Published May 2016
Addressable advertising has been a topic of much discussion at this year's NAB Show. Addressable TV advertising, which is the ability to show different ads to different households while they are watching the same program, is an innovation that could completely change the dynamics of the TV advertising marketplace.
While large broadcast events such as the World Cup, Super Bowl and Oscars might continue to thrive without addressable advertising, there are thousands of programs across hundreds of channels where addressable TV advertising can make a big difference for advertisers, programmers and viewers.
To envision how the ads in everyday TV programs will become more valuable, we need to look beyond the period we're in now -- where very little TV inventory is addressable -- and assume that a majority of all TV inventory will eventually be addressable across traditional linear TV and premium online video.
The industry can prepare for a marketplace where a majority of TV inventory is addressable by taking several actions related to investment, waste, media buyers and measurement.
Invest in data as a differentiator
Advertisers will look to apply more data to their TV campaigns than just age, gender and geography. Some will want to leverage their own data. Others will lean on media sellers to provide unique data, such as behavioral data on television consumption, in order to target light vs. heavy viewers or movie watchers vs. sports watchers. The possibilities are endless. So, the investments you make in data today will help you run smart TV campaigns or sell smart media tomorrow.
Understand waste so you can minimize it
Advertisers can use addressable TV advertising to avoid reaching the wrong people with the wrong message. However, this requires a good understanding of who the “wrong people” are. Advertisers can prepare for addressability by better understanding who their specific target audiences are, who doesn't respond to their campaigns and who makes an unprofitable customer. Media sellers can prepare for addressability by understanding the opposite for all of their advertisers. They should know who responds to each advertiser's campaigns and who makes a profitable customer for each advertiser. These are the audiences that broadcasters and publishers should invest in.
Get to know ‘new-to-TV’ buyers
With addressability, TV advertising becomes useful to more advertisers, such as those with a niche product for a niche audience. As non-TV advertisers and light TV advertisers catch on to the fine-tuned positive and negative targeting that's available with addressable TV advertising, the total number of TV advertisers will grow. This opens up a sales opportunity for media sellers and a job market for media buyers.
Pursue custom, not universal, measurement for now
The industry has been calling for universal measurement that will allow buyers and sellers to evaluate traditional linear TV and premium streaming video on a comparable basis. However, the most standardized tool in the measurement toolkit, C3 and C7 television ratings, requires a static ad load. As long as this limitation remains, the industry is more likely to leverage competing measurement currencies on a campaign-by-campaign basis to define the metrics that guide the transactions between buyers and sellers. For example, buyers and sellers may use viewability metrics, brand lift metrics or census-based impression counts to guide transactions.
If the industry takes these four steps, it won't take long before the majority of all TV inventory becomes addressable across traditional linear TV and premium streaming video. When that happens, even the largest advertisers will buy addressable ads to reach their specific audiences, while consumers will benefit from more relevant ads.
Addressable advertising will be good for large advertisers because it offers them a better way to take segmented products to market. For example, credit card companies can reach different types of card holders, such as travelers, business owners and students, with different offers.
TV viewers will benefit too as they are exposed to things they're interested in and passionate about during commercial breaks and less exposure to things that have no utility or value to them.
A predominantly addressable future is closer than we think because there are already technologies that support addressable advertising for over-the-top (OTT) television. And for linear TV, companies like Sky TV through Sky AdSmart and Google Fiber through DoubleClick for Publishers are already enabling some linear TV addressable advertising today. Soon enough, the question won't be, "Can we transact on an addressable basis?" It will be, "Do we want to transact on an addressable basis?"