Digital Transformation

Brands waste as much as half of TV ad spend on oversaturated audiences

By JUSTIN FROMM | Head of research

February 25, 2022 | 6 min read

The tensions between attaining reach on connected television (CTV) and achieving precise targeting and frequency capping are no more, argues LG Ads’ head of research Justin Fromm. He suggests that investing in automatic content recognition data will help mitigate CTV’s measurement problems and result in a win-win for both advertisers and consumers.

Limes in pile

Have you seen an ad repeated in one sitting recently?

Imagine you’re watching your favorite television show and you see the exact same ad or two in each of the breaks. It might not be hard to imagine this, because it’s likely an experience you’ve had recently – maybe even last night. The fact is it’s much too frequently the case for viewers today.

We’re seeing that the TV viewers who have an average watch duration of over four hours daily are viewing the same ad more than 17 times over the course of a campaign. This lack of frequency management results in a poor viewing experience for consumers and harms the perception of the brand or product. Plus it’s a waste of valuable ad spend.

In fact, proprietary research from LG Ads reveals that brands can end up allocating over 50% of their campaign spend to reach just over 10% of the total available audience. Looking at a broadly targeted campaign, estimating an average $12 CPM, more than $400,000 worth of impressions (amounting to more than 50% of the total campaign budget) end up being delivered to the already-saturated portion of the audience. And what does the advertiser gain from this? An incremental 10% of the total campaign reach.

Advertisers need to reach the entirety of their target audience, but they shouldn’t have to sacrifice optimal frequency maximums among a large portion of consumers to achieve their desired reach and just accept the financial consequences. The urgency to solve for oversaturation of ad frequency cannot be overstated.

Why is this happening so frequently now, and how can the industry go about solving the problem?

Advertising’s measurement problem

With the proliferation and variety of content, platforms, providers and services, the TV landscape is more fragmented than ever, with viewers shifting their viewing away from linear to a myriad of CTV options.

Frequency mismanagement is rampant across the board. In January, according to LG Ads’ automatic content recognition (ACR) data, the lightest one-third of all linear TV viewers watched just two hours per week, while the heaviest third watched four and a half hours per day. The result, as demonstrated in our example above, is that heavy viewers receive the lion’s share of an advertiser’s scheduled impressions.

The situation is no better across the walled gardens of the streaming ecosystem. Connecting consumers across the devices and apps that they use, many of which issue different IDs, is difficult for advertisers. One provider could issue ID 123 while another issues ID XYZ to the same user – how can advertisers tell if this is the same consumer? This lack of unified measurement and identity resolution results in the same situation – repetitive ads for consumers and wasted ad spend for brands pouring money into ‘advanced’ television.

Achieving incremental reach with ACR data

There are better ways to ensure target audiences are being reached that don’t involve the oversaturation that consumers are experiencing today. Chief among such approaches is ACR-driven incremental reach.

By utilizing ACR data to achieve incremental reach, marketers can measure which share of the market they’re reaching via different TV media and the cost-effectiveness of these campaigns.

By identifying who has been exposed to an ad – and how many times – advertisers can optimize budgets to maximize reach to their target audience without oversaturating easy-to-find viewers.

As we move forward in an ecosystem that caters to both linear and digital television, the industry should pivot to a model in which advertisers only pay for ads that are incremental. It’s an everyone-wins situation: advertisers will eliminate waste and consumers will enjoy a better user experience with lower ad frequency.

Establishing the right cadence

Even if incremental reach fixes overfrequency, many advertisers will be left wondering how to determine optimal frequency. Typically, linear TV providers have recommended three to 10 exposures per week, but choosing the right frequency overall depends on the category and the message.

Through the use of deterministic ACR measurement, new forms of closed-loop attribution measurement can take the guesswork out of the equation. By connecting ad exposure data to third-party data such as location data, website-visitation data, streaming app downloads or any other type of conversion data, an advertiser can optimize frequency to their unique objectives and maximize returns-on-investment.

But what remains clear is that not enough advertisers are applying ACR data toward frequency management, and plenty of viewers are seeing ads too often or not often enough.

It doesn’t have to be an ultimatum of either attaining reach or achieving precise targeting and frequency capping. Advertisers can improve reach while also levying effective targeting and mitigating oversaturation – all through the strategic use of incremental reach. The industry needs to focus on getting both frequency and reach right to ensure that television continues to deliver for both advertisers and consumers.

Justin Fromm is head of research at LG Ads.

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