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Fragmented Viewership and Addressable Television

The media press appears obsessed with what’s happening to the television audience: Lower viewership levels and greater fragmentation. Viewership of commercially-supported television is certainly dropping. The impact of commercial-free programming from Netflix, Amazon and others is substantial, undeniable, and not reversible. We’re never returning to the good old days of three networks, 70+ prime time Houesholds Uisng Television (HUT) levels and 90+ 3-network shares. Life was so simple then – but we have to deal with this new reality and a future of even lower viewership and greater fragmentation.

Commercial television has seen the effects of several changes over the years. As the most impactful media available, it has driven the marketing success of a wide variety of consumer-facing products such as cars, consumer packaged goods, credit cards and insurance policies. Television’s power lay in its messaging (“sight, sound, motion and emotion”) as well as the vast audience it was able to reach. That lasted until cable networks came along, atomizing viewership (“57 channels and nothin’ on”). The wide range of choices fragmented audiences making it very difficult, and very expensive, to accumulate unduplicated reach. Then the Internet arrived with its ability to target specific audiences and measure the impact of the campaign through the availability of direct purchaser data. Attribution (one of those magic media words that appear out of nowhere and quickly become ubiquitous) made it possible for marketers to use their media dollars with precision and effectiveness. Ad dollars began to pour out of television.

Facing these market realities, a senior network sales executive recently told me his business is under pressure because “viewing levels are dropping by 8% a year, I have a fixed number of advertisers and I’m being asked to increase ad revenues.”

That’s all true, but despite what so many Chicken Littles believe, the sky isn’t falling.

Addressable television advertising focuses on what is most important – a one to one relationship with each member of a large audience. Program-based audience ratings are not as important as unduplicated reach. Today the only thing that really matters is being able to figure out exactly who is in the advertiser’s target audience – think of direct mail. If you’re selling dog food, you want to reach dog owners. If there’s a dog living in 123 Elm Street, Peoria – you want to reach his owner. And if there’s a cat living in 124 Elm Street – you have no interest in reaching that household. Simple concept, challenging execution. But that’s exactly what addressable television advertising is able to do and with unparalleled success.

It’s taken addressable television advertising in the US about 15 years to develop into a tool sophisticated enough to attract hundreds of national advertisers spending billions in ad dollars. Its rapid growth indicates it will continue to conquer a growing share of television ad dollars. Where in the past, television’s strength lay in cheap audiences, today addressable television’s strength is in both effective targeting as well as a re-aggregation of reach. It is now less important to select which program the viewer is watching; the important thing is that he/she is watching at all. When the viewer is watching, addressable technology is able to send the right message to that viewer, put a frequency cap on it so the advertiser doesn’t suffer huge variations in message delivery rates or drive viewer burn out, and ultimately, use attribution techniques to figure out which campaigns and audience segments worked best. That leads to a game change, coupling the ipact of TV with the kind of optimization that has been at the heart of success for online advertisers.

Media seems to transform itself roughly every couple of decades: Radio was big from the 30s to the 50s, broadcast television went from the 50s until the early 80s, cable television from the 80s through the early 2000s, and we’re now at the end of the second decade of the Internet era. If history is any indicator, this new technology – addressable television advertising – will rapidly grow and absorb advertiser interest, transforming television from one-to-many into one-to-one.
Stay tuned.

Written by Michael Kubin, EVP Media