Brian Wieser, GroupM’s Global President, Business Intelligence, casts his eye over the evolving video media landscape and considers the impact of connected TV as part of the September issue of Admap on smarter video planning.
For at least as long as it has existed, there have been concerns around television as a medium for advertising. New York Times articles from 1951 described the then-nascent medium as “the problem child of advertising”, in part because costs at that time were rising too fast.
If television has had a bigger problem than how it causes advertisers to constantly look to justify its costs, it is that no other medium has been as useful for advertisers who look to borrow the brand equity of content, use sight, sound and motion in support of the awareness of brand attributes and, ultimately, build or reinforce their brands at a massive scale. Ongoing increases in costs are, literally, the cost of doing this business.
In more recent decades, advertiser concerns have been compounded by audience declines for individual programmes, as well as the challenges in managing campaigns with heightened levels of fragmentation. And, yet, television remains generally more effective than any alternative so long as the aforementioned marketing objectives remain in widespread use.
As television continues to evolve, it seems unlikely that its capacity to accomplish this goal and its relative advantage vs. the alternatives will change by much. However, the medium’s evolution does require ongoing monitoring and adjustments in order to optimise its utility.
Towards those ends, let’s review some key recent trends from the US, the world’s biggest market for television – and the market with the most data available to analyse – to establish insights that are relevant to most countries around the world.
Total video consumption on traditional TV screens is still where the bulk of video viewing occurs. Look no further than the recent FIFA Women’s World Cup, where streaming accounted for a low-single digit share of consumption of the final, in line with other sporting events.
Or consider the SVOD service Hulu, which conveys that virtually all of its programming is also viewed on traditional TV sets. Video consumption is significant on PCs and mobile devices, although relatively little of this is with programming that marketers would consider “premium” and where the borrowing of content’s brand equity can occur.
Television is massive in an absolute sense. Across the US, consumers spend more than 500 billion hours on the medium annually, nearly 1,800 hours per person. There are modest declines at an aggregate level, although nothing like what is commonly reported in trade or general interest publications. It is also true that there are double-digit declines in viewing of prime time programming among adults aged 18-49.
However, this accounts for less than 10% of all aggregated consumption that occurs on the medium. If we include all audiences and all times and all types of TV-related activity, TV consumption has been essentially flat year-over-year in recent months, and not far from recent peak levels of activity.
Within that total pool of TV viewing, there is one particularly important area of change: “internet-connected devices”, which is generally where viewing for SVOD services and connected TV-related viewing occurs.
In total, viewing by internet-connected devices is rising by more than 30% annually every month and now accounts for approximately 15% of TV consumption. However, if we look at audiences under the age of 34, we can see growth of more than 20% on share, which now stands at 25%. Assuming deceleration in growth occurs, in line with recent trends, it’s not hard to imagine that within five years we will have more than 40% of viewing among people under the age of 34 on internet-connected devices.
Of course, connected TV is driven by more than just SVOD services. The vMVPD (Virtual Multichannel Video Programming Distributor) business model, which replaces a traditional MVPD as a packager of linear networks, is increasingly important in the US as well. With services including Sling (owned by satellite TV service Dish), DirecTV Now (owned by AT&T), YouTube Live, Hulu Live, Sony’s Playstation Vue, Fubo and Philo, there are now millions of households which only access traditional TV networks through these services, and almost all of the consumption of these services occurs via connected TVs.
While most of the advertising running on these services is identical to the advertising running on traditional cable networks (because of the dominant national network-sold/local distributor-sold ad inventory split), the growth of these platforms is producing a significant increase in the volume of sale-able connected TV ads. It’s also worth noting that millions of additional households subscribe to these vMVPD services in addition to their traditional MVPDs, leading to even more connected TV inventory when consumers choose to watch programming on the newer vMVPDs rather than on their incumbent service providers.
Importantly, not all of this connected TV activity will involve connected TV advertising opportunities. Some SVOD services – Netflix in particular – will not likely ever sell traditional ads (paid movie trailer-like clips or product placement may be an exception) because of incredibly strong cultural preferences within the companies behind those services.
And then changing the business model of television in the US – specifically the national/local split – seems highly unlikely to occur any times soon. Most network groups sign contracts with distributors which are staggered and which last as long as seven years. It’s relatively easy for connected TV ads to run in the distributor’s commercial pods, but as indicated above, these are only a small share of the industry’s total commercial inventory.
It is technically possible for connected TV-related ads to run in national pods, but this would involve complicated negotiations between networks and distributors to determine who earns what share of the ad revenues captured. One network would have to be willing to risk losing revenue, because any network shifting national commercial pods for “local” or connected TV purposes might find that its capacity to help the national advertisers who want traditional ad inventory is diminished vs. the competition.
All of this explains why changes in this sector are gradual. For advertisers, there will be meaningful advantages that follow from the expanding use of connected TV, whether via ad-supported SVOD services, from vMVPDs, or from other sources such as device manufacturers.
Among the most important problems to be solved are helping large advertisers better manage the frequency with which consumers are exposed to a brand’s ads, and the potential to expand campaign reach cost-effectively. There are also opportunities to offer slightly varied creative units from the same brand for different audiences, which also may offer incremental value to advertisers. And then there are opportunities for niche brands to find narrowly-defined audiences on TV and do so with relatively limited budgets.
Of course, with the introduction of new opportunities, such as those which flow from the establishment of connected TV-related ad inventory, many new problems will undoubtedly emerge. So long as the relative effectiveness of the medium remains high vs. the alternatives, given the goals marketers have, new solutions will also eventually arrive as well.