The advertising landscape has been disrupted by digital advertising, slowing the growth of all-powerful television and causing marketer dollars to stream to online video options.
B&C business editor Jon Lafayette asked some of the key decision makers at the biggest media buying agencies what TV is doing to fight back and whether those efforts will lead to more money being spent on broadcast and cable networks in the upfront.
They said that in order to capture the mass audiences TV traditionally provided, networks and agencies are focusing on over-the-top viewers, but it’s still too early in the market, which is likely to remain volatile until hands shake on the late upfront deals.
An edited transcript of what those buyers said by email follows.
After dozens of upfront presentations, what message do you think the networks are trying to deliver this year? Have they succeeded?
Dani Benowitz, Magna: First and foremost, the networks are driving home the message that they will continue to offer premium, Hollywood-produced, well-lit, highly viewable content. TV is not dead; it is clearly moving cross-screen in an effort to keep pace with the consumer. In response to consumer viewing trends, our media partners are focusing very hard on their alternative streams such as OTT and digital video. They believe the eyeballs are still there for each of their individual properties. They also believe the growth of connected devices is bringing folks back to the living room. Time will tell whether or not the sales community has succeeded. However, there are still significant issues with consistent measurement and pricing.
Mike Law, Dentsu Aegis Network: One thing we have heard a lot less of compared to previous years is “We are No. 1” — the focus has clearly shifted to the power of their content, the availability of that content across screens, and their ability to use data to better target specific audience groups. With audiences fragmenting, the networks are really focused on highlighting their ability to find, and measure, the right consumers — wherever they are.
Lyle Schwartz, GroupM North America: This year the networks, rightly so, have refocused their messages on their strategies and content offerings. They’re not necessarily focusing on the data and other ancillary things as much as in years past. It’s a move back to their bread-and-butter — which is exactly what we want to hear, and what we best understand. This refocusing of their communications around their own products and services, how they fit into the consumer lifestyle, and how they interact with consumers should resonate with most of the people they talk to.
Will this really be the year of data? Do you think a significant portion of upfront dealing will be based on targeted audience segments as opposed to the traditional demos?
Benowitz: Data-driven deals have been the topic of conversation for a few years now. There is no doubt that the networks have significantly enhanced their offerings. We’ve seen a small percentage of dollars traded in a data-driven fashion, but there is still work to be done for this to scale significantly. For one, the walled gardens need to continue to come down, and Open AP is a good first step here. In addition, data-driven buys need to live across every media channel, not just TV, and they need to tie into the overall media plan, with similar desired outcomes. That being said, we are sure testing and learning and will continue to do so. We are excited to see the outcomes.
Law: Well, every year is the year of data. But, will we continue to see an acceleration toward using data sources to more effectively target our most valuable consumers in order to accelerate delivery of KPIs? Yes. We are focused on how we maximize reach in order to increase penetration, but also driving lower-funnel metrics through television using better data to prove business outcomes.
Schwartz: I think for a long time, the advertisers and agencies have focused on many variables beyond demographics; however, the negotiations for many reasons have been about what the buyer and seller agree to on the overall delivery, which I believe for the foreseeable future will be primarily demographics.
The notion of data as something other is wrong — ratings, which we’ve been relying on for years, after all are data. The question is really, ‘Will the negotiations be done on advanced targeting?’ To that end, I think the networks will move toward other demographics if they think they’ll receive better value for their inventory.
Will the growth of digital dollars slow because of the controversies involving viewability and unsafe content? Will that benefit the television networks?
Benowitz: The growth of digital will not be slowing. In fact, this is the year we actually saw digital spend outpace television. Issues with viewability, fraud and brand safety have slowed the shift of dollars out of TV — although it is still happening — so some of the growth is organic in digital coming from media that is below the line, such as retail marketing. However, we know that 30% of viewing is non-linear and there are several places in video that are reach-building, offer a similar experience to television and will recapture some of the ratings loss. This includes, but is not limited to, Google Preferred, Hulu and FEP [full-episode players]. If anything, traditional linear partners will see more growth in non-linear spend in the coming upfront.
Law: Brand safety will continue to be one of the most important aspects of our media buys regardless of channel. As we continue to grow our digital spend we need to be vigilant in working with our partners to ensure we know exactly what we are buying. The explosion of content and distribution technology has us on heightened alert. I believe we will continue to see a churn of dollars between digital and traditional, but not as a sole result of brand safety issues.
Schwartz: There’s a lot of digital video that is extremely brand safe and of high quality, and some of those dollars will go there. I think some of these brand safety issues will be short-term issues that will be corrected over the next several months. I don’t think this will mean that money will flow back to linear TV, but some of it might.
What kind of efforts are you making to capture over-the-top and other non-linear viewers? Are they more valuable than traditional couch potatoes?
Benowitz: Magna has already started to capture the non-linear viewers by diversifying our media mix. This includes our strategic partner announcements with both Google Preferred, and more recently, Roku. Our mantra is to follow the eyeballs and reach consumers wherever they are viewing. Moving forward, we expect the continuation of our diversification efforts as we know that a viewer who opts in to a program is more engaged in the content as well as being younger, more affluent and receptive to advertising.
Law: We are focused on injecting quality supply into the marketplace. With the significant loss of measured linear GRPs in the market over the past five years we have seen those eyeballs migrate to other channels, including VOD, OTT and digital video. Those environments offer a lean-in viewer and, typically, a cleaner, less cluttered ad experience. As measurement and technology improve, our ability to scale buys in this space is a real benefit to our clients. We have to think about the value of an impression on all screens, and in turn, it raises the pressure on creative and content on each platform.
Schwartz: The value of over-the-top has to be looked at through the lens of a brand-by-brand strategy. The demographics of OTT, which skews younger and more affluent, have differential value dependent on what brands are trying to sell. While OTT households have more options, they still consume a significant amount of general media, and incremental media in appropriate environments can be used to augment shortfall in the desired delivery. At GroupM, when we want to reach OTT viewers, we’re able to utilize the expertise of Modi Media to effectively and expertly target viewers in the OTT environment.
Last year’s market was classified as the strongest in years. What are the expectations for this year’s upfront?
Benowitz: We believe the market will not be as robust as it was in 2016. Scatter had slowed down which is partially a reflection of those dollars moving upfront last year. While consumer confidence is high — a key driver of ad budgets — flexibility is still of utmost importance to advertisers. Finally as non-linear video options continue to become more affordable, advertisers will continue to invest in alternative video options.
Law: I think the marketplace continues to be more dynamic than at any point in history. Advertisers and buyers have more options than ever before — and this can be powerful leverage in our upfront negotiations. We are strong believers in the power of television, and finding the right mix of linear and nonlinear, broad demographics and audience data, and upfront versus scatter spend will be what ensures we maximize effectiveness and mitigate inflation moving forward.
Schwartz: It’s still too early to get a full read on the demand-side equation of the marketplace. We do know that the supply side is under an enormous amount of pressure due to the decline in linear ratings and the diffusion of audiences toward other devices that might not capture viewership as well, and may therefore be under-monetized. We have to start moving toward an understanding of the video marketplace, and not just for linear video. Understanding the strengths and weaknesses of different platforms and channels will allow us to properly weigh appropriate opportunities for our clients, and having a system of measurement in place that allows for apples-to-apples audience comparisons will help close that monetization gap.