Focus on advertising waste is counterproductive

15 June 2012 | Blog

by Claudio Marcus

If you read media industry publications and blogs, it is likely that you have been exposed to ongoing debate as to the future of the TV business. For those interested in some of the details of the point-counterpoint, I suggest Henry Blodgett’s post “Don’t Mean To Be Alarmist, But The TV Business May Be Starting To Collapse,” and Brian Wieser’s response, “Reports of TV’s Death Greatly Exaggerated.” Some marketing digerati highlight that TV does not deliver as many viewer impressions as we may be lead to believe, as the article “The TV Viewership Fallacy” details. But as several of the comments to the article point out, the truth is that advertising presents only an opportunity for impressions, not a guarantee. The likelihood and quality of the viewer impressions typically reflected in the pricing for advertising.

Comparing the volume of impressions and relative reach of TV versus digital advertising distracts from an equally important question–that of relative waste. Advocates of digital advertising point out that the ability to target and only pay for impressions associated with specific audiences makes it far less wasteful than TV advertising, but such an argument fails to consider the economic efficiency of reaching mass audiences and the relative impact on business results that TV advertising delivers. Several recent research reports continue to confirm that American adults point to TV more than any other ad medium as most influential in making purchase decisions.

Experienced marketers agree that TV is most effective when it comes to driving sales volume. That is not to say that TV is always the most efficient medium; some highly targeted digital marketing campaigns can deliver substantial ROI, often times with lower expense. However, the number of successful targeted digital marketing efforts required to achieve comparable impact on sales volume remains a substantial operational challenge for marketers and agencies. It is notable that research on integrated marketing communications provides evidence that orchestration between TV and digital marketing efforts further enhances overall sales results. Using a baseball analogy, think of it this way: TV does a better job at pitching while digital marketing is best at catching, and together they work best when they are in synch.

With the advent of household addressable TV advertising, some influential marketing and media agency executives have professed that TV advertising will soon be in a position to deliver on the potential to target specific consumer segments, and in doing so, greatly reduce audience waste. But this simplistic view does not fully take into account the likely implications for the major brands already using TV advertising, or the potential reaction from TV media sellers. It also fails to take into account the fundamental value of getting a well-suited advertising message in front of the target audience. There is little value if a pitch fails to get the attention of the viewer.

Let’s consider the potential impact on advertisers. At first glance, the ability to target specific consumer segments seems like a no-brainer relative to the broad based TV campaigns of today. If BMW wanted to target very affluent consumers who are in the market for a luxury vehicle, they may be willing to pay a premium for getting to such a targeted audience—or maybe not. Why not? The answer is competition for similar audiences from various advertisers. BMW could find itself competing not only with major luxury automotive brands but also fine art galleries, financial advisers, and a host of other upscale products and services. That could make the CPMs associated with buying highly targeted audiences much higher than current TV ad buys.

Given the potential outlook for advertisers, it may seem that TV ad media sellers would be on board with the opportunity to attract a larger number of advertisers willing to pay high CPMs for the ability to selectively target specific consumer audiences. But that is hardly the case. TV ad media sellers have concerns as to whether ad revenues associated with dividing up the diverse audiences that make up popular TV shows would cover the revenues that such premium inventory as a whole already produces. So, it should not be surprising that when TV ad sellers hear talk about the opportunity to cut out TV audience waste, they wonder about the potential consequences for their business, and become less likely to embrace such an uncertain future.

To overcome these valid concerns about the uncertain outcomes for major TV advertisers and media sellers, it is important to recognize that the ability to target specific households need not be tied to the sale of specific household addressable audiences. The value of targeting is largely derived from getting the right message in front of the right audience. And for advertisers that have varied products or services that appeal to diverse sets of consumers, the current approach of making broad TV ad buys that deliver efficient mass reach combined with the ability to target different ads to specific consumer segments in itself offers substantial value. This is particularly true for advertisers that have direct-to-consumer relationships where household addressable TV ad targeting could be used to send differentiated messaging between customers and prospects, as well as to varied sub-segments within each of those groups.

In short, the ability to target TV ads to specific households within the context of efficient broad reach TV media buys enables TV to drive incremental value for both advertisers and TV media. So, rather than rant on the opportunity to cut out waste, industry influencers ought be focusing on how to use addressable TV advertising to drive greater value—for all parties involved.