People still watch TV. A lot of TV. The sheer number and variety of TV shows available to watch these days is larger and more diverse than ever before. What has changed is how people are viewing. According to Nielsen, 88% of adults watch live + time-shifted TV each week. This is called linear TV and is programming distributed through cable, satellite or broadcast networks. In addition to this viewing, 55%-60% of the population watch video content via various streaming services. Some of those streamers also watch linear TV, and some watch only streaming content. Add to this the fact that TV viewing no longer requires an actual TV. People are watching on laptops, tablets and smartphones, or via game consoles or connected devices.
How and on what type of device people are consuming TV programming varies by age, with younger demographics watching more streaming content and older demographics watching more traditional linear. This is not an all or nothing proposition, many younger people still watch traditional TV and older folks are dipping their toes into streaming. And of course as the population ages, viewing will continue to shift.
Not only is the way people watch TV changing, but the way advertisers place ads in TV content is also changing, so it helps to better understand the various services available.
Set-top-box video on demand (STB VOD) is placing ads within programming that viewers choose to watch via a cable set-top-box. Ads within this content are non-skippable and ad completion rates are high. STB VOD is usually bought on a cost-per-thousand impressions basis across a somewhat wide list of networks. This generally provides additional duplicated reach against many of the same viewers that are watching linear TV.
Advanced TV is an umbrella term that encompasses Over-the-Top (OTT), Subscription Video on Demand (SVOD), Connected TV (CTV) and Addressable TV.
- OTT is streaming video content via an app or website that bypasses traditional TV distribution. Examples include Sling TV, YouTube, DirectTV Now, PlayStation Vue and CBS All Access. This type of content is distributed via various platforms including Roku, Apple TV, Google Chromecast, gaming systems and smart TVs. Advertising is non-skippable and inventory is generally bought using advanced targeting beyond age and gender, focusing on reaching the right audience instead of buying specific programming or networks. Enough inventory is usually available to accumulate some reach, but it is most often used in conjunction with Linear TV. OTT can provide duplicated reach against viewers who also watch linear TV and unduplicated against cord-cutters and cord-nevers that do not.
- SVOD is a subset of OTT that offers little to no advertising. Netflix, Amazon Prime and Hulu are the top providers.
- CTV refers to TV sets that are connected to the Internet and is therefore also a subset of OTT. Americans watch streaming content on multiple different screens, but CTV is king.
- Addressable TV is advertising delivered on a home-by-home basis via cable, satellite and Telco boxes. Ads are delivered to specific homes using household demographic info as well as first and third party data to provide more precise targeting and better ROI. Ads are not bought by network or program, but targeted to audiences at the household level. There is still a lack of scale with only about 5% of TV inventory available to purchase this way and Addressable TV accounts for about 4% of TV advertising spending. Combining with linear TV and/or OTT helps create overall campaign reach.
Programmatic is an automated, data-driven method of buying linear TV ads. Platforms help automate the process of importing inventory, negotiation and placement, and targeting beyond age and gender is available in most platforms. One challenge is that not all stations participate, with cable inventory particularly limited. Fragmentation in providers and the fact that there is not seamless integration with other buying systems are also issues.
Even though the benefits to buying streaming content are evident, there are also challenges. Inventory is fragmented and sold by an intimidating array of sources. This makes it confusing to buy, but also makes it hard for any single provider to deliver the scale advertisers want. The frequency of ads is another issue. Audiences are often served the same spot multiple times within a short time frame. The core issue is that advertisers are thinking about it like they do linear TV expecting massive reach guarantees, but the only way the platforms can deliver is to serve the same ad repeatedly. There is not enough inventory on OTT streaming services yet to stop the frequency issue. Lastly, the lack of standardization in measurement is a barrier, and will continue to be until providers come to some level of uniformity.
There is a lot of work being done by third-party measurement companies to try to connect the dots between OTT, linear and digital video. Nielsen has its Total Ad Ratings product, comScore and Hulu are partnering on Campaign Ratings, which is ready to start beta testing and NBC Universal is working on the first unified ad metric – CFlight – to measure all live, on-demand and time-shifted commercial impressions on every viewing platform.
Whatever the current challenges, these options are great news for advertisers who understand that TV has unrivaled engagement and massive reach, and now can offer more options for targeting and measurement than ever before. It’s the convergence of TV and digital video - two of the most successful formats in advertising. We do need to approach this as a crawl-walk-run, and the industry as a whole is still learning to crawl.