Analyst Doubles Down on Advanced Advertising

Credit Suisse’s Sheikh sees better targeting generating revenue growth for TV

Analyst Omar Sheikh of Credit Suisse—who called targeted advertising a $100 billion revenue opportunity for the TV business in April—said in a new report that he has “increased confidence” that advanced advertising will help networks grow domestic ad revenues “faster than in recent years and faster than investors currently expect.”

Sheikh, in a report Wednesday, pegged the growth rate at 12% to 48% following meetings with advanced advertising specialist companies Simulmedia, Clypd and Matter More Media.

The meetings buttressed his thesis that the TV industry is developing “potentially game-changing advances in the efficiency of linear TV advertising, which we believe will put the medium in a strong position to compete with digital platforms in the long term.”

Sheikh says four key takeaways emerged from his meetings.

  • Concerns about digital advertising are at a tipping point, and the TV industry is seeking to capitalize on this concern with new targeted advertising products.
  • OpenAP, Comcast-owned NBCUniversal's ATP and other platforms are innovating and gaining traction. An obstacle is advertisers' concerns about protecting their anonymity and first party data. Comcast’s recently announced Blockchain Insights Platform may help overcome this concern.
  • Vertically integrated networks and platforms are in a strong position to serve targeted ads around video viewing by combining their ad-serving capabilities with data about viewers. This could create additional long-term value for AT&T (with its acquisition of Time Warner) and Comcast. Also possibly for Amazon, Facebook, Verizon and Netflix in the future.
  • As networks and third parties build a new TV advertising ecosystem, ad agencies and Nielsen “may have a diminished role in how inventory is bought and sold,” which may impact their returns over the long term.

“Investors continue to regard U.S TV advertising as a structurally declining business, driven by erosion in viewing and competition from the growing reach of digital platforms,” Sheikh said. “In our view, if the TV industry can combine its reach with greater relevance by using technology to improve targeting, the medium will be well-placed to grow its share of the marketing mix over time. This will particularly be driven by below-the-line items, including direct mail and telephone marketing, which account for more than $100 billion of spend today."