Targeting a Path Forward for TV Ads, Data Could Create a $100B Upside

Credit Suisse forecast sparks optimism amid digital gains

Despite declines in traditional linear viewership and ratings, TV ad revenue should grow at a steady pace over the next decade or so, with targeted messages and other advanced-advertising methods rising to replace money that continues to head to digital providers such as Google and Facebook.

Credit Suisse media analyst Omar Sheikh, in an April report whose bullish messages were cited several times at the B&C and Multichannel News-sponsored Programmatic Summit, said targeted ads could account for an additional $100 billion in revenue or more through the year 2030. That would transform what some analysts have predicted would be a slowdown in ad growth (to about 2% annually) into an acceleration, with average growth in the 5% to 7% range.

Rise of Relevance

Key to that thesis is Sheikh’s belief that the ad model is evolving from one centered on reach — making sure a message is put before as many people as possible — to one where relevance is paramount.

That is already apparent in the ascension of digital advertising, which accounted for about 40% of total ad revenue in the first quarter, compared to 32% for TV, according to the Interactive Advertising Bureau (IAB).

“Digital platforms are intrinsically better able to deliver relevant advertising and, as they grow in size, are on a near-inexorable path to take share from all parts of marketing budgets,” Sheikh wrote.

The TV business appears to be ready to embrace targeting fully, as major networks are joining together to ensure their targeted messages are more efficient. Sheikh pointed to the Open AP initiative by Viacom, 21st Century Fox and Turner, which allows advertisers to use their own data, as well as third-party information, to target audiences and ads across all three network platforms. So, instead of using Nielsen’s demographic audience definitions — mainly age and gender — advertisers could target ads to specific consumer segments, such as drivers with auto leases about to expire.

With more targeted and efficient messaging, the Credit Suisse analyst believes networks could reduce ad loads from their current 15 minutes per hour to as little as two to five minutes per hour — putting networks on closer footing with ad-free subscription video-on-demand services such as Netflix and Amazon Video.

Not everyone is convinced the advanced ad revolution will come that quickly. Pivotal Research Group senior research analyst-advertising Brian Wieser said advanced ads are a nice addition to the overall ad pie.

But when it comes to television advertising, nothing substitutes for reach.

Wieser said there is a difference between targeting individual digital devices and “inventory prioritization” on traditional TV.

In Praise of Reach

“Traditional TV as a source of premium TV, with adjacent advertising opportunities, continues to dwarf everything else,” Wieser said in an interview. “As long as you have reach, it means you have the opportunity to manage a campaign against a broad group of the population. Prices go up, frequencies may be difficult to manage, but you can still reach everyone.”

Wieser said about 200 advertisers account for about 90% of network TV advertising. That same group accounts for 60% of all TV ads and 33% of all advertising.

“They need to reach everybody,” Wieser said. “For the most part, you want mass reach.”