Will CTV be the end of TV advertising?
The issues associated with planning, buying and analyzing CTV advertising campaigns make it a ‘death spiral,’ writes Invidi COO Howard Fiderer.
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Connected TV is like Humpty Dumpty after he fell off the wall. There are so many disconnected audience fragments that it will take all the king’s horses and all the king’s men to put a true national audience back together again.
The problem started with the success of addressable advertising being offered by distributors such as DirecTV, Dish and Verizon. Being able to target TV ads to specific households enabled advertisers to produce better campaign results. Seeing that lift caused a shift in the business as advertisers retooled their campaigns to take advantage of addressability to the tune of more than $2bn on cable networks alone.
Content providers wanted to furnish the same level of service but were stymied by distributors’ complex infrastructures. Even when the technology was made available, some distributors were not able or willing to open up their systems to allow addressable advertising. To play in this lucrative sandbox and capture ad dollars, content providers turned to the inherent capabilities of smart TVs and essentially bypassed the distributors.
However, CTV has further splintered the audience. Ideally, OEMs (original equipment manufacturers) would have collaborated to develop software based on a common set of markers in the TV signal to swap out network ads, replace them with suitably targeted ones and offer the ads for sale in a consistent manner across manufacturers. Then you’d have an industry.
Instead, smart TV manufacturers each chose different, incompatible paths and operating systems to implement their services for advertisers.
The result? Of the 199 smart TVs sold in the US, audiences are split into several parts with no one manufacturer holding a significant market share. According to research firm Parks Associates, Samsung leads the industry with over a quarter of all consumers’ primary smart TVs, followed by LG, Sony, Vizio and TCL.
This is just how broken things are
To understand how this disjointed approach impacts ad buying and placement, let’s walk through an example of a national advertiser who wants to reach female auto intenders between the ages of 18 and 34. The audience is already broken up by the content providers. Ideally, the advertiser could buy addressable ads on Warner Bros Discovery, Disney and AMC. The content providers would manage their linear addressable and digital feeds to consolidate the footprint and unify the campaign – no easy task.
With CTV, content providers would have to manage and control the user experience across at least six disparate operational systems: Samsung, Vizio, LG, Roku and Apple TV. If TV manufacturers choose to offer up the placement opportunities for programmatic buying directly to the advertiser, content providers would be in an even worse position.
Think about the issues associated with planning, buying and analyzing TV advertising campaigns. With each new platform, the complexity enormously increases. At some point, the effort required to buy and manage campaigns becomes greater than the benefits derived from addressable, forcing advertisers to go back to buying monolithic TV audiences without targeting.
Without a change in course, we are looking at a death spiral, with inventory value dropping and advertising increasing its migration to the web, leaving networks struggling to replace lost ad revenue with vehicles like sponsorships and content marketing. Everybody loses.
We’ve seen this before as described in Ken Auletta’s classic industry book Three Blind Mice. At one point in time, there were just three networks. Then Fox came in. Then cable networks. All of a sudden, it went from networks with major audience shares to ratings of less than one or two points. No one show could get the kind of audience that generated enough revenue to fund the creation of more content. So they started looking for low-cost programming. Enter Survivor, Big Brother and Love Island.
As if lower advertising revenues aren’t bad enough, consumers are cutting the cord and opting for smaller packages: “We’ll get just Disney and Paramount+.” This puts more downward pressure on revenue and makes it even harder to generate quality content. Eventually, networks are going to fold, which would help unify the audiences but the days of a few major networks are gone and there will not be enough consolidation to maintain a healthy ecosystem.
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So, what’s the solution?
There could be a happy ending to this. Unlike the nursery rhyme, there is a way to put Humpty Dumpty back together again.
To get around smart TV manufacturers’ roadblocks, I foresee a layer that sits atop the various advertising platforms and makes these differences transparent to the content provider and ultimately the advertiser.
In this way, an advertiser can place orders by defining the target audience, specifying the flighting period and constraints, and providing the creative. The management layer would then place individual orders in each of the platforms – Samsung, LG, Vizio etc – while collecting information about campaign progress and delivering the results to the buyer.
Ideally, the layer should also provide campaign forecasts, handle inventory and provide combined analytics, as well as several other key functions.
Even with these basic functions, advertisers would have access to a virtual footprint that covers a large portion of the national audience. And this could be done without TV manufacturers having to cooperate with each other.
To save TV and make money like Old King Cole, CTV’s major platforms are going to have to do a better job of cooperating and standardizing their processes for the good of the industry.
Howard Fiderer is Chief operating officer of Invidi Technologies.