Automation Could Reverse Spot Declines

NEW YORK — The decline of national ad spot revenue in recent decades — and relatively flat growth in core advertising categories — could be sharply reversed, growing the local TV business by 5%-10%. That is, if automated platforms are fully built and allow for an easy and fast makegoods process.

“It would bring more money into the marketplace for people who should be buying locally because they don’t have distribution on a national basis. And it would save us money,” said Frank Comerford, CRO and president of commercial operations at NBCUniversal’s owned TV stations. He also noted that the systems would free up staff to do more value-added work. “Five to 10 percent is not at all a stretch.”

That prediction, as well as information about some sharp pain points, were front-and-center during a panel session that featured agency and station group executives in a panel at TVNewsCheck’s TV2020 on advanced advertising Wednesday.

Automation platforms for the buying and selling of spot is seen as a huge jump forward. But there are all kinds of obstacles throwing that leap off balance.

The lack of a fully constructed, end-to-end automated system is one of the glaring problems. “There are a lot of areas under construction,” said Michele Toller, VP of media at Empower MediaMarketing. “None of them — like Hudson MX or PVX [ProVantage X] or Videa — interact seamlessly with our media management platform, which is Mediaocean. While we can put buys together, it’s a very cumbersome process, and sometimes manual, to get the media management software to where we can bill our clients, report on it, manage it.”

“There is no real connectivity between all the different systems,” Comerford said. “It’s getting there. The TIP Initiative makes so much sense. If everyone works toward that, it will really fast start the process. But until the systems speak to each other, we can only do piecemeal parts [of automation].”

The TIP Initiative, supported by the TVB and several industry players, has provided a set of open-standard rules to allow better communications between platforms in the automated spot space.

Getting automation right could persuade agencies and their clients to spend more dollars in spot. “If you look at the economics, local TV is probably the most costly [type of media], manpower-wise, in an agency,” said Lyle Schwartz, chief integration officer at GroupM. “Relative to national TV, it’s about four times more costly.”

Not only could a smooth-running automated system reduce inefficiencies and inaccuracies, but it would allow for greater granularity of program analysis, Schwartz said. “I think it would raise the bar versus everybody else in the marketplace.”

If and when the end-to-end solution is fully automated, another issue may still need to be resolved, said Missy Evenson, VP of sales, local media at E.W. Scripps. “The biggest problem that’s killing our side of the business is the transaction fees. We are literally getting charged at every turn for our data, or they want to charge us at every turn,” she said.

When all the platform and rep firm fees are added together, they could make up 6% of the revenue from a given transaction, Evenson said.

On the positive side, better ways of handling makegoods are in the works. NBC’s Comerford said his stations are moving more toward a stewardship model used by the networks. “It would eliminate some of the IOU at the end of a buy. Give us rules from the beginning,” he said, referring to information from the agencies about what types of programs or dayparts a given spot could run in if it was bumped or didn’t make ratings guarantees.

In the improved scenario, “if we agree to something and a makegood falls within the parameter of the rule, it happens automatically,” Comerford said. “At the end of the day, the agency avoids having to pay back that money [for under delivery] to the client.”

Both Evenson and Comerford said their teams are finding success with so-called pay per performance transactions. With that option, a seller guarantees a certain number of impressions or ratings points for a given flight. And if the spots fail to reach their agreed-upon goal, the stations credit the buyer for the cost of the flight or give them cash back.

Evenson said that Scripps has developed a predictive system that makes their projections of audience guarantees much more accurate, and that makes the pay per performance system particularly viable.

“We’ve moved a significant portion of our business to pay per performance,” Evenson said. “It’s going really well. What it’s done for us, in our local markets, is I’m not buried under hundreds of thousands of dollars of UD [under delivery] weight on a quarterly basis. On the national piece of the business in particular, it has given literally hundreds of spots in inventory for local sellers to go out and sell.”

“We’re trying to do the same thing,” Comerford said. “It’s scary for people at the stations. But it stops one of the bigger problems that national spot has — which is a good chunk of our business. That is, the decline of money coming into the marketplace. There’s a direct correlation between the money that the agencies spend to execute, and the money they have to give back to advertisers when things don’t post.”

The panelists also talked about another area that needs to be improved: targeted advertising. “The local industry is so far behind where we need to be,” Toller said. “With national TV, we’re taking our clients’ first-party data and building an audience and targeting that data.”

Toller doesn’t buy on a specific demo like females 25-54. “We are transacting on business outcomes,” Toller said, referring to deals that are based on how a given flight drives store sales or otherwise moves the needle for clients.

With spot “we’re talking about moving from GRPs [gross ratings points] to impressions, which is a math equation. Even that move puts local well behind where they need to be, and what marketers are demanding today,” Toller added.

In speaking of the need to offer impressions as a currency, Evenson noted that as consumers move away from traditional television, impressions will allow broadcasters to measure audiences in broadband-only homes.

Schwartz said he’s “seriously troubled by” Nielsen’s new measurement methodology, with its inclusion of out-of-home measurement. “It’s going to inflate ratings.” He believes the numbers include “unviewable impressions.”

Schwartz said that he can provide charts that show ratings on some stations go up between 200% and 500% in the key 18-34 and 18-49 demos, when compared to the previous methodology numbers. “And that rating is not out-of-home. That rating is in the household,” he said.

Comerford pushed back. “I think you might be exaggerating the rate of growth,” he said. He noted that Nielsen’s new methodology utilizes audio watermarks to identify what people are watching.

The argument by some people that a person counted by the measurement system might be in another room doesn’t hold water, according to Comerford. “Unless these things have supersonic hearing ability, that’s not going to happen.”

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