Deep Dive: How the coronavirus crisis accelerated the already cresting CTV sea change

Viewing habits were transformed, with more people than ever signing up to streaming services. Advertisers want to follow the consumers into that space and that’s thinning out the linear advertising landscape.

And advertisers are responding to these shifts by committing more budget to CTV spending. “That allows us to be able to add more media dollars to that area now, given that the overall demographic is broadening,” said Karina Rhem, Offline Media Manager at Ro.

These changes are exposing the inherent limitations of the way the TV advertising model is working. CTV advertising needs to be more relevant to viewers and there’s an urgent demand for more effective targeting that engages viewers without reaching the point of overkill.

Advertisers also need more flexible approaches to ad buying. The year has seen the upfront model ruptured by canceled contracts, as advertisers have embraced the more situtational appeal of programmatic advertising. That trend will only continue and a rebalancing of the upfront model is necessary going into the new year.

The current climate has laid bare the deficiencies of the GRP as a measurement of performance. While there’s general agreement that the GRP has to go and a better option adopted, the industry is struggling to forge a clear path forward.

“There’s a lot that needs to change,” said Matt Sweeney, Chief Investment Officer at GroupM. “There is a lot of interesting technology out there right now and some emerging companies doing this.”

The pace of change is being helped along by a fearless spirit of testing and learning. The pandemic necessitated experimentation, but with the industry in a state of flux now there’s every reason to aggressively pursue testing into 2021 and beyond.

Here’s what you need to know

In a difficult year, CTV is one of the big winners. The pandemic caused distinct shifts in the way consumers are watching TV, who is watching and what they are viewing. In short, people watched more TV, motivated by opposite sides of the same coin. On one hand, viewers watched more news for information about the coronavirus, and on the other, entertainment shows offered an escape from its bitter realities.

Network and cable TV struggled to rework schedules in the face of production shutdowns and coped with the temporary absence of live sports. In contrast, streaming services were perfectly positioned for the pandemic in terms of content and pricing, welcoming many new subscribers throughout the year. “We’re starting to see older audiences also tap into that space,” said Rhem.

• Advertisers need to be where the audience is to meet their reach goals – and that means CTV. As the demographic balance shifts away from linear TV, advertisers need to follow the audience or simply risk falling short.

“If the consumer is in a medium and we as advertisers are not in that medium enough, that’s what will be that tipping point,” said Catherine Warburton, EVP and Chief Investment Officer at 360i. “The media agency, when they run their reach and frequencies, it’s clear that they won’t reach the number of people that they need just by using linear TV. And I think the consumer is going to force the issue.”

• Spending on CTV is increasing. Companies are recognizing the benefits that CTV offers, from more targeted advertising, to more flexible buying models, and the shift to streaming is speeding up the corresponding transfer of spending weight to programmatic.

Jesse Judelman, svp, sales at Vevo, said the company has tilted a significant chunk of its ad spend towards CTV in the second half of 2020. “40 percent of our investment right now is within the CTV market in fourth quarter,” Judelman said. “It was 20 percent in third quarter. This is during a global pandemic, while we grow substantially. So it’s just an indicator of how significant this wave is that is larger than any platform, any content provider.”

• Linear still has a role to play. The traditional TV networks are walking a fine line of building up their CTV revenue without throwing linear advertising under the bus. In fact, linear still has a lot to offer some advertisers — it’s more cost-efficient than before and can be incredibly impactful in certain demographics — even as its importance wanes.

Matt Sweeney, chief investment officer at GroupM U.S., said linear remains important in spite of the decline of pay TV and falling ratings. “Our strategy has been, let’s lay the foundation with linear,” he said. “I mean it’s still a great way to get to mass markets, and it’s still an incredibly efficient and effective medium. Let’s not lose sight of that.”

A major boost for advertisers as 2020 closes is that viewers don’t seem to object in principle to CTV advertising. They just don’t want to be bombarded by the same messaging repetitively — and the advertising has to be relevant to their needs and interests.

