Is Targeted Digital Video Advertising Worth the Cost?

Ad spending in digital for 2016 is set to surpass TV, according to eMarketer. Industry experts recently spoke at the Advertising Week New York conference about how traditional TV and digital video are converging.

Why is the digital ad spend growing the way eMarketer predicts? "I think the reason for that is because digital is really a targeting platform," said Jonathan Bokor, SVP and director of advanced media for Mediavest|Spark. It allows us in many ways to buy against audience. It also allows us to prove ROI or a direct KPI that leads the sales or that leads to much closer to what advertisers are looking to accomplish with their advertising dollars," 

The biggest complaint is that  while TV has huge reach, TV advertising is only bought based on age and sex demographics and not targeted the way online has the ability to be. "(U.S. consumers spend) 140 hours a month consuming linear TV live and time shifted," said Randy Cooke, VP of programmatic TV, SpotX. "If you think about the existing ad load just somewhere around 14 minutes an hour, we're talking about trillions and trillions of demo impressions within TV." That’s a lot of ads at the same time viewing time is decreasing.

Now we have programmatic TV, addressable TV, and OTT. All of these formats have the ability to make real-time changes based on data. Programmatic TV is more about how ads are bought through open or closed auctions and served in an automated fashion. Addressable TV is a newer area for ad sales, with the ability to target specific ad pods to broadcast or online audiences based on data. OTT is or should primarily be data-driven advertising, but as Streaming Media's Dan Rayburn recently asked, if advertisers have all this data, why are we still seeing the same pre-roll delivered 10 times in a row? Good question.

"I think that there needs to be a realistic understanding of what's the value that targeting brings. At a certain point, there comes a time when if the price becomes too high, you might as well just take the whole audience," said Bokor. "We can buy cable and broadcast from FOX and NBC and competitors at very attractive rates in comparison to what some of the CPMs that are being sought (via digital). At a certain point, they say, 'You know, I'm going to take the wastes because it ends up being cheaper'."

Comments like that just encourage viewers to tune out. Bokor said platforms like Hulu and Roku are more expensive and there are a lot of legacy practices within the industry that need to be overcome before targeted, data-driven advertising achieves its potential.

"First of all, I think addressable inventory is probably not priced correctly today. It's not because people haven't tried. I think there's just so many moving pieces in terms of what actually determines the proper value for it. Is it how scarce is that particular audience? Is it what's the value of a lead for that particular type of product?" said Aaron Radin, SVP of partnerships & portfolio products at NBC Universal. "All those are variables that are going to change depending on who the client is and what happens with that user? The other thing is what type of campaign is it? Is it a brand building campaign? Is it acquisition type campaign? Those are things that I think candidly we're still trying to figure out."

"I think you've got to start with an assumption that addressability has more impact," said Scott Rosenberg VP of advertising and audience development at Roku. "Then, the question is, what's a fair share of the improvement in efficiency between the buyer and the seller? I think that depends a bit on who's bringing the information to the table.

"In the case of addressable and what the cable operators are selling, I think their mindset is it's our data, it's our subscriber, we have all the information to inform the buy and so we're going to try and extract a pretty significant premium for it," said Rosenberg. "In the programmatic open market places often times, it's the buyer who's bringing to the table visibility of that user across hundreds of thousands of media vendors."

Bringing those buyers and sellers to the table in a way that’s transparent and affordable seems to be the biggest problem advertisers are facing. So where does that leave us? "I think one of the answers is it's going to be less about ad tech and more about marketing tech," said Peter Naylor, SVP ofadvertising sales for Hulu. "The difference is facilitating the business of advertising is going to become a commodity, but marketing tech when you're measuring outputs and value and making better use of inventory or efficient targeting is a place where people will be hungry for M&A activity."