As more marketing money shifts to digital, TV networks need to reimagine their advertising sales businesses in order to grow.
Ad money is moving from TV to digital. If there was any doubt about that, just look at the developments out of this year’s Newfronts and Upfronts. According to a survey from the Interactive Advertising Bureau, 68% of marketers expect to spend more on digital video ads over the next 12 months. Two-thirds of respondents expect their broadcast and TV ad budgets to stay the same or go down. It is not hard to understand why. Marketers are becoming more serious about higher growth alternatives to broadcast and cable television as traditional video viewing declines and more premium video is consumed on digital devices and in on-demand environments.
The major TV networks recognize the strategic implications of these changes: They need to work harder and smarter to attract the spending of agencies and marketers. It’s no longer enough for brands to get that buzzy, water-cooler high from spots on a hit show like The Walking Dead or The Voice, combined with a jolt of what still passes for mass reach today. Increasingly, it’s about who saw that spot and how closely that viewer matches the marketer’s specific consumer target. Digital video has trained marketers to expect more targeting from their ad dollars. They want to know about the quality (not just the quantity) of their advertising viewership. They want to know how to target their ads to ensure they reach the right consumers. And they want to know how many of those users took action. In short, household ratings aren’t enough anymore. Marketers want to connect media and advertising viewership and their related video spending to their desired business outcomes. And they will shift their marketing dollars disproportionately to the media companies where they have the greatest confidence in the return on their video investment.
Savvy TV advertising leaders recognize that they need to pivot quickly and leverage their strengths in new ways to attract these dollars. Step one on this journey has been for networks to reorganize their brand portfolios to better respond to the requirements of an advertising market focused on audience scale, targeting, and data – whether the video user environment is live or on-demand, or across TV, desktop, tablet, or smartphone. Many leading players have consolidated sales efforts under a broader umbrella and more concentrated executive leadership. NBC Universal, Turner, 21st Century Fox, and most recently, Viacom, have all restructured their ad sales efforts to achieve the benefits of streamlining the buying/decision-making process for clients across screens and brands. This also enables their own teams to create more cross-brand sales opportunities and focus more on the scale of their audiences across both TV and digital.
Step two is about developing new data products to quench marketers’ growing thirst for the audience-driven targeting, data, and optimization that they’re becoming accustomed to in digital, but paired now with the reach, engagement, and quality associated with networks’ premium content. NBC Universal (which is owned by Comcast) is investing in new capabilities around technology, data analytics, research, and sales in order to better connect NBCU content and audiences to the needs of marketers across all its brands and programming genres – entertainment, sports, and news. With its audience targeting platform or “ATP”, NBC Universal can now slice and dice its huge viewership (NBC Universal claims to reach 93% of American adults every month) into more granular segments beyond conventional age, household, and gender demographics. Aided by a mix of first and third-party data, including Comcast set-top box data, the network can push further into areas like personalization and attribution. The promise of products like ATP is that they can help NBC Universal simultaneously thwart digital challengers while strengthening the value and appeal of the company’s premium video inventory and shows.
Time Warner and Viacom have also announced initiatives to respond to marketers’ desire for more data and better targeting. Time Warner’s Turner unit is building a centralized data management capability across both traditional video and digital – named the Turner Data Cloud — that will enable marketers and their agencies to buy their preferred audiences wherever they reside within the Turner portfolio in terms of brand or screen. Turner is also reportedly offering guarantees based not on how many people watched an ad but on things like increased brand recognition and purchase intent. Viacom is moving in a similar direction with its new data advertising product, Viacom Vantage. Vantage focuses on translating insights into the commercial and digital behaviors of Viacom audiences into sharper, more custom targets for marketers across the entire network portfolio.
Step three will be around capitalizing on the creative talent and IP that reside in TV networks’ premium content portfolios, to create new content- and innovation-driven products that take advantage of the surging demand for digital video. Turner Broadcasting recently announced the unveiling of Courageous, a branded content studio for marketers that will “produce relevant storytelling” with the capability to be distributed across CNN’s global portfolio of linear and digital properties, in addition to being optimized for success on social platforms. For the networks, the success of these efforts will largely be dependent on two key factors – the ability to drive scaled engagement and sharing with users and the expertise to achieve those objectives not just within their own portfolio but also in those that dominate mobile such as YouTube, Facebook, Pinterest, and Snapchat.
Taken together, these are very important moves – and the TV ecosystem will make more of them throughout 2015. In order to reinforce their premium positioning with advertisers, TV networks need to demonstrate convincingly that they can leverage the best of both worlds around their premium content – high quality, large audiences and deep data at marketers’ desired scale. When the networks can demonstrate and deliver that, they will be in a more powerful position to start reclaiming some of the ad dollars that have been lost to digital and capturing more overall market share. Those that are able to execute on the new winning formula of broad reach plus data, targeting, and technology will have a real first-mover advantage. Those who don’t will be left behind.
This is a guest post by Christopher A.H. Vollmer, a partner at Strategy& (part of the PwC Network) and global managing director of the firm’s Digital Services group. He also leads the firm’s global media and entertainment practice.