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Future of TV Addressable TV Technology

How brands can capitalise on the addressable TV revolution

By Jakob Nielsen, Addressable TV Lead

May 18, 2017 | 6 min read

Change is coming to TV. In the next five years TV advertising will change more than it has in the last 50. This transformation will not be the death of TV, but its rebirth in a range of new and wondrous forms, bringing with it new opportunities for advertisers outside of live TV programming.

How targeted ads will change the way brands advertise on TV

How targeted TV ads will change the way brands advertise on TV

This global change is being driven by trends such as cord-cutting and time-shifted viewing and the UK is leading the transformation.

The UK is the principal adopter of time-shifted viewing in Europe. More than 8.3m households subscribe to at least one SVOD service, with Netflix – the largest such service – reaching an estimated 6.5m households, according to BARB. IHG estimates that we spent £451m on online TV subscriptions in 2015, representing an annual growth of 42%.

More than three-quarters (78%) of GB adults have watched recorded TV or video on demand at least once in the past 12 months, and 30% have watched live TV online. Ofcom’s Digital Day research reveals that among 16-24 year olds, time spent watching live television has declined to 36% of total viewing time, whilst recorded, on-demand, and live TV now make up 59% of this age group’s viewing.

But while the way consumers watch TV has changed, what they like to watch hasn’t. The most popular on-demand video sources in the UK include BBC iPlayer (37%), ITV Player (20%), All4 (18%) and My5 (10%) – suggesting that quality TV content is critical. Never has there been more invested in content than in 2016; with £6.5bn spent on network TV programmes, according to the Ofcom Communications Market Report 2016.

The battle ground for viewers is based on compelling original TV content – shows like The Night Manager and The Walking Dead are now attracting significant audiences on-demand. Newer on demand players such as Amazon and Netflix understand this and are investing $4.5bn and $6.0bn in content, respectively, in 2017.

If TV in all its forms is strong then advertisers benefit by having access to the most effective and engaged environments – via quality long-form content, delivered on the big screen. This is arguably the most powerful platform on which to build a brand.

In addition, these new forms of viewing – as well as changes to existing delivery systems such as satellite – also bring other benefits, the addition of data and technology. This allows broadcasters, brands and agencies to work together to create more targeted and more relevant advertising.

Data and technology facilitate targeted TV ads, reaching only those households that satisfy a specific range of consumer attributes such as postcode or income. Ads can be replaced in a live TV break, where everyone would ordinarily have seen the same message. Targeted advertising also allows specific commercials to be inserted into on-demand content.

Together data and technology can deliver both precision targeting on TV and better understanding of media effectiveness – which in turn helps brands spend smarter and optimise their TV campaigns, just as they do with online ads.

Of course, not all TV advertising will become targeted. The current panel-based live TV buying model and broad reach will continue to be a key pillar of brand building for major advertisers.

However, we do think that for some brands, between 30% and 50% of TV advertising could be shifted to targeted ad spend. It might be in the form of more segmented messaging based on refined target audiences or a specific geographical focus, for example.

The demand for broad-based brand awareness should not be underestimated. We believe when targeting TV becomes more mainstream, we will see a substantial movement from direct and trade marketing activities.

The advantage for brands is that it will be more cost efficient. The advantage for broadcasters is that it will enable them to secure incremental revenue – from both existing and new-to-TV advertisers – without diluting current revenue streams.

Our tests show that the targeted approach can be hugely effective. We recently worked with the GroupM agency MEC to develop a customised audience of urban men passionate about fashion, technology and sports on behalf of a shampoo brand. This targeted solution enabled the company to reach an audience on the main TV screen, at a much lower cost of entry, and the messages were watched to completion by 98% of those who saw them via on-demand and connected TV.

We have also worked with a family travel/leisure provider, to run performance-led activity designed to build awareness of its family break offers, drive site visits and increase the number of holiday quotes. By optimising the direct-response video on the basis of arrivals to the client’s website, quotes, time of day, day of week and content, we were able to exceed our targets by more than 300%.

Targeted TV has the potential to make the world’s greatest medium even better, but no one company can create it alone. It’s time for distributors, broadcasters and demand sources to work together to develop an ecosystem that creates value for everyone who loves brilliant TV.

Jakob Nielsen, GroupM Addressable TV Lead, will be joining the Royal Television Society ‘Is targeted advertising the future of TV?’ panel on 24 May alongside Sky, YouView, Channel 4 and Nationwide.

Future of TV Addressable TV Technology

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