The following opinion piece is a guest post and does not necessarily reflect the opinions of this publication. Read more about MediaShift guest posts here.
Modern-day television is in the midst of a metamorphosis, thanks in many ways to the rise of the digital landscape. New ways to consume media have emerged and with this came new advertising capabilities, making the traditional way of doing business obsolete. This is perhaps most evident in the tale of television’s reign. For the first time, TV is expected to lose its dominance over digital media and, in 2016, digital’s advertising revenue will surpas s TV ad spending. As massive TV advertising budgets become fleeting tales of days past, linear television will be forced to face its greatest challenge yet. To continue to satisfy advertisers, they must start selling impressions in the way advertisers want to buy them: by audience segmentation.
More ad options = more competition
Once upon a time, television offered advertisers the perfect platform: the ability to reach millions of viewers with one 30-second spot. In a world where consumers had finite options to consume video, television commanded advertisers’ attention with little effort. With limited competition, television could rake in revenue based on sheer audience size alone. For the most part, this worked, and today’s television business is based on these same principals. TV ad sales practices have seen little amendment over the years, mainly because there was never any real need to change the model.
Enter technology and the growth of digital media: computers, high-speed Internet, smartphones and tablets. Consumers now have a range of ways to consume content, with a growing desire to do it on their own terms. The audience that was once available only through a handful of options (television, radio, and newspaper) is now spread out across a variety of platforms. As these advertising options grew, so did the technology to support these new marketplaces, giving the buy-side a range of sophisticated audience targeting capabilities. A buyer can now buy the female-only portion of sports content or the male-only portion of a soap opera. These technological advances give the digital advertising space a strong edge over other mediums.
Advertisers of days past were governed by the classic John Wanamaker saying: “I know that half of my advertising dollars are wasted … I just don’t know which half.” The digital world has solved many of these problems (albeit, it presents its own host of challenges) and provided advertisers with hyper-targeting capabilities they never had access to before. Assumptions, “gut checks” and probabilistic models have been replaced with deterministic metrics and quantifiable data. Today’s advertisers can pinpoint down to the exact impression what strategy worked and what did not.
The needed change
The current television model fails to offer buyers these same options to refine and maximize ad spend and therefore will continue to become less and less appealing. Instead of offering impressions based on data and targeting capabilities, advertisers are forced to purchase air-time in advance, with no guarantee that the spot will reach a desired audience. And it’s not specific. Where digital allows advertisers to target based on individual attributes, in television, when you buy one you buy them all. An advertiser that is interested in the female audience ages 18-25 viewing ABC’s “The Bachelor” can only access them if they also purchase the female audience ages 25-49 that are also tuning into the program. As advertising strategies focus more on the impact of individual consumer engagement, television will be deemed as a frivolous waste of ad spend. Each advertising dollar spent must show a meaningful return on investment, and with so many options to engage with audiences, television is falling flat.
We have passed the tipping point where ad dollars have shifted away from television and toward digital and the pace is only accelerating. While Comcast, Dish Network, CBS, and others launch their own OTT products, and Time Warner is rumored to be buying a stake in Hulu, there is still much more to be done. As the definition of television evolves, so should its advertising capabilities. Individual targeting, instantaneous ad placements and viewing data must become pillars of television ad sales. To maintain any dominance over advertising dollars, the television industry must re-position its inventory to provide the same type of solution as digital and change its stagnant advertising practices to reflect the demands of the buy-side. Addressing these needs will be television’s only defense against the new generation of digital invaders looking to claim dominance over the advertising world.
Tom Herman is CEO of DashBid, a video-only supply side platform.