TV Ads: Not Dead Yet

With Web measurement firm comScore Inc. reporting that U.S. Internet video viewing increased 13 percent in December 2008 alone, advertisers are becoming increasingly interested in the medium. In fact, many argue that broadband and mobile platforms are essential to reach younger demographics, since TV is no longer an effective ad channel for them.

Recent research refutes this assumption. A new study found that TV remains the dominant medium despite growth in digital media, even for reaching younger demographics, as reported by Ad Age. The study was sponsored by the Council for Research Excellence and conducted by Sequent and the Center for Media Design at Ball State University. In fact, marketing-mix analyses conducted since the early 1990s by Marketing Management Analytics (MMA), a body that evaluates TV ad effectiveness, have found that TV advertising has become more effective in recent years, though only slightly. In addition, one in three digital brand searches were driven by offline advertising (particularly TV), rather than online ads.

The sustained relevance of TV advertising is certainly driving investment from cable operators, despite the impact of the global economic downturn on the local advertising business. For example, U.S. cable giant Comcast Corp. (Nasdaq: CMCSA, CMCSK) saw a 5 percent drop in ad revenue over 2007, and excluding non-repeating political spending, it actually fell 20 percent. But the MSO has no plans to slow investment in Canoe Ventures LLC , the joint venture among the big U.S. cable operators to create a nationwide platform for targeted, interactive advertising.

In the second quarter, Comcast expects to launch the Canoe-enabled "Creative Versioning," which will allow operators to use demographic data to target ads to more relevant household groups. Canoe has already tested an interactive polling application inserted into a national feed on multiple operators' systems, and will shortly be offering TV networks interactive ad insertion templates for interactive polling, as well as a "request for information" application.

Service providers around the world, but particularly in North America, could well benefit from a new revenue stream as their IPTV services ramp up. Given the dominant position that cable enjoys in the North American pay TV market, it's important to follow and support Canoe. Telcos will not be able to interest advertisers in their own standard. However, telcos do own significant wireless assets, and being able to layer mobile capabilities onto TV advertising would be an attractive proposition for advertisers.

The telcos' multiplatform reach, particularly at a local level, could be a significant advantage. The key, however, is to enable advertisers to purchase nationally or via a single point of purchase and reach a nationwide aggregated audience, but still target locally or by demographic segment and return specific ad exposure metrics.

The technology, interface, standard, or service provider that can enable that will offer advertisers a truly compelling value proposition.

— Aditya Kishore, Senior Analyst, Heavy Reading

digits 12/5/2012 | 4:10:04 PM
re: TV Ads: Not Dead Yet "The key, however, is to enable advertisers to purchase nationally or via a single point of purchase and reach a nationwide aggregated audience, but still target locally or by demographic segment and return specific ad exposure metrics."


The main thing that springs to mind here is that this would require a level of collaboration and mediation that, even in desperate times, seems unlikely.

Maybe there will be (is?) a tech solution that could get around the issues that the multiple parties involved inevitably bring to the table...

sachsab 12/5/2012 | 4:09:55 PM
re: TV Ads: Not Dead Yet Ray,

Is the Canoe standard & market representing Comcast, Time Warner, Cox, Charter, and Cablevision the tech solution and the market?

While there will be an understandable bit of reluctance on the part of networks to accelerate this video service provider centric model, their customers, the advertisers, will not leave them a choice. The targeted, engaged eye-ball is worth so much more.

Aditya's comment on the synergies with cross platform advertising sound compelling. However, we have to remember that advertisers flock to a market. The union of wireless subs and TVs subs for each of Verizon and ATT is just too small (1M subs/500k homes nationally for each?) to create a new advertising synergy.

Unfortunately, the same market dynamic exists around highly hybrid web/TV advertising models that would be 'a piece of cake' for IPTV operators but are operational nightmares for Cable companies. Even if the standards develop for the highly fragmented world of IPTV, the market will just be too small in North America to attract any significant advertiser attention. This basically negates the effect of a significant architectural advantage IPTV has over the Cable architecture.

What I am most intrigued by is the evolution of advertising (and video) as more individuals migrate to on-line video viewing of something more than youtube clips (Hulu, Netflix online, ..). Then, as the story goes, the tortoise catches the hare. With current 15x to 30x oversubscription rates on local access infrastructure (not core stuff that is easily upgradeable), on-line video viewing will be caught in a 5 year traffic jam while video service providers (Cable and IPTV) deliver guaranteed 1080i optimized content and advertising. The premium eye-balls will remain with the video service provider during this time and will allow the Comcast's of this world the ability to keep their STB as an important piece of the video service chain.

The real losers here will be networks. The notion of a 'channel' will go away and, with the above, their central point in the advertising value chain will as well.
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