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Debunking Addressable TV Advertising's Biggest Myth: Scale

"While scale is nice, the key benefit of addressable is not massive reach, but in the ability to target efficiently. It is counter-intuitive to try to hit all 64 million households with one addressable campaign – instead, the true value comes from hitting your desired audience." -Chris Morse, director, digital partnerships, Alliant

The forces of cord cutting, new streaming services, and digital delivery have altered the face of TV advertising. Whereas TV once represented one concept, advertisers now have a plethora of options when it comes to their media plans. This is a good thing for TV advertisers, because it opens the door to granularity and precision that were missing from the broadcast era. But advertisers remain slightly confused—if not downright fearful—of change.

One of the key ways TV is changing in this era is the rise of addressable TV advertising. Thanks to improvements in technology, advertisers can now serve ads into linear programming, targeted on the household level through the set top box. But the rise of over-the-top (OTT) services and cord cutting have created confusion around addressable, including one persistent myth: that addressable lacks the scale to be effective. In normal times, that’s not the case, and with TV viewership soaring with nearly a 20% increase as Americans remain in their homes, it couldn’t be further from the truth. Let’s look deeper at the reality of addressable TV.

First things first: there is scale. More than 64 million households can be targeted with addressable TV ads, either through cable TV or satellite. That’s nearly three times the 21.9 million that have cut the cord, and nearly 70% of the 86.5 million households that have pay TV.

It’s also critical to note that addressable inventory isn’t limited to only those who haven’t cut the cord. There is one-to-one addressable inventory available across traditional linear and new OTT options, such as Sling and Roku. Much of the addressable conversation focuses on inventory offered by multichannel video programming distributors (MVPDs), but when these OTT players offer linear channels to their users, they can be classified as virtual multichannel video programming distributors (vMVPDs). Sling TV, Hulu Live TV, Pluto and DirecTV Now all qualify as vMVPDs.

Addressable ads are served in the two minutes per hour that networks give to cable providers to sell. Yes, there is less addressable inventory per hour available than there is inventory available directly through the networks, but the degree of scale that TV advertisers want is certainly there, even as ad-free subscription services like Netflix, Amazon and Disney+ grow in popularity.

While scale is nice, the key benefit of addressable is not massive reach, but in the ability to target efficiently. It is counter-intuitive to try to hit all 64 million households with one addressable campaign – instead, the true value comes from hitting your desired audience. Cable providers have personally indentifiable information (PII) on their subscribers, which, when anonymized, can serve as a match key with other anonymized audience data resources (Roku leverages PII as well). Advertisers can then target the households that match their desired audiences, and only those households. In other words, two neighbors can sit down to watch the same program, and see two different ads during the same break in the programming, because they fall into two different audience segments.

Here’s how it might work in practice: an advertiser can approach a cable or satellite operator that has 17 million household subscribers. After comparing subscribers with the desired audience, the MVPD may find that 2 million households match. This becomes the addressable audience for the campaign. There’s little value in paying to advertise to 17 million households, much less 90 million, if only 2 million households match the audience profile. The advertiser can deliver its ads to those households, regardless of the program those houses view, while knowing that they aren’t wasting ad dollars on messages that reach unqualified viewers.

This is different from the way many TV buyers have thought about buying media in the past, and perhaps surprisingly, it’s different from the way even some of the largest brands think about TV today. Many of these buyers have a deeply-ingrained Nielsen panel-based mindset. They think of targets in terms of age and demographic – if they want to hit viewers 65 and over, they know they can buy Jeopardy! and Wheel of Fortune.

But this-panel based thinking only became the currency for TV buying because the precision of addressable and targeted TV advertising wasn’t available at the time. Addressable is more akin to the way that digital ad inventory is sold programmatically, and as these lines continue to blur, broad, panel-based data becomes more archaic.

Addressable creates an opportunity to tap into the power of TV, with the precision of digital, while TV viewership at large undergoes a time of transition. Current trends show that linear TV is still a major part of consumers’ lives, and this period of increased viewership could be an opportunity for advertisers to experiment with addressable messaging. These kinds of short term experiments can help buyers cut through the noise of myth and misconception. There is scale and efficiency available in TV, provided brands and agencies are willing to try new ways of buying.

Alliantis a data-driven audience company.