The TV landscape is changing. With the advent of digital came the question, “Is this the end of cable television?” Until now, the answer has been no, but the television industry has not been immune to change, as viewers increasingly shift to a range of video on demand services, including Netflix, Comcast Xfinity, and most recently, an unbundled HBO.
As TV adapts to new developments in technology and shifting user preferences, so does the realm of television advertising. TV advertising has been a hot topic in the news recently, with much buzz on the shifting distribution of advertising dollars towards digital and projections about what holds for the industry’s future. In this evolving space, there are a couple key trends to be familiar with.
Downward Trend: Spending
Last month, a Cabletelevision Advertising Bureau (CAB) report announced a 6% reduction, or $577 million decrease, in spending in cable TV advertising compared to the previous year. This marks the first time since the 2009-2010 season that advertisers allocated less dollars than the previous year for the “upfront” market, which represents the time of the year when TV networks sell the majority of their advertising in advance for their fall programming. CAB attributed the decline to clients holding onto their ad dollars longer in order to achieve a greater sense of flexibility and align ad spending with immediate business needs.
The negative trend is similarly reflected in spending for February’s upcoming Super Bowl, for which advertising sales has also slowed compared to previous years. According to an NBC exec, marketers are holding back ad budgets and spending much closer to air date, avoiding buys “until they have to.”
Despite the downturn, TV is still the dominant advertising medium, projected by eMarketer to make up 38.1% of total US ad spend in 2014, with digital amounting to 28.2%. But this balance is expected to change come 2018 (and even earlier according to other projections), when digital ad spend will surpass TV ad spend.
Upward Trend: Programmatic
Although overall spend might be decreasing for now, there has been a lot of talk about programmatic TV advertising, or the data-driven automation of TV advertising. Programmatic TV advertising would allow for increased specificity for advertisers, enabling them to reach a more targeted subset of consumers through access to audience data.
Globally, programmatic advertising is on the rise:
In the UK, Channel 4 has announced its plans to launch a programmatic marketplace for its video on demand service, 4oD. The channel will offer advertisers access to viewer data, enabling them to trade ad inventory programmatically. The broadcaster claims to be the first in Europe to offer a programmatic TV marketplace. By 2016, Channel 4 plans to sell more than half of all its ads on 4oD via demographic and interest-based targeting, and even predicts to phase out traditional genre-based ad selling within the next few years.
Australia too is making strides in this space. Multi Channel Network, which sells ads for 70 different cable networks in Australia, plans to launch a programmatic television marketplace across the entire Australian TV business. Broadcasters including MTV, Fox Sports, E!, and Discovery will be harnessing the dual power of technology and data to sell ads.
Will programmatic advertising take over the television advertising industry? Although TV advertising will, in the future, involve a greater level of programmatic, there are mixed feelings about whether this trend will completely dominate. At this point it’s tough to say—less than 1% of TV inventory has been sold programmatically this year. In the US, TV execs have been cautious to adopt programmatic selling, in part because American networks haven’t had much trouble selling ads in the past. With dwindling figures, however, this could very well change.
While the future of TV advertising is not clear at the present, what is apparent is that significant change is taking place. As traditional TV ad spend continues to decrease in favor of digital, we will likely see an increase in attention towards the programmatic marketplace. No doubt 2015 will be a year to watch in this space.