The question of how to efficiently serve up relevant advertising to the right consumers is one that advertisers and their media partners will be wrestling with in the year ahead. Managing frequency and privacy compliance are priorities, but overall, the game-changing shift will be to place the viewer at the heart of advertising systems. “You really have to think more about that consumer experience than we have to date,” said Sweeney.

• Moving towards a more audience-tailored industry. Advertising will engage viewers more reliably if the advertiser is able to target them as individuals, rather than as members of a demographic who watch a given show or network.

Sweeney advocated a more individualized, “audience-first” approach to targeting as well as measurement. “Managing engagement and experience by an audience versus by the content,” said Sweeney. “If we can do that, we create better marketing opportunities for clients and a more engaging experience for consumers, something that they’re not willing to turn off and more likely to be able to respond and lean into.”

• Consumer privacy is becoming an urgent priority. Advertisers and ad networks are figuring out how to optimize audience targeting while staying on the right side of regulations and consumer sensibilities.

The industry can approach the privacy question by drawing on lessons learned from earlier developments. “How do you identify and target these audiences in a way that’s privacy compliant, and hopefully a little bit more welcoming than what we saw and what we learned from the early days of digital?” asked Sweeney.

• Frequency management is an issue that still needs to be solved. Customers hate seeing the same ad over and over again in quick succession, so brands have to manage media buying to try to avoid this.

Setting frequency caps is an option, and can be useful when placing ads on multiple platforms via an ad network. However, brands have to be conscientious about setting exclusions, especially when combining placement through ad networks with buying direct. “It has to be solved, because we get calls from clients that are like, ‘We just saw five ads in a row,’” said Cara Lewis, evp, video investment at Dentsu.

The upfront model of buying and selling ad inventory, which was the cornerstone of television industry ad placement for decades, has taken a beating in 2020. Changes had been afoot for some time due to the rise of less rigid programmatic advertising models and with momentum shifting away from linear TV towards streaming on demand and CTV and OTT. However, with the pandemic forcing advertisers to make hard choices and cut spending, something had to give.

The months since have seen many brands canceling upfront contracts, with the programmatic models proving an attractive and cost-effective alternative. The industry is now at an inflection point, but the future lies in offering the client greater flexibility, even if upfront-style deals endure in some form.

360i’s Warburton argues that the term “upfront” is outdated and should be replaced by something that conveys a more collegial, cooperative spirit. “When we work with Google, they don’t want to talk about the upfront,” she said. “They talk about our business plan for next year, how they can align with our business plan. I think we have to have more of that type of conversation.”

• Networks and advertisers are rethinking their relationships as partnerships rather than transactions. Although each side of an upfront deal obviously have their own interests to secure, the parties can work productively and flexibly in this new age of CTV and OTT.

“While we might be committing to dollars in advance, a lot of them are being activated programmatically … I see more and more pushing programmatically, because we have that opportunity to better target, you’re actually placing the inventory closer to actual air,” said Warburton.

• Advertisers are insisting on applying the flexibility-forward principles of digital advertising to TV. Advertisers can no longer afford to be locked into upfront contracts. Instead, they want to respond to events as they unfold.

Talia Arnold, head of strategy at Exverus, said it’s important for brands to be able to jump on pockets of inventory as opportunity arises. “I need to be able to get in and out of inventory based on ratings, based on viewership, based on how my business is performing,” said Arnold.

• Upfront will remain attractive in specific use cases. Some advertisers will still be willing to trade flexibility and commit to upfront deals, especially if the network or platform agrees to a comprehensive package that delivers on a number of the advertiser’s desires.

Arnold said she is generally an advocate for retaining a more nimble position when it comes to media buying. However, she said upfront deals may be worth considering for advertisers who “want to go really deep with one partner,” have precise needs and who wish to align with a specific network.

