Collins | The Advertising Experience Re-Imagined
There is no question that 2019 will be a year of change for television advertising. But, what we are looking at is evolution, not revolution.
NBC Universal’s announcement, last week, that it will “reduce the number of commercial breaks in primetime TV shows by more than 20% across all of its networks by 2020,” surely caused some eyebrows to raise. The company had already committed to a 10% reduction in breaks for 2018.
Like linear television viewership, traditional television advertising has been under pressure for some time. Various groups make it their business to forecast advertising spending. In December, Broadcasting & Cable reported that GroupM predicts a 0.5% increase in TV spending to $74.9 billion in 2019. Contrast that with what is says was a 2% increase, to $79.1 billion, in 2018. Of course, 2018 spending was fueled by the Olympics and mid-term elections spending.
Interestingly, GroupM also says 2019 will be the first time that digital spending will outstrip that for television. It is forecasting $79.8 billion, a 9% increase from 2019.
With the explosion in connected digital devices — in people’s hands, on their desks, and even at the gas pump and on the sides of buildings — more ads are being shown to more people in more places than ever before. To survive, video programmers are expanding their footprint beyond the fixed screen in the family room (or the living room, or kitchen, or bedroom). We covered one aspect of this in my Nov. 30, 2018, Front Office column about the evolving newsroom and how stations are reorganizing news writing workflows to feed both on-air and digital outlets.
At the same time, advertisers are demanding new advertising measurements. As I discussed in my June 1, 2018, column, measurements such as gross rating points (GRPs) and demographics are no longer enough.
Fewer Ads, More Revenue
The question then becomes, how can a media company make more money by reducing their inventory? Axios’ Sara Fisher, who broke the news about the NBCU ad reduction for 2019 (and was a featured speaker at MFM’s annual conference last May), explains that there are a few variables at work in the calculation. First, she reminds us that an announcement is not the same thing as actually taking action and that “overall, total U.S. ad load rose from 2017 to 2018.” More importantly, cutting ad load is only part of the strategy. The rest hinges on better targeting options coupled with an increase in digital ad sales.
On the targeting front, two NBCU tactics are getting the most attention. “Prime Pods,” are 60-seconds of national ad time that air near the start or end of a program and feature just one or two sponsors, which NBCU began selling during the 2018 upfront. In addition, the company plans to expand use of its proprietary AI-powered technology, which helps advertisers align their messages with specific moments from programs.
New Measurements And New Guarantees
This new era calls for new types of reporting and guarantees for advertisers. In addition to its Prime Pods, NBCU also announced a new advertising measurement during its upfront sales. Called “CFlight,” its goal is to provide advertisers with a sense of total campaign viewership, regardless of the medium.
Video programmers are also working to measure campaign engagement. A+E Networks offers select advertisers “outcome-based guarantees.” These guarantees may include website visits or in-store foot traffic.
Hulu just announced its effort to provide advertisers with “attribution” measurements. These are defined as actions such as a purchase, a test drive, or a website sign-up. The measurement is currently in beta testing with select Hulu clients. Hulu is launching this effort despite the Fast Company report that the company grew its advertising revenue by 45% to nearly $1.5 billion — the most in its history — and added eight  million new subscribers for 2018. The company ended its fiscal year with more than 25 million total subscribers across its subscription-on-demand (SVOD) and live TV plans in the U.S. This marks a 48% subscriber increase year-over-year and extends Hulu’s customer reach beyond that of the country’s largest cable and satellite pay-tv providers.
Finally, Turner used last week’s CES 2019 (formerly the Consumer Electronics Show) to announce its plan to leverage AT&T set-top box data to help advertisers target television and digital advertising.
Premium Ad Exchanges
Television networks simply do not have the scale offered by a Google or Facebook. That is the bad news. The good news is that recent missteps by those big publishers, particularly in the areas of “fake news,” bad metrics, and targeting mishaps in which ads appear adjacent to content that the advertiser finds objectionable, make digital offerings from trusted network providers more attractive. NBCU’s focus on digital includes joining publishers such as Vox Media on a premium ad exchanged called Concert. It has also joined networks including Turner, Viacom, Fox, and Univision in Open AP, a digital TV ad exchange. This later exchange uses data from Nielsen, Comscore, and others to sell TV ads digitally across a number of TV networks.
What About Local TV Stations?
Yesterday, Gordon Borrell, CEO of Borrell Associates Inc., shared his thoughts about where local advertising is headed. While I finished this column before he spoke to MFM members and others participating in the webinar, I do know that he is forecasting that local advertising will only grow by 1.3% in 2019. More importantly, he is predicting that there will be significant declines for some types of media, while outlets like digital and outdoor gobble up all the growth.
Part of the answer may be in his insights about why local businesses are expanding their marketing choices, but reducing the number of media companies with which they are working. Things to look for include those trends we are seeing on the national front including new measurements, new guarantees, and a streamlining of the ad sales process.
Borrell offered this webinar as a precursor to Borrell Associates’ 9th Annual Conference LOAC 2019 slated for March 12 and 13 in New York; if you want to take a deep dive into the subject I encourage you to register for this informative event. I also expect to cover his insights in more depth in an upcoming column.
MFM CFO Summit
In addition to Turner’s CES announcement about its working with parent company AT&T’s Xander advertising business unit, Turner President David Levy addressed attendees saying in part that sports on TV is strong and getting stronger, bolstered by the legalization of gambling. That raises questions around what stations can legally do when it comes to selling advertising for sports gambling outlets. That is one of the topics on the agenda for MFM’s CFO Summit scheduled for March 7-8 in Ft. Lauderdale, Fla.
As the TV advertising business continues to evolve, there will be many opportunities for evaluation, financial and otherwise. MFM is committed to remain at the forefront of these developments so we can continue to fulfill our commitment to make media finance employees more knowledgeable and valuable today while developing the next generation of global media leaders. If there is something you think we should be covering, please let me know by either commenting on this article or sending me an email at the address below.
Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary, the media industry’s credit association. She can be reached at [email protected] and via the association’s LinkedIn, Twitter or Facebook sites.