Targeted television advertisements miss the point
In 2012, Deloitte estimates that targeted TV advertising will likely represent less than one tenth of a percent of global television advertising revenues, which is less than $200 million out of a total market of $227 billion89. A targeted TV ad, also known as an ‘addressable ad’, is a conventional TV commercial spot served specifically to a television set or computer. The ad is selected according to contextual data, such as income level, purchasing history or stage of life, for an individual viewer or household90.
The clamor for targeted television advertising dates back to the origins of TV ads. One of advertising’s fundamental objectives is to target specific customer segments, such as those who allocate a household’s spend on cleaning products, or specific demographic groups. Yet television is a mostly mass-market medium, which means that many people who view a TV ad are not its main targets. On this basis, TV advertising could be criticized as wasteful and inefficient, particularly when compared to the targeted advertising that the Web is perceived as delivering91.
Targeted television advertising seeks to mitigate the inherent inefficiency of TV ads while incorporating the best of traditional media and new technologies: keeping the power of TV, but only showing an ad to an audience that is most likely to be receptive. Targeted advertising would enable ads to be selected for the specific viewer, using principles similar to those for Web-based advertising92. For example, dog food ads would only be shown to pet owners; luxury car commercials would only be shown to viewers likely to purchase top-of-the-line models; and ads for a local restaurant would only be shown to people who live nearby93.
Every year, the technology to deliver targeted advertising improves. The array of data on customer purchasing patterns, income levels and browsing behavior is constantly growing; and the processing power available to analyze this data increases every year. Options for delivering targeted ads are constantly improving as well. One approach, for example, is to download commercials appropriate for a household to a set-top box (also known as a cable or satellite box). These ads can then be inserted during commercial breaks. Targeted ads can also be inserted at the point of transmission when delivering individual streams of video to a household.
The ability to deliver television signals on-demand via the Web enables advertising to be allocated according to geography, even down to specific streets in a neighborhood.
Some metrics show targeted TV ads to be more effective than regular television advertising. Viewers shown targeted ads appear less likely to change the channel during commercial breaks94, and brand recall can be higher95. Hundreds of millions of dollars have been invested in companies focused on delivering targeted TV advertising96.
Targeted TV ad campaigns enhanced by technology are certainly attractive in principle, but execution remains a challenge. And in 2012, it is unclear whether the need to deliver further degrees of advertising is sufficiently widespread to justify the required investment: many broadcasters offer hundreds of different customer categories, but advertisers rarely ask for more than 10 different segments. This is why, despite the hypothetical attraction of targeted TV ads, the market in 2012 is likely to remain small.
The high cost of creating a television commercial means that advertisers are very unlikely to make multiple versions for a single campaign. TV ads are generally becoming more expensive. The cost of creating a TV advertisement focused on brand-building is likely to exceed $500,000, while major campaigns with wellknown celebrities or complex special effects often cost more than a million dollars.
The rising cost of producing a television commercial makes it less likely that small businesses with modest marketing budgets (who might want to target ads just to households in their area) will be able to advertise on TV. Although airtime may be available for relatively low cost, creative costs are far harder to economize on.
Traditional TV ads, while relatively expensive to produce, can enjoy major economies in preparation and allocation compared to targeted advertising. Determining who exactly to target can be resource intensive. Aligning multiple sets of data, such as matching households to individual purchasing history, or identifying viewers most likely to be interested in premium kitchen utensils, can require significant resources. Traditional TV campaigns, the largest of which involve billions of impressions, lack this degree of precision but require much less laborintensive preparation.
In addition, delivering targeted ads via a set-top box requires boxes with uniform specifications and capabilities. Yet the installed base of set-top boxes varies widely, with some units up to ten years old97. Advertisers generally want TV ads to have as wide a reach as possible – even if they intend to target specific households within this base.
Current TV advertisements are already targeted to a considerable degree, a fact that is often overlooked. Every TV program attracts a certain, relatively predictable type of viewer, against which relevant advertising that is likely to resonate with the program’s expected audience can be sold. Multi-channel television, available in any country with digital distribution of a TV signal, enables general and specialized programming to be broadcast. With the guidance of a good media agency and planner, this can provide sufficiently accurate allocation of commercials on a per-program basis.
Although such targeting may not be precise down to the household level, deeper targeting based on detailed data analytics may deliver only limited incremental benefits – often at significantly higher costs. That said, it should be noted that in many markets advertisers do not pay for “wastage” (reached viewers who are not the core target for the campaign). Ads are not sold in terms of total audience, but total target audience. Advertisers purchase a volume of targeted individuals, such as decision-makers for purchases of cleaning products. Anyone else who views the ad in that household is not charged for, even if they may be influencers of near-term purchases or potential customers in years (or even decades) to come.
Joint decision-making on some items means that the shotgun approach to delivery that is inevitable with traditional TV advertising is potentially more effective than strictly targeted advertising, since it reaches a large number of influencers as well as decision makers98. Purchases of high-priced items, such as vacations and cars, are often based on collective decisions. While one individual may pay for an item, other members of the household are likely to have a significant influence on the choice. For example, a parent purchasing a car may well base part of his or her selection, consciously or otherwise, on the approval of his or her children99.