The Gross Rating Point (GRP) is an anachronistic method of measuring an ad’s effectiveness. The GRP simply isn’t up to the job of delivering the granular detail that advertisers hope to capture in the era of programmatic, OTT-driven advertising. And yet, the GRP has proved stubborn and immovable in the face of the chorus calling for its replacement.

That’s partly a product of inertia, with many advertisers simply accustomed to speaking the language of the GRP. The bigger question is what to replace the GRP with, and that’s the issue that many in the TV industry are hoping to resolve sooner rather than later.

The way forward is a measurement, or many measurements, grounded in audience and impressions data.  “I don’t know if it’s ever going to die,” said Dentsu’s Lewi . “But I think moving to impressions is probably the way that we should be looking at it.”

• The ground has shifted decisively away from GRP. Advertisers and agencies are impatient for change, and frustrated with some of the heel-dragging that has gone on. 

“Measurement is something that we’ve got to get up to speed on,” said GroupM’s Sweeney. “I know Nielsen and others are working on this, but it feels like we’re not moving quickly enough.”

• GRP will be replaced by measurements based on impressions and audience. The GRP doesn’t give audience-based marketers the data they need to target very specific groups of consumers. Players like Nielsen and Comscore are exploring ways they can evolve their ratings to better incorporate the kind of audience and impression data that programmatic advertisers are asking for to guide the industry into the future.

“The demo GRP is probably something that we need to eventually move away from and talk more about our audiences, because they’re just more effective,” said Lewis. “While they might seem on a CPM basis that they’re more pricey, they’re actually more efficient because you’re getting down to an effective level.”

• Some advertisers are still clinging to GRP. Brands understandably want to see they are getting ROI, but those who have a track record of spending heavily on linear TV advertising don’t always think about success in terms of the full spectrum of video advertising.

Lewis said agencies have to communicate with clients consistently to ease them away from relying on the GRP as the be-all and end-all measure of success. “We are getting the GRPs, but in a very different way, and making sure that they’re more effective because we are looking at video holistically, and not just linear TV,” she said.

The tribulations of 2020 forced advertisers into an often improvisational cycle of testing, learning and iterating that has accelerated the pace of change in the TV landscape. And while that pace may be hard to sustain through 2021, those short cycles of speed testing have injected dynamism into a market that is already rife with change and uncertainty.

“There’s a ton of demand in TV right now and more broadly in video,” said Sweeney. “And so, with that increased demand you’re finding marketers that are saying, ‘Let’s get ready for the future.’”

• Forging a complementary relationship between linear ads and audience-based CTV approaches. Sweeney said that GroupM has been exploring ways to build on the reach captured by linear by leveraging CTV and a broader spectrum of video partners.

“We’re working on models that allow us to extend reach and find people that are not exposed to traditional TV,” said Sweeney.

• Advertisers have taken advantage of a favorable pricing environment. Cut-price ad rates during the pandemic gave advertisers a unique opportunity to experiment with TV ads. For many clients, it was their first foray into TV.

Telehealth company Ro pulled together an in-house creative team during the pandemic and tested a variety of approaches to TV advertising to market its in-demand services. “We were able to lean into new places to continue testing and iterating off of that, specifically within the entertainment space, as well as news and streaming,” said Ro’ Rhem.

• Viewers are responding to more diverse voices. Sonic branding and voice branding are becoming more central to the TV experience, and that includes advertising.

Brands are developing their own voices, both figuratively and literally, and viewers expect to hear themselves represented. “A myriad of voices is what’s expected at this point,” said Lauren McGuire, president of Man Made Music. “The brands who are still using the sort of classic, white male-centered normative voice are not testing as well as voices that are really across the spectrum in terms of what their backgrounds are, what groups do they represent, the authenticity of their voice and what a voice means for a brand.”

“It’s definitely frustrating for them to see it as the client because they want to be hitting a consumer, not banging them over the head.”

