My family was quite the early adopter as we bought our first VCR in 1980. My mom could finally record her soap opera while she was at work and watch it later -- a miracle if there ever was one! Nineteen years later, TiVo introduced its DVR and catapulted us to where we are today, a world where DVRs are pretty common. Most of us who have DVRs get them from our dish, fiber, or cable provider. And of 43.3 percent of U.S. households that have a DVR, one in eight households have more than one. So what does this have to do with RTB?
If you ask most forward thinkers in digital, they may not say it out loud or on the record, but desktop display is clearly the appetizer for what programmatic and RTB can become. Don't get me wrong -- it's the seafood tower of appetizers. But long term, it will be a smaller piece of the pie. Online video has come on board, mobile is slowly coming, and social has joined in. This is all still "digital" media, though, and leaves out all of the traditional media such as print, TV, and radio. Mary Meeker's latest reveals that digital only represents 23 percent of ad spend, leaving quite a chunk untouched during this revolution -- but not for long. How far behind can Pandora, every magazine now digitally published in tablet format, and TV really be? We're going to address TV because it still garners more budget than any other medium, and it seems like it will be the last to be impacted because of the malaise of players-content owners, networks, distributors, set-top box manufacturers, TV manufacturers, and even SAG. But last doesn't mean never -- last means eventually. And when it does happen, there will be a fight.
Let's advance seven to 10 years into the future: By this time, I predict the online display world will have solved its viewability conundrum and figured out a way to both measure and monetize most of its inventory correctly. This will set the stage for other media to adopt an already agreed-upon standard. TV will be fully ready to go programmatic, but politics may hold it up. One of the smaller content delivery players (DISH Network, a smaller cable system, or a smaller fiber company) will turn 100 percent of its inventory into RTB to get the ball rolling. (A bigger bet is on a smaller player because it makes strategic sense.) This will mean spots in shows that were once commanding a $40 CPM may command a $100 CPM due to tighter delivery of target audiences. Other shows that were sold at a $10 CPM may be traded for a $1 CPM due to the lack of an accountable audience delivery. Markets won't be perfect, but they surely will separate the wheat from the chaff quickly.
Meanwhile, three things will be happening:
- DIRECTV, Comcast, and others likely will see the potential for $100 CPMs and will want to get in quickly. Forget the $1 CPMs. $100 CPMs!
- Viacom, Disney, NBCU, and others likely will panic. How will they get paid, in full, for every spot?
- Advertisers will demand everyone go all in. Targeting! Merge online and offline! Holy Grail!
Let's take this list and work backward. Advertisers certainly will be clamoring for a full advertising-integration rollout, but it won't even be a full day's news cycle before someone puts two and two together and realizes that the online-approved viewability standard should apply to TV. In other words, advertisers won't pay for skipped ads. Did someone say $100 CPMs? Paying for completed-view-only ads could show eCPMs of more than $200 in today's dollars.
Working our way up this list, the major networks will realize they run the risk of putting their produced content over the air for very little money (just what the delivery systems pay them, usually pennies per subscriber) when they should be getting these huge CPMs. They won't let that stand. So, what is there to do? To predict the future, history is usually the best guide. When the delivery systems and the networks didn't agree in the past, there's been a stand-off. But this time, it won't be just about money. This time, I believe it will be about ad-skipping technology. To address this, we first need to look at an oft-overlooked truth out there today.
First, 43.3 percent of all homes have DVRs and more than 50 percent skip ads. That means more than 20 percent of all TV ads are never being seen. You'd think the networks would account for this, but it's not that easy. Viewership is still measured very, very inaccurately. For example, even though Nielsen moved from diaries to a metered system, only 25,000 households are tracked using the meter to extrapolate 114,000,000 households' behavior. I'm not a stats guy, but with more than 300 cable networks, I'm pretty sure this doesn't provide statistically sound data for the long tail of TV. Also, TV ratings are sold on a Live+3 or Live+7 basis. This means Nielsen not only measures those watching the program live but also anyone who watches within the following three to seven days. Despite the fact that 50 percent of these viewers are skipping commercials, Nielsen still includes them in the ratings with the same weighting and value as those watching live. All of this will change with RTB. Advertisers will require some portion of their ads be seen and won't be willing to pay for skipped ads.
Then, watch for a fight. One scenario is the networks will tell the delivery systems they'll pull their channels if they don't get rid of ad-skipping technology. In this case, consumers will be stuck with a DVR that will let them record shows but not skip ads. That won't fly. After all, in the end, they are still boss. If this happens, something like a Pandora or Hulu model is most likely to emerge.
I'm personally interested and eager to see how all this plays out. Unlike online -- where there is way too much inventory to ever keep demand pricing at a level acceptable to publishers -- I believe RTB will drive CPMs higher when it comes to streaming radio, tablet-edition magazines, and TV. We'll get there, but the path isn't defined. There may be bumps along the way that will disable ad skipping. So if you're a TV watcher, hold on to that VCR. It might be the only hope you have to avoid unwanted TV ads in the future.
Jay Friedman is the COO of Goodway Group.
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