By the end of 2014, investment in addressable TV is expected to top more than $200 million, which compares to an estimated investment of $30 million-$40 million in 2013. While the market has grown exponentially over the last year, and appears just now to be taking off, the technology was introduced more than a decade ago.
Starcom MediaVest Group and its clients have experimented with the technology through all that time and have tallied more than one billion consumer impressions. With that research, experimentation and investment have come key learnings and the development of industry standards for this newer form of audience-based buying on television.
These standards are making this ad-spending medium truly accountable for the first time, but before that could happen, three key issues needed to be addressed:
• Data Quality
In our presentation, Driving Data to Television, at a recent Advertising Research Foundation event, we discussed what we have learned over the past 10 years with regards to data quality, measurement and privacy, and how advertisers can benefit from this technology to enhance the efficiency, effectiveness and, above all, the accountability of television. Here are some key findings.
While TV is still the top dog when it comes to capturing viewership, ratings have dwindled precipitously over the past 60 years. In the 1950s, Texaco Star Theater with Uncle Miltie was raking in a 61.6 Nielsen rating; in the 1980s, The Cosby Show topped all shows with a 34.2 rating. When you move to today, CBS is ecstatic with NCIS, which brings in a 10.7 rating.
Viewers watch their programs where they want and when they want — through TVs, laptops, tablets, phones and more — and as a result, advertisers need to find more efficient ways to reach their audience.
Addressable television offers considerable efficiency in only delivering — and paying for — the households of interest to each advertiser. There are now four cable and satellite providers who offer addressable TV, reaching more than 40 million households. This reach has yielded tremendous results for advertisers, and across the 30+ addressable campaigns that SMG has executed to-date, we have found, on average, a 37% increase in efficiency compared to linear television.
There are more than 115 million households across the country, and now that addressable TV has grown to 40 million households, more useful data and demographic information is available to advertisers. But before using and relying on the available data to make investment decisions, there are key questions all advertisers need to ask:
• What is the data source and how is it being collected?
• How representative are the data being used to target and measure?
• How much of the target is known vs. modeled?
• How often are the data refreshed?
• How consistent are target definitions?
Industry standards are now in place around data quality to help advertisers determine what data is useful.
When personal data is used to reach a specific consumer, there are bound to be questions about privacy. Any consumer who is concerned about privacy issues, however, can opt out of addressable ads by going through their TV operators, all of whom have processes in place to enable this. In fact, consumers have to agree to receive addressable TV ads when they sign their contract with their cable or satellite service provider, so they can opt out from the beginning.
Consumers who do participate and provide their name and address and the shows they view are documented and shared with a third-party data company. The operators are responsible for, and take great steps to maintain and protect consumers’ privacy at all times, in line with federal, state or local legislation.
Most consumers understand the benefits of addressable TV (increased relevance of ads, more choice, increased competition) and the risks (security breaches), but simply want reassurances that their privacy is protected and that they have the ability to opt out.
In most of SMG’s addressable campaigns, we have included some form of response-based measurement to demonstrate the greater effectiveness delivered by addressable TV. Using an experimental design (test vs. control groups), we have compared the actual consumer response among those exposed to addressable ads vs. control groups that were not exposed.
In some recent campaigns where we were able to link ad exposure directly to sales data, we were able to demonstrate measurable results: a 38% lift in penetration and a 21% increase in sales rate. This was accomplished through a simple test and control design.
The success of SMG’s addressable TV campaigns comes after years of pioneering work to fully understand the issues surrounding data quality, consumer privacy and campaign measurement. As we deploy more campaigns, we will continue to experiment, learn and lead the industry toward best practices and standards that will be beneficial to the entire ecosystem.