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4 Misconceptions About Addressable Advertising on TV Debunked

May 23rd, 2019   ||    by Susan Kuchinskas

There are plenty of misconceptions about addressable advertising on television, a relatively new way for marketers to reach consumers. Television remains one of the most powerful mediums for delivering messages that resonate, and addressable adds an important new dimension.

As marketers, agencies, and broadcasters learn the value of this new approach, we’d like to clear up some misconceptions about addressable advertising in the TV world.

1. The Audience Isn’t Big Enough

With deeper penetration of set-top boxes and smart TVs, this audience continues to grow—and it’s already big enough for advertisers to take a look. The Video Advertising Bureau estimated that the addressable TV audience in the US is 162.2 million people, up 30 percent from 2016, Broadcasting & Cable reported.

2. It’s Only Suitable for Marketers With Small Target Populations

As Broadcasting & Cable explained, even mass-market advertisers like CPG brands can use addressable TV to gain audience insights and test segments. For example, an advertiser could use the reporting from a small, targeted TV campaign to see which networks, dayparts, and days of the week their audience is available. They can also use addressable for A/B testing of creative. These insights can help inform the rest of their television advertising spend.

3. Addressable TV Is Too Expensive

It’s true that the cost per impression (CPM) for addressable TV is higher than for run-of-network. But Digiday pointed out that they can be much cheaper if you calculate effective CPM, or eCPM. To get the eCPM, an advertiser divides the total amount spent by the number of impressions served to the intended audience.

For example, if an advertiser wants to reach mothers with children, perhaps only 10 percent of ads in a $10 CPM, non-targeted campaign might be seen by them. That means the effective CPM is $100. On the other hand, a $10 CPM addressable campaign would be seen only by mothers, making the eCPM $10.

4. The ROI Is Unproven

The problem of calculating the return on investment for a traditional television campaign remains complex. Programmatic buying platforms for linear TV can solve this problem. With programmatic TV buying, stations offer advertisers the ability to reach consumer segments at the household level. What’s more important, they provide measurement tools to help media buyers understand the best and most efficient buys. This transparency lets them understand the true ROI of these campaigns.

Banish These Misconceptions

It’s not surprising that misconceptions about addressable television advertising are rife. It’s an inevitable result of a paradigm change, as Shereta Williams, president of Videa, told MarTech Series. She said, “Whenever this amount of change is introduced into any industry, there is skepticism and reluctance. The television industry is no different and it’s especially true because there hasn’t been a technology evolution like this in over five decades.”

It’s true that this is a very new technology, but it’s growing. The Video Advertising Bureau predicted spending on addressable TV to reach $3.3 billion by 2020, up from $2.1 billion in 2018, Broadcasting & Cable reported. While only 15 percent of advertisers are now using it, those who have tested it plan to invest more.

It’s safe to say that addressable TV is the future.

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