into our home broadband pipeline, my family and I have adapted to using apps and services through a Roku device (and no, not the latest, greatest generation!) that delivers far more entertainment, news, and sports options than anyone could ever consume in a 24-hour day!

Living in the "on demand" world has been an eye opening experience to say the least. Yes, the world has changed so very much from television being a passive experience where the family gathered around the TV set...  

...To watch what was "on" one of the few channels that were being broadcast...

Ah, the TV of the author's youth—six channels to choose from!

Today, we live in a world of seemingly unlimited choices...

...All of it at our fingertips. (And no, that's not my personal "man cave" setup there!)

To apply the label "game changing" to what is occurring today is really selling short the very real revolution in television and video media that we are seeing today. Entire industries across the entertainment, media, and sports landscapes are being reshaped as the world becomes "on demand," rather than simply "what's on now." One can add to the mix the fact that more and more of us are using multiple screens when watching TV, scrolling and tapping on our smartphone, tablet, or laptop at the same time. All of this adds up to one thing—the advertising world is changing fast—very fast—right before our very eyes.

From a marketing perspective, the prospect of viewing content "on demand" presents new, unprecedented opportunities to advertisers. Until recently, TV advertising has been based on "real time" viewing. The "worth" of an ad was based on a delicate dance of trying to match the demographics desired by the advertiser with the anticipated size and characteristics of the audience drawn to watch specific programming at a specific point in time. While TV ratings made post hoc analysis possible to gauge the perceived value—and hence, the effectiveness—of a particular ad and even an entire ad campaign. However, in the end, for those on both sides of the equation—advertisers and television media alike, the entire process really depends on shaky metrics and even shakier ROI calculations. There are just a whole lot of assumptions that have to be made—and relied upon—in traditional television advertising about who is viewing what and when. How engaged are they really in the content that happens to be on their TV screen at that particular point in time.

And so with great interest I recently ran across a very interesting, just released report on this subject from the marketing analyst firm, eMarketer. The report, entitled "Still Early Days for TV Ad Innovation," was put together by Ross Benes, an analyst with the firm whose bio interestingly enough includes his authoring the books, Turned On: A Mind-Blowing Investigation into How Sex Has Shaped Our World and the Sex Weird-o-Pedia. (Not to worry about clicking on those links to check them out as they are to Amazon, not to check out something that may get you fired!) Benes' report serves to put "meat on the bone" of the true revolution that is—and will be into the future—taking place in the world of television advertising as we move from "linear" commercials to precisely targeted, interactive ads. Smart TVs and multiple screen viewing mean that television advertising is itself becoming smarter—and advertisers see the efficacy of much smarter, laser-targeted ads and want more—much more—of them in the digital near future.

The truth of the matter is that television ad sales are—overall—flat. In fact, they are very flat! Overall, the projections for the next five year period shows that advertising revenue will see an overall decline from now through 2023. The peak for TV advertising sales is today—right now—in 2019! According to a recent analysis from the analyst firm eMarketer, television ad sales are projected to total just over $70 billion in 2019. And over the next five years, total TV advertising revenue will reach—well decline—to approximately $69 billion in 2023. By definition then, television advertising is thus a stagnant—or even a declining—market overall.

Source: eMarketer - "Still Early Days for TV Ad Innovation" (February 2019)

So, the TV ad marketplace is the very definition of a static market—overall. However, there is a far different picture in the picture (to borrow a smart TV term!) bubbling just below the surface. And that is the area of smart, precision-targeted television advertising! If I am an advertiser, the attraction of "on-demand," addressable advertising to cater to exactly who my targeted audience is and what they are watching at what specific time is literally the stuff of dreams! The ability to target chronic sufferers of X disease or the demographic that has Y characteristics at any given point in time gives marketers the ability to target a market—a very specific market—like never before!

And so the eMarketer report, "Still Early Days for TV Ad Innovation," provides a roadmap on not just how far we've come, but a guide to what is to come in the future when it comes to "addressable" television advertising. As you can see in the chart below, while the growth rate is dramatically down in terms of such targeted television advertising between 2016 and 2020, addressable TV advertising is comprising an ever-larger share of overall television marketing expenditures.

Source: eMarketer - "Still Early Days for TV Ad Innovation" (February 2019)

The clear driver for the growth is simple: Marketers - and that means consumers - simply want it! As reported by eMarketer in their recent report, companies are looking to precision targeted, addressable TV advertising as one of their most coveted technologies. And one can certainly understand why, when such addressable ads solve the ages old equation of who is watching my ad at a particular moment in time and how are they responding to it. As you can see in the chart below, the "Holy Grail" of such targeted advertising is highly desired by advertisers—and thus—the "ad space" in this content will be a valuable asset to be marketed by advertisers as this form of TV viewing becomes not just more common, but in point of fact, the norm for most American and even world-wide consumers of video content.

Analysis

Increasingly, watching a five, ten, 15, 30-second ad is being viewed by consumers as simply a "cost of doing business" in the internet age. That is precisely why the potential for addressable, highly targetable and personalized ads is so attractive for marketers and advertisers. Having full knowledge of who is watching your ad when connected to what programming and potentially interested in what kinds of products is literally the stuff of advertisers' dreams. To be able to market directly to a targeted market takes all of the "if's" out of the marketing and advertising equation.  In 2019 and going forward, it will be possible to know who is viewing your ad and when they are seeing it, and then the next step—that is already "baked in" to many of the ads with "calls to action" like clicking on a link to learn more or click to buy, then the link is closed. The proof is in the pudding. The ROI (return on investment) advertising expenditure for a company is made quite clear in this environment: If you spend X, you will be able to get Y visitors to your website and Z will buy. 

And so, whether on a Roku, a Fire stick, or another type of Smart TV or device, addressable advertising appears poised to be the key driver—perhaps the only upward force—in the television advertising marketplace. The mass market is gone! Dead! In its place is rising an addressable, targetable consumer base. As we cede increasingly cede our privacy and preferences for convenience and come to accept a "personalized" web experience, the potential for growth of targeted, addressable advertising—with video content and other forms of media—is literally only limited by the tolerance and acceptability of the audience—which is us!

About Professor David Wyld

David Wyld ([email protected]) is a professor of Strategic Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, publisher, executive educator, and experienced expert witness. He is the founder and publisher of both The IDEA Publishing [The Best in News, Information, and Content Marketing] and Modern Business Press [The Best in Academic Journals].

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