Help! The Computer Ate My TV Buy!

How Software Is Eating Video Ads And, Soon, TVMy new report, “How Software Is Eating Video Ads And, Soon, TV” just went live. In it, I document how automation has gained traction in digital media buying and why it’s only a matter of time before we see it jump to assets such as online video. Read the report now and join me for a Webinar on Tuesday, February 25, at 11:00 a.m. Eastern standard time.

Sure, the scarcity of inventory and the premium associated with professional video content drive caution and reluctance among sellers. But in a few years, short- and long-form video content, both user-generated and broadcast-native, will be bought programmatically in an inevitable takeover of automated trading that has already started today – and will work all the way up to TV buying. Two forces make programmatic buying unavoidable:

  • Traditional buying cannot cope with audience fragmentation across devices. The explosion of new platforms and ways of viewing videos will continue dispersing audiences, making it increasingly difficult to reach the desired number of viewers through linear TV alone. And many of these new platforms are digital, enabling a break from broad age/gender ratings buys and a move to addressing ads to individuals. Traditional manual buying approaches simply can’t cope with this volume of video sources and the shift to addressable advertising.
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Marketers: Focus On Video Audience Fragmentation, Not Cord-Cutting

With all the talk of cord-cutting, you'd think consumers were abandoning video entertainment for a return to a Neolithic era of telling stories around the campfire after the day's hunt. I published a report a couple of weeks ago called Marketers: Don't Worry About Cord-Cutting that shows this isn't the case. (First, a shout-out to my colleague Jeff Wray, who allowed me to use some of the data in his Forrester Research Pay TV Forecast, 2013 To 2018 [US]).

Are consumers getting their video entertainment from different source? Yes, largely migrating from cable to telecom providers like Verizon and AT&T. This has little to no impact on how marketers plan and buy their TV campaigns.

Are consumers filling some of their video entertainment hours with online streaming sources? Sure, but for the most part, online video viewers are -- and remain -- heavy linear TV viewers, using new sources to get more of the entertainment they love (as I documented in this report last fall). Some younger consumers are delaying getting a pay TV subscription of any type, and perhaps they may never. But then they will fill their entertainment hours with video from Vevo, YouTube, HuluPlus, etc., where advertisers will have ample opportunity to reach them (oh, yes and some ad-free Netflix, but then, ad-free DVD viewing is fading away).  

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The Sunset Of GRPs

Gross rating points (GRPs) have been debated in the digital world for years — census level impressions should crush a panel-based measurement like GRPs — until you run into the raft of pesky technical issues: bots, viewability, server-side versus client-side measurement, et al. Meanwhile, the big money (i.e., TV) continues to be traded on GRPs, and with the advent of Nielsen OCR and comScore VCE, it appeared that digital was ready to throw in the towel and trade on GRPs, at least for online video.

But the story doesn't end there. GRPs, being a panel-based metric, have become more and more vulnerable as audience fragmentation decreases the number of viewers for any individual show: first small local broadcast markets, then low-rated cable networks, and now the general decline in audience size across the TV spectrum. This leaves a lot of audience unmeasured by Nielsen but still with intrinsic value to the advertiser, if only you could find another "currency." 

MAGNAGlobal's most recent Media Economy Report takes one of the most direct stabs into the heart of this venerable metric, as reported in this Mediapost article: MAGNA calls for shifting to impression-based trading for local TV ad inventory.

I believe this is a harbinger of the end of GRPs. As I said in my April 2013 report Digital Disruption Rattles the TV Ad Market, disruption won't likely be a sudden, massive event but will begin at the margins in areas like spot advertising, which are smaller dollars and thus less risk to the advertiser's campaign results if a new technique isn't successful. 

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January Sets The Stage For Faster Disruption Of The TV Ad Model

The annual hype surrounding Super Bowl ads has reached a crescendo this week, and I won't add to it. (You can always go read the article I published in the Journal of Advertising Research when I was CMO of a social media listening company, proving it was more effective to preview your ad before the game than keep it secret.)

Don't let this cacophony drown out three events this month that signal 2014 as a pivotal year in the evolution of TV advertising. Any single one would be big enough news, but the fact that all three happened in just one month shows that the drivers for changes are accelerating:

  • Charter bids for Time-Warner. Behind-the-scenes overtures broke into the open when Charter went public with their desire to buy their larger rival. This event is a symptom of underlying margin pressures and technological change that we will see accelerate this year http://forr.com/TWCinplay 
  • Verizon buys Intel's online TV service. The chip giant threw in the towel in its attempts to create an over-the-top TV service, frustrated in part by content owners' intransigence. Verizon reportedly got a very slick new user interface, but also potential to become the first "virtual MPVD", an IP-delivered TV service that isn't constrained by the geographic footprint of their infrastructure or regulatory definition of its operating territory. 
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DVRs vs Online Video: Which Will Win the Battle for Consumer Viewing Time?

Since the introduction of the DVR more than a decade ago, consumers have learned they don't have to conform their lives to broadcast programmers' schedules in order to watch their favorite TV shows.

Along come online sources like HuluPlus, or the network's own websites promise even more convenience: Get any episode of any show with no need to remember to record it. But adoption is hampered by the awkward viewing experience of the cramped screens of laptops, tablets, and smartphones.

Welcome to TV viewing in the Age of the Customer. Consumers want their favorite shows when they want them, on their preferred device, with little or no effort on their part.

Linear TV, DVRs and today's online viewing experience all fail on at least one of these dimensions. Viewers increasingly cobble together a mix of sources and devices to create this level of convenience, and each of these players vies to capture more of viewers' time by improving its offering.

In my new report, "How Online Video Will Challenge DVRs' Role," I delve into how these two sources of video entertainment vie to meet consumers' increasing expectations. DVRs have the advantage of incumbency, while online viewing offers greater flexibility.

