Targeted ads were supposed to save the $70 billion TV industry, but advertisers say that time is quickly running out

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The TV advertising industry is trying to reinvent itself and become more digital, but there have been signs that the long-held promise of targeted TV advertising is losing some steam with advertisers.

The pandemic has accelerated cord cutting as the number of streaming services grows while advertisers cut linear TV budgets and rework big commitments with networks like NBCUniversal, Disney, and ViacomCBS.

And AT&T — one of the biggest sellers of targeted, or so-called addressable advertising — is reportedly mulling spinning off its pay-TV service DirecTV and digital ad firm Xandr that was supposed to help it along.

Addressable advertising has always represented a small amount of TV inventory, but the coronavirus has exposed some of its pitfalls like high ad prices, a lack of measurement standards, and growing competition from streaming TV companies.

When the coronavirus shut down production schedules and sports, advertisers pulled their addressable campaigns along with national ad spend, said Matt Kramer, managing director of advanced advertising at Omnicom Media Group.

Targeted ads are costly, and there’s more competition

Addressable budgets typically go into small “innovation” budgets that advertisers use to test different mediums. Its high price makes it a barrier for advertisers and an easy place to cut.

Kramer said that addressable ads cost 10% to 20% more than OTT ad inventory. Steven Golus, an independent sales and training consultant for TV networks and agencies, said that CPM rates for addressable advertising can range from $150 to $400 compared to linear TV CPMs of around $30.

“There are questions around the ROI of this medium and a lot of that comes from pricing,” Golus said.

Also, advertisers can get the household-specific targeting promised by addressable ads from digital streaming giants like Roku and Amazon — along with lower prices and the ability to easily turn ads on and off.

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Addressable advertising pitches the ability to target ads by household

The promise of making TV ads more digital with targeting and measurement has existed for decades. For the TV companies, addressable is a way to squeeze out more money from TV ads as they face pressure to reduce their ad loads in line with streaming services. And for advertisers, addressable promises to avoid showing people the same ad over and over.

“We have the ability to look at who we’ve hit with our national buy and make sure that we’re hitting the rest of those people or play with frequency,” said Lisa Herdman, SVP and director of national video advertising at RPA.

Here’s how it works: Addressable advertising plus into cable boxes to zap ads to specific households. A person in the market for a car might see an ad for a local car dealership on TV while a fast-food restaurant might target ZIP codes with local offers. AT&T, Dish, and Ampersand are the biggest players in the space and negotiate fees with networks to carry their signals over satellite and cable services and are allowed to sell two minutes of ads space every hour of a local broadcast.

But addressable inventory makes up a …read more

Source:: Business Insider


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