Harvey participated in a recent Jack Myers Leadership Conversation on the future of Advanced TV with a panel that included Kevin Arrix, Senior Vice President, Dish Media Sales, Jamie Power, COO of Advanced TV, Cadent, Marcien Jenckes, President of Advertising, Comcast and hosted by Jack Myers, founder of MediaVillage. Watch the conversation here.
The Addressable Market Landscape Today
Myers launched the panel with an opinion that I believe many of us share in the industry. "I have been studying the advanced, interactive, VOD, addressable market for a long time," he began, "and truthfully, I'm not all that clear on who's who and what's what." There is a litany of companies in the media space, who seem to offer opportunities that can overlap or conflict or split the market. "Help me understand the dynamics," he asked.
For Power, one of the reasons that there might be some confusion is, "because we over complicate it." In looking at the current set top box addressable marketplace with the MVPDs, she explained that there is, "Ampersand that has about 60% of the addressable households … then you have Dish and then Xandr," which, combined, rounds out to the rest of the 40% of the country. She then noted that they have expanded to IP addressable to get their clients full reach in television. Cadent's role is that they have, "created a platform to make it easy to execute across all the different screens and channels with consistent workflows and universal data, to get measurement aggregated all in one place" she stated.
"It's worth noting," added Arrix, "Advanced television is a holistic category. I would define it as anything that is data driven. I think Addressable is a part of the Advanced television marketplace. From my point of view addressable is defined as deterministic. That is the line that makes something addressable or not." Ampersand, Dish and Xandr all have deterministic set top box data, he noted, adding Sling, AT&T TV Now, YouTube TV, Google Live and fuboTV that are also subscriber based MVPDs.
Jenckes believes that the competitive set within advanced television is complementary because, "different distributors reach different households. So in order to reach the full U.S. market you have to figure out ways to work across them." He agreed with Arrix that, "there are other new forms of distribution that are emerging, like Roku which is a virtual distributor in some sense and there are others with addressable capabilities out there." He added that once the national networks are enabled, we should expect significant growth in the amount of addressable inventory available in the marketplace.
"I agree with everything that has been said. Addressable is the umbrella term and the one type we have not called out yet is data-driven linear," explained Harvey who added, "All of this is aimed at better results for advertising. That's the whole point." For Harvey, the topology maps out as such: MVPD addressability through a switch from the set top box and the Connected TV, which can be a Smart TV or a connected device. The challenge from a data standpoint (which is something Nielsen and Project OAR are tackling) is how to best combine different data streams (such as from a smart TV in a local household or from terrestrial and satellite sources) that may have different latencies, delay times and black screens.
The Addressable Market Marketplace
So where is addressable headed? Forrester predicted in 2000 that addressable advanced television would be a $30 billion industry in 2020. "Well here we are in 2020," Myers noted, "and it's significantly less. It's a fraction of that." He added that, "our forecasts are that in 2025 it will represent about 8-10% of the television ad revenues which will be significant growth but not the $30 billion that Forrester recommended we would have today." Considering how off predictions were in 2000, one could be forgiven for being a bit skeptical about the robustness of addressable revenue growth in the next few years.
And yet, Jenckes believes that the biggest barrier to addressable growth – the technological challenge of switching from programming to ads - has now essentially been solved. But, he added, "the limitations we are having right now are around the amount of inventory we have available," which is the two minutes an hour for addressable but even then, this inventory is often used in other ways. "So the challenge is how you improve inventory and how you manage yield. You can sell the inventory in a lot of different ways. I can sell a full spot at a set CPM or a much narrower sliver of that spot for a higher CPM but as the owner of the inventory I have to figure out which is best and how I optimize the value of that."
The final challenge, Jenckes added, "is measurement and the biggest issue around measurement has been the historical restrictions that Nielsen has imposed on us as an industry," Addressable is easy to measure because it is impressions based. The challenge is to measure, "the under addressable part of the campaign. What happens to the rest of the spot? Since Nielsen is panel based, if one of the panelists happens to get a different ad it breaks the model because Nielsen doesn't know if that is one impression or a lot of impressions represented by that one panelist. There is a lot of work that needs to happen on that front," he concluded." But," he then added, "these hurdles have been coming down. There has been a lot of progress around standards, around enablement and even on the measurement front although I think that will be the last frontier."
For Power, "the opportunity of addressable has been around for years. But agencies haven't done it because we haven't invested in the ad tech" to facilitate the consistent measurement across platforms and services. In addition, "as a marketplace we are not articulating what the value-proposition is. We are over-complicating it. Advertisers and agencies are not understanding it." She advocates for the creation of standards and a common currency. "If we cannot even agree … it makes it really confusing and there is not trust in the marketplace to try it."
According to Arrix, "The key to the future is all about interoperability. The technology is getting better, the process is getting better. There has been a significant amount of progress made in the last few years." That, with the recognition by the industry that, "data-driven advertising is just smarter," is leading the industry to a growth surge for addressable.
The Future of Addressable
Propelling a robust future for addressable is data and measurement. In the past, the industry was wedded to the Nielsen panel. "But," as Harvey pointed out, "right now there is more data each individual party has. The data is now disaggregated into these silos and if we put them all together we have the measurement system of the future. We don't need panels except for nuances like co-viewing projections and stuff like that. Eventually that goes away too." He admonished the industry to, "work together. Not just say it like we used to do but actually do it."
That is the underlying structure for the business. "The big money comes when we get the network inventory. The two minutes an hour is not going to make it a big business. The $30billion comes as soon as you start switching to network addressable," Harvey concluded.
"It is at the beginning of the game," Arrix noted. "We see two paths right now. There is the true addressable path where you are breaking up the linear spot into impressions and you end up having the 80/20 rule with the 20% as the target and the 80% is the underlying impressions that you have to figure out how to monetize. That is how we operate now in our addressable business. The other initiative is creative versioning where you are not breaking up the linear spot but you are using deterministic data to deliver the right creative to the right household."
But the stakes are high and the future is not assured if we all can't come together as an industry to create standards and work together. "My fear is that unless we do that, we will be relegated to … the weakest player within television," Jenckes warned. "And if that's the case, we can all start the clock right now for the full and predictive demise of TV folks have been talking about for a long time. The good news is that because of the progress we've had, I don't think that is going happen. There is a path and it requires collaboration."
When it comes to business during the pandemic, "is business a bit little softer than usual? Yeah. But I don't think COVID-19 has a major effect on this," Power stated, "The same problems that existed before COVID-19, exist now. One thing that has happened is that there are more eyeballs watching the television and we know that we will pass the threshold (of 50%) at the end of this year from linear to non-linear viewing. Data is the only thing that is going to win in this marketplace."
Also Read:
A United TV Advertising Front, and How to Start It by Simon Applebaum
Will 2020 Be the Breakout Year for Addressable TV? by Bill Harvey
Media Experts Agree, 2020 Is a Decisive Year for Advanced TV by Nathan Holman
Addressable TV: On the Cusp of Going National Scale by Jeff Minsky
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The opinions expressed here are the author's views and do not necessarily represent the views of MediaVillage.com/MyersBizNet.