TV and digital have been on a collision course for years, but they are finally meeting head-on. TV advertisers are buying networks’ streaming video (OTT) inventory. Digital advertisers are investing in addressable TV. And both are converging within connected TV. However, the increasing parity between TV and digital is not without its headaches, as advertisers on either side try to understand the ongoing merger of the two channels. Brand and agency execs gathered at Digiday’s Future of TV Summit in Palm Springs, California, to discuss the opportunities and challenges as the future of TV advertising draws closer.

What we learned:
The future of TV demands a dictionary
What are we talking about when we talk about the future of TV? No one is really sure. Terms like OTT and connected TV are often used interchangeably, even though OTT refers to a method of delivering content (via the internet) and connected TV refers to a device to which that content is delivered (via an internet-connected device hooked up or built into a TV). Addressability is another confusing term. Some define it broadly as targeted advertising, but its truer definition is targeting ads at the household level. This linguistic limbo may seem inconsequential, but a lack of lingua franca can introduce or reinforce barriers and curtail investment.

  • The TV and digital video ad industry is overrun with ill-defined jargon that can overcomplicate an already complex marketplace.
  • This language barrier can obscure advertisers’ understanding of emerging opportunities like OTT and addressable TV to the point of impeding investment.

Bottom line: As TV and digital converge within connected TV, the industry needs to establish a baseline of terms to aid education and avoid ad dollars being lost in translation.

Focusing too much on price can obscure advanced TV advertising’s value
Despite continued viewership declines, advertisers love TV because it can be a cheap way to reach a lot of people. In comparison, addressable TV and connected TV advertising can appear overly expensive to the point of seeming ineffective. CPMs for ads on cable TV can go for $10 to $12, whereas CPMs for addressable TV and connected TV typically range from $20 to $40 (and higher as more targeting options are added). However, concentrating on the CPM ignores the trade-off with effectiveness. It may be cheaper to reach a lot of people through traditional TV, but a sizable number of those people may fall outside the advertisers’ intended audience. On the other hand, addressable TV and connected TV ads can eliminate waste by only serving the ad to the exact audience that the advertiser wants to reach.

  • Traditional TV is cheaper than addressable TV and connected TV when pricing is strictly considered.
  • Targeted TV and connected TV ads can be more costly, but they can also eliminate waste to be more cost-effective than traditional TV ads.

Bottom line: Addressable TV and connected TV ad prices may appear off-putting to advertisers, but they need to see beyond the CPM.

The connected TV ad toolset needs better tools
As a nascent channel for advertisers, connected TV is showing its age. The promise of connected TV is to apply the sophisticated targeting and measurement of digital advertising to ads running against TV and TV-quality programming. But in reality, connected TV is not yet as advanced as ad buyers would like. With more than 200 OTT apps distributed across a handful of different connected TV platforms, advertisers face a fragmented marketplace and lack the tools that would offer them comprehensive planning and measurement capabilities. “We don’t have the tools we need,” said one attendee during a closed-door session for brand and agency execs. The sentiment was shared by many attendees who lamented that existing planning tools are often rudimentary and that measurement can be spotty because not all platforms or publishers can be measured, especially not on a like-for-like basis. The hope is that, as advertisers spend more money to advertise on connected TV, the tools will be developed to merit further investment. However, a concern for connected TV ad sellers is that the tools will first need to become available to warrant that early investment wave.

  • Being a digital platform, advertisers can reasonably expect connected TV to offer sophisticated planning and measurement tools on par with other digital platforms.
  • Connected TV’s advertiser toolset is as underdeveloped as the market is nascent.
  • A chicken-or-egg scenario could arise between increased advertiser investment and improved planning and measurement capabilities.

Bottom line: The tools available to connected TV ad buyers need to be more advanced.

Advanced TV’s household targeting balances scale and specificity
When it comes to targeting, addressable TV and connected TV advertising split the difference between traditional TV’s broad age-and-demo targeting and digital’s narrow one-to-one targeting. There are opportunities for advertisers to use first- and third-party data to aim their advanced TV ads at individual viewers, but the underlying identifiers remain largely at the household level. That’s not a bad thing. There are 67 million households that can be targeted on addressable TV, and 89 million households with connected TVs, according to Alex Kaptsan, associate media director at GroupM’s Modi Media. Being able to target entire households can help advertisers to reach enough people to overcome any scale concerns, and the household-based identifiers can provide a wider attribution window by taking into account other devices in a home.

