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How Viacom Plans to Turn Ad Sales Around

After posting a 9% decline in domestic advertising revenue in the third quarter, Viacom, the poster child for how changing viewing patterns are hurting TV ad sales, thinks it can grow sales next year.

The advertising drop—bigger than analysts expected—helped send Viacom’s stock price into 14% dive Thursday and contributed to a selloff that affected most media stocks.

But on Viacom’s conference call with analysts, CEO Philippe Dauman said even though a similar size drop in likely in the fourth quarter, that in the next fiscal year the company expects a return to growth in our advertising revenue.

Naturally, an analyst asked how he expected Viacom to accomplish that feat.

“The reason that we have a view that we are going to resume growth in advertising revenue in the full fiscal year next year is that--obviously we had a tough year this year--we have begun to expand the scale of our targeted advertising initiatives, Viacom Vantage, Viacom Velocity. We have added a lot of human resources to those efforts,” Dauman replied.

Dauman noted that while domestic ad revenues were down, they were down less than ratings. He attributed some of that differential to “our substantial and growing next-generation advertising capabilities. These provide marketer with some of the most sophisticated and efficient products on the market.”

Viacom Vantage uses proprietary and third party data to precisely customize the audiences they want to reach and pinpoint buys with programming that best delivers that target.

“Three months ago I told you that we had piloted this platform and that we were committed to move aggressively. I'm pleased to tell you today that Vantage is working with 10 of the largest and most sophisticated advertisers in the world, representing leading brands in a variety of sectors including automotive, retail, telecom, financial services, consumer products and many others,” Dauman said. “In fact, Vantage already is generating significant incremental advertising revenue and that is just a start. We been investing in data and planning for this pivot for some time and are committed to accelerating the rollout from here.”

Dauman said that Viacom Velocity was an important part of the company’s upfront discussions. (Viacom managed to ad volume close to last year despite its ratings and despite an ad market that was down overall, he said.)

Viacom also has a larger volume of signature original shows, more event shows, more scripted shows. “These are higher value and we are increasing accordingly our ad revenues from significant advertisers who want to engage with those kinds of programs on our networks.”

He added that distributors are enhancing their facilities and ramping up products like dynamic ad insertion and video on demand.

“I mentioned new products in the mobile area also offer advertising opportunities,” Dauman said. “So we feel that we are going to be able to climb back up as we add all those different factors in.”