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Summary:

Despite fewer viewers and blunt advertising metrics TV is still king, with revenues that dwarf online. Still, Doug McCormick of Rho Ventures says using smarter, online-style tech to better target ads will benefit both networks’ and marketers’ bottom line.

Since the advent of internet advertising, marketers have been demanding verifiable results and increased accountability from their media buys, instead of being forced to rely on the sorts of broad gender and age demographics used by TV for decades. And now that possibility is a reality, thanks to smarter set-top boxes, new software and sophisticated data. And yet here we are, with few taking advantage of this capability. Just like in the early days of cable TV, buyers turned their back until clients forced them to buy in. It’s essential then with these new capabilities that traditional TV step up and become as accountable to standards as their Internet video counterparts have always lived by.

Ever since the days of black-and-white TV, the broadcast industry has been a big-reach numbers game – and despite the hype and allure of the ‘net, it’s still by far the big gun in an overwhelming majority of national media plans today. To wit: Broadcast and cable TV combined lead all advertising categories, with revenues hitting $70 billion this election year, while total market for mobile video and display advertising won’t even hit $7 billion until around 2015. This is a testament not only to traditional TV’s reach, but also to its track record in stimulating sales. Marketers know that there’s simply no substitute yet for the impact of a good TV spot and its ability to convince customers to buy their products.

When ported to a big screen, OTT, Hulu and YouTube can have the same big-set experience; however, none of these players have created the type of audience traction that broadcast delivers. A hot online video can certainly grab several million eyeballs in a short period, but typically only for short-burst viewing and nowhere as predictably as TV, which delivers millions of viewers every night, for hours at a time, 365 nights a year.

Of course, TV’s preeminence as the big-reach vehicle still makes it a comparatively expensive medium for advertisers. This is in part because of the inefficiencies of the marketing buy. For the most part, TV is still bought on the basis of age and gender – two very broad demographics – so advertisers inevitably end up paying for viewers who will never buy their product. For instance, while women ages 18 to 34 may be a great target demographic for selling cat food, there are far more women without cats than women with them.

There have been some advances in media accountability throughout the years. For example, TV programmers finally signed up for commercial ratings a few years ago, charging marketers only for the audiences that actually watched the commercial break, raising the bar and the scrutiny about audience guarantees. (What a shocking move, right?) But there is still a lot room for improvement. In fact, the data now exists to let marketers know that if he or she spends X dollars on the right TV programs –which is to say ones that deliver buyers not just bodies – they can expect almost precisely Y product sales.

Nielsen’s IAG and Precision Demand (disclosure: Precision Demand is a Rho Ventures portfolio company) are making real advancements in the underlying analytics for this. While IAG measures viewer engagement via online commercial recall surveys, Precision Demand uses product-purchasing data to correlate with settop box and viewer profiling information from marketers to predict reliable ROI on TV media dollars spent with remarkable accuracy. For example, in one case study one client was able to calculate sales within 5 percent for all channels and within 1 percent for a big box store by using such data. Thus the same behavioral attributes used to guide internet media buys allow marketers to target key purchasers and eliminate waste from their media spend.

So while the TV industry cocktail conversation continues to revolve around how video is migrating to the Web, there’s another important storyline that needs to be aired: that the ability to strengthen traditional TV buys is not only possible, but readily available now. Agencies must start managing media spends to develop specific sales forecasts for items or services that their clients are marketing, while ensuring that they deliver the target users at the most efficient price. The agency/media equation should not stop with the delivery of tonnage audiences. It needs to take the next step. And once they transition to using a scientific media buy, using the most recent tools available, the result will be a win-win for marketers and TV.

Doug McCormick is a partner at Rho Ventures. Previously, Doug was chairman and CEO of iVillage Inc. and CEO of Lifetime Television Networks.

Photo courtesy of Shutterstock.

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  1. The problem with web-like ad metrics is that they have been completely misused: brands are using them to measure events (“buy now”) rather than the process of brand-building, which necessarily happens over time.

    The results from web-like ad metrics are not encouraging: the more data we have the dumber we have become. In the name of “optimization”, we have driven click through rates from a high of 35% in the early days down to near-statistical zero today. As Peter Drucker once said, “There is nothing so useless as doing efficiently that which should not be done at all.”

    We might be forgiven for making this mistake with web banners, which remain a tiny fraction of most marketers’ total marketing spend. But, woe to the CMO – and CEO — who repeats the same mistake with the millions they spend on TV.

    There is absolutely a role for Big Data for TV advertising, but to get there we *must* first re-boot our thinking about digital and go back to metrics that are meaningful for brands.

    It’s in everyone’s interest to get it right this time. The stakes in TV are far higher than they ever were online.

  2. My thoughts are that cable TV is late to the party – Behavioral Based Social Media System for the Cable TV Market

    Cable has long history of failing to develop 1-1 target marketing. Canoe Ventures (latest MSO venture) was touted as the Holy Grail of targeted advertising and is reportedly less than a success at this stage.

    http://tech.fortune.cnn.com/2011/01/03/the-56-billion-ad-question/

    Excerpt from above link on January, 2011 Fortune.com –
    “Advertisers will spend $56 billion putting ads on TV this year,…The cable industry thought it would be a big opportunity too, but its efforts have fallen short. Canoe Ventures, a two-year-old project of the six biggest operators, has launched just one notable product…”

    http://www.businessinsider.com/jason-kilar-here-are-my-thoughts-on-hulu-and-the-future-of-tv-2011-2

    Excerpt from above link on February, 2011 Business Insider
    Identifies advertising market being missed by Cable TV operators
    “Advertisers have weighed in heavily on the future of TV, with both their thoughts and their considerable wallets. Advertisers are increasingly expecting to present their advertising messages to just their desired audience…and not to anyone else. For over 60 years, video advertising could only be bought via a TV show’s projected audience, which served as a blunt proxy for a certain target audience. The result has been many wasted impressions and an often irrelevant experience for consumers. In the near future, advertisers will demand the ability to target their messages to people rather than targeting their messages to TV shows as proxies for people.”

    The obvious alternative, with the least cost to implement is an independent Cloud CRM solution designed to cross index cable subscriber households with their corresponding social network interests. The current regulatory and privacy issues experienced by cable TV operators gathering unauthorized data from set-top boxes could be minimized, by validating subscriber and even eliminated by essentially having an opt-in plan (provided conveniently by the social media). Access along with profile and interests of households would be controlled by the subscriber’s social media platform of choice. Facebook has high consumer acceptance and could be used for household profiles, product interests, social interests, and viewing entertainment interests. There would be incentives to the subscribers to opt-in including notification and reminder of viewing favorites, Groupon type ads, and specific ads matching interests with infomercial type group discounts and urgency to buy.

    The current design of target marketing advertising ventures is fundamentally flawed. They focus on demographics, and fail to identify the individual behavioral current and future household interests.

    I would propose using a data cross indexing similar to a data warehouse project I was involved with at iN Demand. http://www.indemand.com/ .

    Project would involve developing a bidirectional Cloud interface program using a CRM application between the social media and MSO subscriber records and communicating behavioral marketing – business advertising, discounts, specific videos/groups, family albums – providing subscriber awareness of TV programming — movies, products, etc. similar to Amazon and Groupon. This would make subscriber stickier and substantially reduce turnover.

    To paraphrase a comment I made in the CED 1999 publication about the Internet, cable TV operators need to become the new best friends with the 600 million members of social media.

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