After several years, advertisers, content providers, ad tech companies and program distributors have been busy laying the groundwork for dynamically inserted television advertising. Addressable TV allows advertisers to deliver more targeted ads to individual households via cable, satellite or telco set top boxes or web-enhanced “smart” TVs.
The potential for addressable TV advertising could be big. Mitch Oscar, the director of advanced TV strategy for USIM says currently, there are about 54 million MVPD (cable, telco or satellite) households that are linear addressable and 35 million that are ad supported video-on-demand addressable households. As a result, Oscar estimates there are 66 million unduplicated addressable TV households. In addition, Mitch Oscar also notes there are also about 25 million homes with web enhanced TV sets currently capable of receiving addressable TV advertising via automated content recognition (ACR). Some of these homes however, may also be an MVPD subscriber.
Using addressable advertising, an automotive ad can promote a different car model to different households. A politician can insert a different campaign issue to different voters or a prominent packaged goods marketer can advertise different products to different households.
Addressable advertising could give the TV ad industry a much-needed revenue boost. In the first six months of 2020 another 3.8 million homes cancelled their cable TV subscription, resulting in a loss of subscriber fee revenue into the hundreds of millions of dollars. Moreover, the ratings for many top tier entertainment networks have been in decline, as viewers migrate to content from streaming video providers. The loss of audiences has also impacted ad revenue, especially during a recession.
In recent years, annual TV ad spend has been stagnant at around $70 billion. Some industry analysts project ad spend for addressable TV advertising could grow from $1 billion in 2017 to over $5 billion by 2021. The cost of an addressable TV ad would be greater than a typical linear ad, with the idea being a more relevant ad message would elicit a more emotional response to an engaged viewer, resulting with an increase of sales. A study from Bill Harvey Consulting found addressable TV advertising has a higher return-on investment than either digital media or linear television.
In the past, addressable ads were limited to the local two minutes each MVPD sells every hour. These MVPDs use their own set top box tuning data, first party data from an advertiser (or third-party data from Experian and Acxiom), as well as other technology to send targeted ads based on zip codes, cable zones or even down to individual households. The amount of addressable advertising inventory will increase notably as national networks, which sell about 14 to 15 minutes of commercials every hour, get more involved.
There are two industry trials currently taking place in the smart TV universe; Project OAR and Nielsen’s Advanced Video Advertising.
Project OAR: One initiative in addressable TV advertising is Project OAR (standing for Open Addressable Ready) which was created in March 2019. The goal of OAR is to set standards for addressable TV advertising using an open source. OAR is a consortium started by TV manufacturer Vizio and includes many prominent content providers; Disney Media Networks, NBCUniversal, CBS, WarnerMedia’s Turner, Hearst Television, Scripps and AMC Networks. These programmers account for 80% of all linear TV viewership.
Inscape, a data-tracking company owned by Vizio, developed OAR’s technology using ACR. In June 2020, OAR began the first phase a live test which provides more relevant ad messages for both linear and on-demand on smart TV’s. Participating were Fox, ViacomCBS, NBCUniversal, Scripps, and AMC Networks. A second phase is scheduled for mid-August 2020 and will include Disney Media Networks, Discovery, Hearst Television and WarnerMedia.
Project OAR is available on 10 to 13 million web-enhanced Vizio TV’s. One of the goals, is to build scale by allowing more partners into the consortium with hopes they will be available on all “smart” TV’s. This will require the participation of TV manufacturers Samsung, LG and Sony. Also, as part of the OAR consortium are TV ad delivery companies; Comcast’s FreeWheel, AT&T’s Xandr, Google Ad Manager and Invidi that are implementing technical integrations.
Nielsen Advanced Video Advertising: In February 2019 Nielsen launched AVA, focusing on addressable advertising for web enhanced TV sets. The announcement had come after Nielsen acquired addressable TV technology provider Sorenson Media, which was in bankruptcy protection. Nielsen integrated Sorenson with ACR technology from Gracenote and Qterics, a smart TV software and privacy management company, to accelerate their addressable TV initiative.
AVA will be using 15 million smart TV sets from LG Electronics. The addressable initiative has the participation of nine national content providers; A&E Networks, AMC, Discovery, Disney, Fox, NBCUniversal, Univision, ViacomCBS and WarnerMedia. They account for about 90% of all linear viewership. Nielsen had launched a two-phased beta version in January which has been extended until the end of 2020 due to the pandemic. Mitch Oscar notes, as a long-time ratings supplier, Nielsen may be serving ads and verifying the impressions, instead of using a third-party, this could be an issue for advertisers.
On Addressability: In June 2019, Comcast, in partnership with Charter and Cox, formed On Addressability, an addressable consortium with a goal to develop industry definitions and standards, provide education for advertisers, and identify best practices and business standards for transacting on addressable campaigns. Also, the three cable operators hope to pool what they learned from offering addressable advertising to help other content distributors do the same. In June 2020, AMC Networks became the first content partner followed by Discovery in late July. Canoe Ventures provides the backend ad tech support. Collectively, the three cable operators have about 27 million addressable ready TV homes.
Measurement Challenges: With several trials taking place there are several industry issues facing addressable advertising such as inventory maintenance, revenue sharing and privacy. Another issue is audience measurement. Prasad Joglekar, the SVP & General Manager TV, cross platform products at Comscore says, “Addressable TV occupies somewhat of a middle ground between traditional linear TV and digital video advertising. Today, most addressable TV advertising is viewed as an evolution of TV. As such, the default measurement lens that gets applied is the traditional TV lens, which ratings and panel based. This leads to 3 significant measurement issues that various industry players are sorting out:
First, the things that make addressable TV interesting – the ‘breaking’ of the live spot, the delivery of multiple advertisements within the same unit etc. – are precisely the things that make it impossible to measure with a panel, or as a traditional age-gender rating. Trying to shove what is inherently an impression-based buy into a spot-based measurement scheme doesn’t work.
Second, for national addressability, a 30-second unit must be individually enabled in 3 to 5 different operator and distribution platforms. Each operator’s addressable insertion, pacing and reporting stack is unique. It is a hard and laborious process to measure each platform individually, and then combine the numbers to create a true national view.
Third, when an ad is made addressable, some impressions are targeted, but the vast majority are not. On average, ~30% of the impressions in a spot will be targeted. The impressions not targeted are seen as suspect or remnant and tend to be devalued. Decorating those impressions with useful, actionable audience attributes, across the 3 to 5 operators described above, is a measurement and planning problem that must be solved.”
As the industry continues to test addressable advertising and develop standards, Mitch Oscar agrees that similar to digital media, the currency for addressable advertising should be audience based, instead of ratings based, that has been the traditional measurement for linear TV for decades.