TV Advertising’s Inflection Point

2013 is the year that “video neutrality” tipped from an insidious trend to a full scale change in the way

that TV advertising campaigns are managed.

October 1, 2013

Strategic Inflection Pointsand the Insidious Trends that create them

“Strategic inflection points can be caused by technological change…they are full scale changes in the way business is conducted.They build up so insidiously that you may have a hard time putting your finger on what has changed, yet you know that something has.”

Andrew Grove

2013:The Buy Side

2013:The Sell Side

Insidious Trend #1Untethered TV Viewing

• May 20, 2004, Fox ordered 35 new episodes of Family Guy, marking the first revival of a television show based on DVD sales.

Video Enabled Devices

Source: MANGA Global/IPG Media Lab “Are All Screens Created Equal”, Sept 2012

TV Viewing Inflection Point• Most consumers now think of “television” as a type of

content, not a type of hardware.

Insidious Trend #2Commercial Avoidance

• Super Bowl 1987: Harvey Schultz, commissioner of the New York City Department of Environmental Protection, issued a "bowl warning" urging Super Bowl viewers to stagger their trips to the bathroom so as not to put too much of a strain on the city's water system.

Insidious Trend #2The subscriber supplants national advertising as the more important revenue stream for “traditional” Television.

• An insidious trend that began with the birth of cable TV has tipped the national television industry away from a dependency on advertisers towards a business built to super-serve the subscriber.

$97BCable Operator Revenues: 2011

Source: SNL Kagan

SUBSCRIBER

$54BNat’l TV AD REVENUE

Source: Kantar

0%

50%

75%

100%

1980 1990 2000 2010 ----- 2012

25%

Smart TV Inflection Point• The screen in the family room is bigger and better than ever…

but each insidious development in viewing technologies has made commercial avoidance easier.

Insidious Trend #3The empowerment of the Viewer

• 1992: Bruce Springsteen releases “57 Channels (And Nothin’ On)”• 2006: Broadband passes 50% of US households and Google buys

YouTube

Media Fragmentation Infinite Choice, On-demand

Inflection Point: “Quality” Content On TV: The Experts Decide Online: The Consumers Decide

• YouTube video content uploading = 48 hours/second• Gangnam Style was uploaded 7/15/12 - It has 1.7 Billion views in one year!• The definition of “Quality Programming” is evolving away from the studios and into the

hands of the consumer.

Insidious Trend #4Online video learns to super-serve the needs of brand advertisers.

• Great Creative Plus Scale Drives the Inflection Point• Online ads reached more than half of the US Population in June 2013. According

to comScore, 183 million Americans watched 44 billion streaming videos this past June. While doing so, they also watched 20 billion video ads.

Insidious Trend #5: Media Research

• February 2013: The dominant leader in TV audience research publishes a study* that recommends moving ~15% of the TV budget online.

http://www.iab.net/media/file/Digital-Video-and-TV-Advertising-Viewing-Budget-Share-Shift-and-Effectiveness.pdf*

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Nielsen People Meters for TV

Nielsen OCR for Online

Total GRPs

Inflection Point: Nielsen “OCR” DataFinally – a common language for audience metrics and ratings!

• Brand advertisers can integrate their TV and online video budgets without a break down in the process for estimating media weight levels.

+

The Digerati’s Inflection PointNew Respect for TV Advertising Strategies

TV benefits from the GRP which has $70 billion in spend behind it. “It’s our job as the digital industry to upset that balance and look for something better.”

Greg Stuart in 2007 Randy Kilgore in 2013

“We need to reposition digital from a DR metrics business to one that can build powerful brands.”

Four PredictionsThe Other Side of TV’s Inflection Point

1. Each year going forward, $1B of National TV ad spending will move to streaming video.

2. Marketers will ask Broadcast Negotiators to be on-point for video neutral campaigns.– Ad agencies have a short window to get this right.

3. Online Video will be programmatic but will not spiral down into the RTB hole.

4. Commercial avoidance on TV will accelerate spending shifts towards online video.

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