TV now has web-like ad metrics–so why aren’t they being used?

Doug McCormick, Rho Ventures — Sun, 11 Nov 2012 20:00:20 +0000

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.

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Internet advertising still a growth business, but pace slows

Ki Mae Heussner — Thu, 11 Oct 2012 17:57:56 +0000

Internet ad revenue may have reached $17 billion in the first half of the year, according to the Interactive Advertising Bureau, but the rate of growth declined between 2011 and 2012.

In a Thursday report, the industry association said online ad revenue in 2012 climbed 14 percent, from $14.9 billion in the first six months of 2011. But between the first half 2010 and the first half of 2011, revenue increased 23 percent, indicating softening growth.

When asked about the slowdown, research executives at the IAB and PwC (which conducted the study for the association) mostly attributed it to the overall macroeconomic picture. In 2010, the economy was particularly weak, making growth in 2011 look especially strong. And uncertainty in the current economy could be dragging down spending this year.

David Silverman, a partner at PwC US, also said the appearance of a declining rate of growth could be a function of the growing industry.

“As your base gets bigger, your dollar growth can be higher but as a percentage it looks smaller. That’s just going to be a natural phenomenon that will happen over time as the base continues to grow,” he said.

According to the report, mobile continues to be a big gainer, with spending nearly doubling from $636 million in the first half of 2011 to $1.2 billion in the same period this year. But though it’s seen as a new revenue source and diver of overall growth it remains a relatively small piece (7 percent) of the overall online ad spending pie. Among all categories of online advertising, search leads with 48 percent of the spending ($8.1 billion), followed by display with 33 percent ($5.6 billion).

Rich media saw a 32 percent decrease, the researchers said, but explained that spending in that category is moving to digital video, which rose 18 percent but remained flat year over year.

Another interesting finding from the IAB report was that brand dollars are moving online at a slightly slower pace compared to previous half-year reports. But Sherill Mane, the IAB’s SVP for research, analytics and measurement, said that while performance-based advertising (in which payment is based on a direct response) seems to be currently outpacing brand advertising (which is based on impressions), dollars for the latter type of advertising are continuing to come online.

While the IAB continues to tout the health of the online ad market – and cite the strength of its growth relative to that of other mediums – the majority of ad dollars are still spent offline. Online publishers and platforms are making headway with new ad formats that deliver increasingly premium experiences, but they’re just beginning to show that they can offer measurable results.

As for advertiser categories, the report said spending by pharma and healthcare was up 81 percent to $1.1 billion in 2012 and automotive climbed 29 percent. Consumer packaged goods grew by just 4 percent but though that number seems small relative to the big gains in other categories, the researchers said it’s a solid number for a tough economy.

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TV now has web-like ad metrics–so why aren’t they being used?

Internet advertising still a growth business, but pace slows