– Cara Lewis, EVP, Video Investment, Dentsu

Clients naturally want to place ads across multiple platforms and networks, but no advertiser wants the viewer to be served the same ad so many times that it becomes grating. Exclusion options can set a cap on how many times each viewer sees each commercial, but this has limited effectiveness. Lewis acknowledged that this is a problem for the advertiser as much as for the consumer, and managing and optimizing the frequency with which viewers see a given ad is sure to be one of the biggest issues advertisers and networks will continue to wrestle with in 2021.

“When you’re in doubt about the emotional statement that you’re making, take a pause. Flexibility is easy. You don’t need to tweak it much in order to get to the great emotional point. But when in doubt, remove it.”

– Lauren McGuire, President, Man Made Music

Tone is always important in advertising, but 2020 threw up more sustained challenges in this area than the average year. The cost of getting it wrong in today’s social media-driven world is just too great, so advertisers should consider their messaging keenly before putting it out into the world. And that applies to all aspects of advertising, from visuals and copy to sounds. McGuire talked about making a tough decision with a client to pull a sonic logo that had only been in use for a few months. “Even in three seconds, people take away emotion, and if you’re not hitting the right tone, they’re going to be confused by the brand note,” she said.

“Buyers need to stay vigilant. What doesn’t sound right usually isn’t, and it’s the old adage that what [sounds] too good to be true probably isn’t.”

– Steven Woolway, EVP, Business Development, DoubleVerify

Woolway advised advertisers to apply the same caution when approaching the CTV marketplace as they would anywhere else. He said two factors make CTV an attractive target for fraudsters. By its nature, CTV is a high-demand, limited-supply arena, and high CPMs offer fraudsters a unique opportunity to make a fast buck from unsuspecting advertisers. Second, as a relatively new advertising territory, the CTV marketplace is a competitive space populated by multiple suppliers and intermediaries. This creates a degree of cover for bad actors to operate with impunity, at least in the near term. “Fraudsters are going to get away with what they can for as long as they can,” said Woolway.

GRP (Gross Rating Point) For decades, the Gross Rating Point has been the standard for measuring the performance of TV commercials. The GRP unit is calculated by taking the percentage of the target audience reached by the ad and multiplying that figure by the number of times the ad was aired (the frequency). As the TV advertising market has fragmented with the rise of CTV, streaming services and video as a whole, advertisers want measurements that allow them to understand campaign performance on a more granular level. Although it still performs a certain function, many advertisers have called for the GRP to be phased out and replaced with a measurement that captures the complexity that today’s advertisers are grappling with.

Sonic Branding From the podcast boom to the rise of voice-activated smarthome devices and ASMR influencers, sound plays an increasingly important role in consumers’ lives. Naturally, this development is impacting advertising and one upshot is that brands are paying greater attention to the suites of sounds, voices and motifs that define how consumers “hear” the brand. Apple’s iconic startup chime is perhaps the most famous example of a “sonic logo.”

Man Made Music’s McGuire noted that during the pandemic, McDonald’s ads had featured an understated adaptation of the company’s “I’m Lovin’ It” jingle, reflecting the pervasive sober mood of the times. But with e-commerce exploding, and especially with more transactions taking place on mobile devices or via voice assistants, brands are using sonic branding to shape a distinct experience for online consumers — and they can use TV ads to introduce and familiarize consumers with these sounds.

DSP (Demand-Side Platform) DSPs simplify the ad-buying process for programmatic advertisers, acting as the middlemen between client and network. Rather than purchasing ad placements for each platform individually, advertisers turn to a DSP. It’s the DSP that has done the hard work of forming relationships with streaming services and other TV and video platforms. The advertiser hands its creative over to the DSP, specifying the target audience, budget and setting other relevant parameters. The DSP then places the ads on behalf of the advertiser to meet the given campaign specifications. DSPs have the advantage of offering highly targeted ad placement, thanks to the audience data owned by platforms like Hulu and YouTube.