Let the battle begin!

How are you thinking about video content these days?

As I get deeper into the changes impacting television and online video, their convergence, and the possibility of entirely new forms of video entertainment content, I'm thinking about content in the following categories:

  • Long-form professional video -- i.e., produced originally to be broadcast on TV
  • Professional clips -- news, sports highlights, scenes from programs
  • Short-form professional -- i.e., Maker Studios, et al, producing videos shorter than 30 minutes, specifically for Internet distribution
  • Brand videos -- i.e., content marketing done in video form, such as Home Depot's do-it-yourself instructional videos
  • Consumer-generated videos

Then there is the medium by which they are distributed:

  • Linear, i.e., at broadcast time
  • DVR, where the consumer takes control
  • VOD through the cable box
  • Online streaming, from either the cable/satellite provider, the programmer, or a streaming service like Hulu Plus

And, of course, there are the devices on which the content can be viewed:

  • Traditional TV
  • Computer/laptop
  • Tablet
  • Smartphone
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Time-Warner and CBS Settle -- And Set the Stage for the Future of Online TV Viewing?

After a month of haggling, snarking, and outright marketing war, CBS and Time Warner came to terms. While details were not disclosed (though this CNBC article has some intriguing hints) both CEOs -- Les Moonves at CBS and Glenn Britt at Time Warner -- had soothing words about how this agreement is good for everyone. 

I think the winner is the future of online viewing.

Digital rights were the second biggest sticking point (after a roughly tripling of retransmission fees that CBS initially sought). Time Warner wanted a continuation of the 2008 contract, which gave them digital rights as part of the contract; CBS wanted a separate payment. In other words, in 2008, no one thought digital amounted to anything so CBS threw them in at no cost. Now both sides see enough value that they become worth arguing over. And by retaining digital rights, CBS is free to pursue that value by licensing its content to other services like Netflix, Amazon Prime, and is rumored to be talking to Sony for its yet-to-be-announced video service.

Prior to this agreement, CBS had no incentive to think about digital distribution because they had signed away the rights; Time Warner had little incentive because they didn't pay anything for those rights. They have dabbled with TV anywhere, but it was a sideshow to their real business of cable delivery of video. 

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Deals and IPOs in video entertainment and advertising: an inflection point or bubble?

A spate of events this month argues that the industry that revolves around video entertainment and advertising (I no longer call it the "television" industry!) has entered a period where long-delayed change will burst out:

  • Video ad networks/technologies YuMe and TremorVideo both went public. While neither was blockbuster, these IPOs signal that investors have enough confidence in the future of digital video that they'll put some chips on the table. They see advertisers using online video to extend their TV campaigns and this sector growing at rates far higher than the advertising market as a whole. 
  • Two $400 million + deals for cross-device video ad technologies. The much-hyped AOL/Adap.tv deal and the quieter Extreme Reach/DG deal reflect different corporate strategies, but both are rooted in the idea that the distinctions between TV and digital video will continue to diminish. Marketers increasingly realize they must put their sight/sound/motion messages on every device if they hope to achieve the reach that TV alone used to deliver.
  • CBS/Time-Warner dispute. The mutual benefit of carriage fees has made the programmer/distributor relationship cozy for years. Now this relationship is fraying, and outright wars that include blackout of stations like the current CBS/Time-Warner fight have become increasingly common in the past couple of years. The lure to programmers of streaming their programs online increases in direct proportion to how contentious this relationship becomes.  
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Five Trends That Will Disrupt Europe's TV Ad Market

My new report, Convergence Disrupts Europe's TV Ad Market, looks at the fascinating landscape of TV advertising in Europe. The bottom line: disruption is coming that will make established TV buying strategies and practices ineffective. Marketers need to understand this change, and over the next three to five years, adopt new tools and strategies in order to achieve the reach and results they want from their video advertising.

While each country has unique attributes that both drive and hold back this evolution, five trends are unmistakable across the region:

  • On-demand viewing -- While on-demand is a small percentage of viewing time now, consumers are embracing the ability to catch up on missed favorite programs or discover other content on streaming services like LoveFilms. Younger viewers especially flock to these new viewing options and make up an increasing percentage of the classic 18 to 44 age demographic.
  • TV anywhere -- As relates to on-demand viewing, consumers find they're not always in their living room when they want to catch up on their favorite show. Programmers, networks, and distributors are all offering apps and services to make viewing on tablets, smartphones, and computers easy.
  • Original online professional content -- YouTube isn't just cat videos anymore. There is an explosion of high-quality professional content that won't ever be broadcast. I'll be watching these experiments closely to see how well they engage viewers.
  • Addressable advertising -- The dream of delivering different video ads to different viewers to match their interests is a marketer's dream. Long talked about -- and long delayed -- we will see the first broad market implementations this fall.
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AOL and Adap.TV -- Audience, not Content, is King

I talked with several reporters yesterday about AOL's $400 million purchase of online video technology company Adap.TV. A popular question was "Why is a media company buying a technology company?" as if they had no business being combined. The published coverage focused on the value of their technology for programmatic buying and its future application to TV as the digital evolution disrupts today's television advertising industry. Important, but I think misses a more fundamental issue: Content may be king for consumers, but the consumer is king for advertisers. And to deliver consumers to advertisers in the way they want, content companies will need to have strong technology backbones.

AOL has always trumpeted that content is king -- I remember the Bubble 1.0 days (pre AOL Time-Warner, even!) when Ted Leonsis virtually coined this phrase. Even since the Time-Warner split, AOL has continued to pursue the content-centric strategy with the acquisition of The Huffington Post, Tech Crunch, and video syndication firm 5min Media. Until now.

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