January 23, 2012 – 1:30 am
As GroupM's Mike Bologna told TVExchanger last week at the CES show, it is now possible to insert ads directly on 25 percent of all usable, connected televisions. And within two years, he expects to between 50- and 75 percent of connected TVs will be able to accept ads directly.
That would seem to upend the traditional method of buying and selling TV ads across broadcast and cable programming. And even though it's still far from replacing the traditional approach, when wifi-enabled TV manufacturers like LG, Samsung, Sony and others get into the direct sales business, it left us wondering: what will an IPTV advertising world mean for the future of the upfront, which saw a record $18.5 billion spent on cable and broadcast networks?
Irwin Gotlieb, CEO GroupM: Much of what we saw at CES relates to things we’ll be seeing 24 months out. In my mind, it’s all good: we’ll be able to target better, we’ll be able to segment better. The ads will be delivered on screens that are sharper, look better, larger, which ultimately provides more effective communication. There’s one last element: in the role that we [media buyers] play, we have a responsibility to ensure that technology develops in a manner that doesn’t shake up the supply-and-demand equation of our business, doesn’t destroy the content amortization business, isn’t disruptive simply for the sake of being disruptive.
If it does alter the supply-and-demand equation, it needs to do so positively, not negatively. When you have the share of the deal volume that we do, you can’t just be passive about it. You have to try and influence it. The technologies and devices that begin to get manifested at a trade show like this needs to be guided, so that it all works out in the best interests of our clients.
Brent Horowitz, VP, Business Development at FreeWheel: We don’t think the fact that more ads are available on connected TVs will change the nature of the television upfront, at least not in the near term. There are a number of reasons for that. But the biggest is it’s helpful to think of the difference between a device and the business models that run on it. The reality is that television still attracts about $65 billion in advertising dollars, that TV viewership for linear broadcasts is, depending on who you ask, is either growing or remaining steady. Even if you think it’s shrinking a bit versus other media, the fact remains that traditional viewership is massive – especially when compared to premium video online or on a connected TV.
Also, scarcity is an important factor. One of the ways that TV programmers are able to continue to attract such high CPMs is the scarcity involved. There are only so many slots available in TV and that will continue to be highlighted and sold via the upfronts.
More broadly, video as a branding medium will still be powerful whether it’s on a mobile phone, a PC, a tablet, a connected TV or a ‘traditional TV.’ It’s sight, sound and motion; it’s emotion, its context. Ultimately, all of that points to the top of the purchase funnel as way of buying video, particularly super-premium video. Brand metrics, purchase affinity will continue to influence how video is bought and sold and it will continue to be television’s strength. I don’t think that it will all of sudden turn into a direct response medium, simply because it’s easier to serve ads and tweak campaigns. Again, the reason that commoditization in the display space happened was due to the infinite amount of inventory.
What the upfronts are about is reducing risk. Brands need to hit tremendous amounts of users over time. The only way to guarantee those ratings points in advance and in environments that feel safe for them is through television.
Rex Harris, Innovations Supervisor, Publicis' SMGx: It’s a little too early to say that connected TV advertising will be a factor in the upfront and that advertisers will go out and commit to a certain amount of money in that kind of process. Eventually, this space will work its way into the upfront negotiations. We’re years away from that, of course, since eventually, all video content will be served over IP. What you’re going to see first is an evolution of the metrics of connected TV advertising, as advertisers want to see it prove its success. Once we can tell what kind of engagement we’re seeing with specific programs, that’s when you’ll start to see a ‘smarter upfront.’ But there will still be a need for an upfront marketplace.
Jeff Siegel, SVP, Global Media Sales, Rovi:
I think real-time bidding has a purpose with certain advertisers and with certain publishers. Certain advertisers are particularly action-based: they want to be able to tweak their campaigns, they tend to be more direct response based. And the publishers involved at the end of those bids tend to be smaller, without as much clout and as much premium content.
I do think there is a role for that. But I don’t think it impacts the upfront, necessarily. The upfront is about big, branded advertisers; it’s about buying blocks of video inventory; it’s about negotiating a price and using leverage for that. RTB is completely counter-intuitive to the upfront. What we’re doing now in terms of serving as a platform for buying ads directly on smart TVs, is more of a scatter-based buy, than it is an upfront buy, of course, but I don’t think TV will go down the RTB road. One of the reasons it works for online is because there is unlimited inventory.
In the IP world, you potentially have unlimited content. But unlike online, there are not billions of video publishers out there. So you will continue to have scarcity of inventory, which will make it difficult to do RTB against non-premium impressions.
By David Kaplan
January 23, 2012 – 1:30 am