How addressable advertising solves TV audience targeting dilemma to drive monetization

September 30, 2020 by Roger Franklin, General Manager of LTN Signal

Television advertising emerged in the early 1940s when the US Federal Communications Commission (FCC) issued a commercial license to NBC-owned WNBT, airing the first-ever legal TV commercial. The TV advertising industry has grown into a multibillion-dollar industry, but budgets are under threat as marketers reevaluate their spending behaviors, plowing more into digital, or spending less altogether.

The erosion of TV ad spend by digital mediums is further compounded by the myriad choices viewers have over what, how, and when they watch video content, causing significant audience fragmentation. With so many content platforms now available to consumers and audiences scattered across them, traditional ad buying has failed to keep pace with a changing media landscape.

Spending more to reach your target market — the modern-day equivalent of the infinite monkey theorem — is an unsustainable means of marketing products and services. Each year, billions of wasted dollars deliver advertising to many irrelevant and uninterested people with the understanding that it’ll get to some of the right people, eventually.

Conversely, media platform proliferation, including OTT platforms providing live TV, creates issues around scalability for advertisers that want to take a targeted approach. Each platform requires a unique advertising workflow, leading to unmanageable technical and operational complexity.

So how do advertisers deliver the right message to the right audience cost-effectively across multiple platforms? The solution is addressable advertising, which automates hyper-targeted advertising.

Delivering relevant content: What is addressable advertising

While spiraling ad spend might have been acceptable in a pre-pandemic world, now, every cent has to count, with budgets cut and the global economy in turmoil. Broadcasters must, therefore, provide brands with a compelling reason to spend money on TV advertising. Dynamic and personal advertising enables brands to optimize spend and deliver a measurable return on investment.

Addressable advertising provides brands with the means to deliver more relevant, impactful, and targeted messaging to individual households, simultaneously watching the same linear content. Right now, addressable advertising is just a fraction of total TV ad spend, predicted to be 3.3% in 2020, but that represents 38% year-on-year growth. As digital challengers and geopolitical events squeeze TV ad revenues, expect to see this figure jump considerably over the next few years. But how does it work, and why do I make this prediction?

By targeting ads based on who the viewer is than what they are watching, they instantly become more relevant.

While audience fragmentation is irreversible and likely to increase, addressable advertising enables advertisers and media distributors to overcome the ROI challenges this fragmentation creates. You no longer buy ads to align with specific programs or deliver on a particular platform; you target ads at specific households.

Watching TV

It’s a common misconception that consumers hate advertising, but what they really hate is irrelevant advertising. Advertising instantly becomes more relevant when targeting the viewer, rather than making assumptions and sweeping generalizations about a given show’s audience.

Addressable advertising solutions harness audience data and enable granular, insightful measurement of audience interests to deliver the best ad to the most appropriate audience, at a time when they’re going to be most receptive to it.

Leveling the playing field: Traditional broadcasters vs. digital giants

Ad budgets shifting from TV to digital is not a new phenomenon, and we’ve already touched on the impact this is having on TV revenues. But addressable advertising is a powerful mechanism for traditional broadcasters to stay relevant and regain advertisers’ attention, as they push back against digital-only players like Netflix, Amazon Prime Video, and Hulu.

Measuring addressable advertising’s success lies in evaluating consumer engagement with interactive campaigns, particularly as more brands look to leverage second screens to deliver targeted mobile ads to global viewers. A broadcaster could, for example, serve up an addressable ad for ice cream, and simultaneously provide a coupon for said ice cream to be redeemed at their local mall. (Unless, of course, they are lactose intolerant, in which case, they would receive an ad for something else.) Brands could then identify the impact of combining addressable advertising with mobile advertising, versus doing just one or the other.

Deploying targeted TV advertising: Understanding the technology requirements

New possibilities bring new challenges. Broadcasters must work with technology providers to identify solutions that can generate different signals for varied distribution platforms, including OTT platforms, smart TVs, and set-top boxes. Accurate ad insertion is critical to delivering consistent user experiences, and advanced monitoring systems are necessary to ensure the ad insertion signals successfully reach each downstream ad insertion platform.

Open Addressable Ready (OAR) is an example of one of the efforts to provide access to ten million homes for addressable advertising, but this accounts for fewer than 10% of US TV households. For addressable advertising efforts to scale and reach a more significant number of homes, the same inventory needs activating across multiple platforms. Today, providing and purchasing this inventory is burdensome due to market fragmentation (i.e., varying requirements for different platforms and devices).

Accuracy and transparency in addressable ad inventories are necessary for accurate targeting, as are stringent privacy measures.

Perhaps the more significant issue, though, is finding ways to deliver addressable advertising at scale. Accuracy and transparency in addressable ad inventories are necessary for household targeting, as are stringent privacy measures. A process of anonymizing and matching the target audience to the operator’s subscriber universe in a privacy-compliant manner follows, so data quality must be high.

Maximizing ad inventory to deliver high-quality experiences

Creating and precisely inserting ad content packages into linear broadcasts on an individual household basis is not without its challenges. Critical to any addressable ad platform’s success is delivering intelligent, frame-accurate signaling and ad logistics as managed services to ensure the right signals containing the correct campaign IDs reliably reach each ad insertion platform.

Addressable advertising can revolutionize the business model broadcasters, and media operators have relied on for decades. Meanwhile, there is an opportunity for brands to reassess ad spend and create unique, rich, and meaningful experiences delivered to the right people at the right time.

Effective addressable advertising will enhance viewer interaction with brands, level the playing field for broadcasters competing with digital competitors, and maximize the ROI of ad spend.