Joint viewing of television, particularly in the living room, means that one aim of deeply targeted advertising – delivering a commercial specific to an individual – would still result in wastage if others in the room were not also targets for that particular campaign. Thus, the most fertile ground for targeted advertising is likely to be video-on-demand TV programming that is watched on a computer or smartphone, which is more likely to be viewed alone. While video-on-demand is growing, viewing volumes are still relatively small, at less than ten percent of all viewing of video content. And online viewing of TV programs is less than a tenth of that100.
There are actually very few TV ads that will never influence what we purchase, either today or in the future. Ads for diapers and pet food are often cited as examples of campaigns that are irrelevant for vast segments of the population, since many people will never own a pet, or will not be buying diapers at any point in the future. Yet product categories such as these are rare indeed.
Before TV executives become either petrified or over-excited by precision targeted advertising, they must understand how big this market really is: online advertising, after all, has so far been led by search, not contextual advertising. And online advertising’s biggest growth is likely to come from display ads that do not rely on context.
The main advantage of TV targeting is that the audience is self selecting. Viewers do the hard job of matching themselves to ads that are expected to be relevant to them through their viewing choices. If planners have done a good job of matching advertisements with programs, ads shown should be mostly relevant to the audience. With Web-based advertising, serving relevant ads can actually be harder. If the context for selecting an ad is browsing history, this can mislead as a high proportion of computers are shared. Furthermore, some individuals use multiple machines, and browsing on these machines is not necessarily amalgamated.
One of TV’s biggest roles is launching new products and brands – an activity where companies do not always know exactly who is going to be in their target market. In situations like this, a shotgun approach may well be an advantage. When people watch television, they are generally passive, and a variety of marketing messages tends to work well in this context.
Television advertising should be blended more closely with online advertising; however, the focus should be on matching TV viewing to browsing patterns. TV’s ability to influence search patterns is well documented101: it can effect an 80 percent uplift in searches on a brand over the duration of a TV ad campaign102. Yet, at present, there is little widespread conjoined monitoring of TV viewing’s impact on search. Mapping an individual’s TV viewing to his or her searches could quantify a TV campaign’s ability to influence people’s interests and purchases.
Deloitte Canada, as referenced in videos, podcasts, or online materials related to TMT Predictions 2012, refers to Deloitte & Touche LLP, the Canadian member firm of Deloitte Touche Tohmatsu Limited.
89This Year Next Year, GroupM, December 2011
90We consider online TV as a subset of online video, and online TV ad spend as a subset of online video ad spend.
91The ultimate marketing machine, The Economist, 06 July 2006: http://www.economist.com/node/7138905
92For example, one recruitment campaign was based on four different types of users. An ad was created for each type. Source: TV’s Next Wave: Tuning In to You, The Wall Street Journal, 7 March 2011: http://online.wsj.com/SB10001424052748704288304576171251689944350.html
93For more information on the data approach that could be used with this, as well as pros and cons, see: In Defense of Targeted TV Ads, Time, 10 March 2011: http://techland.time.com/2011/03/10/targeted-tv-ads/
94One test found that homes receiving targeted ads were less likely to change channels during commercial breaks. Source: Calculating the Benefit of a Targeted TV Ad, The Wall Street Journal, 7 March 2011: http://blogs.wsj.com/digits/2011/03/07/calculating-the-benefit-of-a-targeted-tv-ad/
95According to one trial, recall can increase by 40 percent. Source: Will Targeted TV Ads Justify Higher Fees?, Bloomberg Businessweek, 7 April 2009: http://www.businessweek.com/magazine/content/09_16/b4127000389178.htm
96Google Boosts TV Ads With Invidi Investment, GigaOM, 05 May 2010: http://gigaom.com/video/google-boosts-tv-ads-with-invidi-investment/; Cable Firms Join Forces to Attract Focused Ads, The New York Times, 10 March, 2008: http://www.nytimes.com/2008/03/10/business/media/10cable.html
97Will Targeted TV Ads Justify Higher Fees?, Bloomberg Business Week, 07 April, 2009: http://www.businessweek.com/magazine/content/09_16/b4127000389178.htm
98For one example of targeting to the entire family, see this commentary on a dog food ad aimed at the end-user (the dog) rather than the purchaser. The TV commercial that targets your dog, The Week, 4 October 2011: http://theweek.com/index/219921/the-tv-commercial-that-targets-your-dog
99For a further discussion on this topic, see: blog strategy “waste”, DDB, 1 March 2011: http://www.ddb.com/ddblogs/strategy/waste.html
100Analysis based on data from comScore, March to September 2011. Source: comScore Releases September 2011 U.S. Online Video Rankings, comScore Website, 21 October 2011: http://www.comscore.com/Press_Events/Press_Releases/2011/10/comScore_Releases_September_
101One example of how TV has been used to influence search was a campaign for an online comparison company that had an advertising objective to get viewers to search on “meerkat” rather than “market”. One rationale for doing this was the difference in cost per click on each term – the latter was priced 100 times higher, at £5 (about $7.50), rather than at 5 pence (about 7.5 cents). For more information see: The search strategy behind Compare the Meerkat, blogstorm, 1 September 2009: http://www.blogstorm.co.uk/the-search-strategy-behind-compare-the-meerkat/
102Source: The value of a Super Bowl ad: A performance marketer’s perspective, 3 February 2011: http://blog.efrontier.com/insights/2011/02/the-value-of-asuper-bowl-ad-a-performance-marketers-perspective.html