  • Advanced TV’s household-based targeting makes it a middle ground between TV’s broad reach and digital’s individual specificity.
  • Targeting at the household level can widen advertisers’ purview into how their ads performed beyond the device on which they were served.

Bottom line: By aiming ads at entire households, advanced TV can offer advertisers targeting at scale.

Speaker highlights
Modi Media’s Alex Kaptsan and Ben Toder broke down advanced TV ad buying. Their key points:

  • Targeting ads based on deterministic data, like people’s shopping and location histories, is important for eliminating waste and ensuring ads are served to the intended audience.
  • Smart TVs’ automatic content recognition capabilities can be used to track the ads people saw, so that a brand could retarget people who saw its ad or target people who saw a competitor’s ad.
  • Advertisers can run interactive ads on connected TVs for people to click on, enabling them to track if people are engaging with their ad and how that influences their likelihood to purchase a product.

Varick’s Kait Boulos highlighted how DTC marketers and so-called challenger brands are defining the connected TV ad market. Her key points:

  • Upstart marketers have seen search and social ad performance plateau and are turning to the TV screen to build their brands like their established competitors. But they often cannot afford to advertise on traditional TV.
  • Because of connected TV’s ad targeting options, smaller advertisers can go head-to-head against larger advertisers and win because connected TV isn’t about how much money a brand is spending but how wisely it is spending that money.
  • The fragmented connected TV audience landscape may put off larger brands, but challengers are comfortable with cobbling together their target audiences.
  • Challenger brand clients shifted around 15% of their search and social budgets toward connected TV in 2018, and that figure is rising this year to 25% to 30%.
  • While mature challenger brands are moving from search and social to connected TV, new challenger brands are opening up to connected TV almost immediately.

ForwardPMX’s Jesse Math explained how performance marketers are investing in connected TV. His key points:

  • Performance marketers are applying the audience-based buying strategies they have honed on Facebook to connected TV, which they see as a potential alternative to Facebook.
  • For their connected TV campaigns, performance marketers aren’t focusing on TV metrics like reach and frequency but business outcomes like site traffic and store visits.
  • Mapping various devices in a household, including connected TVs, enables advertisers to attribute their connected TV ads to business results.
  • Private marketplaces offer a way for advertisers to know and control the inventory that they are buying and measure performance by inventory provider.

Overheard
“TV is linear and also OTT and all of these acronyms that we use. Set-top box. FEP. There’s DVR. There’s OTT. There’s CTV. The content is moving across all screens. It’s all TV. It’s all moving across distribution channels, which are apps. That’s the new cable and the new distribution. It’s all TV,” said Michael Piner, svp of video and data-driven investments at MullenLowe’s Mediahub.

“For the foreseeable future, I still believe linear television is going to deliver a massive audience for us,” said Peter Jung, vp of brand marketing at Nascar.

“People aren’t watching broadcast TV. There’s too much clutter, too much noise,” said David Lang, chief content officer for North America at Mindshare.

“I’ve seen three of the TV upfront presentations already this year, and the thing I was most shocked with is they’re not really talking about TV. They’re talking about their content and their platforms,” said Kevin Van Valkenburgh, chief connections officer at The Tombras Group.

“When it comes to TV and digital, everyone is too siloed on both the buy and the sell side.”

“You can’t plan TV and video cohesively. There are really good ways of measuring a lot of it, but they all come with the trade-off of not everything you want to buy is measurable.”

“Tracking, attribution, everything we’ve been living in for 15 years in the digital ecosystem — many of those pieces are missing in the OTT channel,” said Josh Boaz, founder and managing director of Direct Agents.

“OTT and traditional TV seem apples to apples because the output is the same. But it’s really not in terms of the application of data and being able to target.”

“Now that OTT is on the rise, clients want to understand it. It’s less relevant to TV buyers but more relevant to digital buyers.”