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What’s Keeping Addressable Television From the Local Level?

September 26th, 2017   ||    by John R. Osborn   ||    No Comments

How closely are you following the progress of addressable TV? According to eMarketer’s latest forecast, addressable TV spending will grow fourfold between 2016 and 2020 to over $3 billion. This is a significant rise, even if addressable television will continue to account for less than 5 percent of total TV ad spend—excluding over-the-top (OTT) and connected TV.

Here are some ways local TV stations can prepare addressable advertising capabilities in order to compete with digital video.

Next Steps by Segment

MarTech Today breaks addressable television out into three segments, all relevant to local TV sellers. The first segment, traditional linear TV, is in the process of automating buying and selling processes, which will open up programmatic buying opportunities and more addressable data targeting down the line. To prepare for addressable capabilities, local stations and buyers should be looking at building partnerships with HD video antenna and DVR providers like TiVo Roamio, as well as data providers and data management platforms (DMPs), in order to predictively target over-the-air (OTA) times and programs based on other local set-top box (STB) audience data insights.

MarTech’s second segment is addressable linear TV. Current addressable television ad placements go to the two minutes per hour of ad inventory currently owned by local multi-channel video program distributors (MVPDs). Future MVPD carriage fees must reflect the increased value for the addressability of local station inventory ad slots.

Addressable OTT and connected TV make up the final segment. This is where a real—yet counterintuitive—opportunity exists for local TV buyers and sellers. Along with skinny bundles from streaming video-on-demand (SVOD) providers like Sling TV and YouTube TV, national and local TV broadcast programming—through the local network affiliate system—will become “channels” offered through data-collecting OTT devices like Roku, Apple TV, and Chromecast. It’s up to each station to ensure such channels are included and effectively marketed as more cord-cutters and cord-nevers move away from traditional TV distribution.

Addressable TV, sometimes called “targeted TV” or “data-driven TV,” seems to have advantages for all sides of the ecosystem. Advertisers can reduce the waste of ads that spill out to nonprospects. TV providers can, in any given ad slot or video-on-demand (VOD) session, charge more for highly targeted ads. And viewers will see ads more tailored to their interests and lifestyles. Remember, TV has always been a safe haven for advertiser brands.

Divining Future Growth

So, with 75 percent of television households (TVHHs) capable of delivering addressable ads today, why isn’t addressable TV scaling up at the speed of, say, programmatic display advertising? Oscar Orozco, senior forecasting analyst at eMarketer, suggests that “for programmatic TV ad spend to grow as fast as we’ve seen on the digital side, it must advance to complete automation.”

Other reasons for the slower growth include:

  • Audience measurement, formatting, and technical inconsistencies between MVPDs/STB providers.
  • Significant operational investments required on the sell and buy side.
  • Analog/digital silos within companies on both the buy and sell side.
  • Need to build trust in a new process of buying and its performance.
  • Potential consumer privacy concerns and regulatory issues.

Programmatic TV growth, defined by eMarketer in its forecast as “the use of software platforms to automate the buying, selling or fulfillment of live TV and VOD advertising,” is almost identical to addressable television in projected ad spend. Both are aligned because both rest firmly on the progress of automation.

Experts agree. In a 2015 Beet.TV interview, investment banker and industry analyst Terence Kawaya spoke of addressability as a big game-changer for television—but said that solely offering targetability is not enough. Buyers and sellers must put together end-to-end capabilities to sell, fulfill, and measure audiences, and manage the intricacies of yield management, ad placement, accountability, and trust.

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