The rise of Netflix, YouTube and Spotify makes it easy to assume that everything sprinkled with internet fairy dust is better than what came before. It seems to extend to advertising -- in countries like the U.K. and the U.S., spending on digital ads will outpace television this year, and globally the shift is not far off.
But the dinosaur that is television has a big weapon to fight back.
Cable companies like Comcast and European pay-TV leader Sky Plc are deploying new set-top box technology that allows web-style ad targeting by age, demographics, or interests. These should be a big topic of conversation as the world’s biggest marketers, ad agencies, and tech players hobnob in Cannes for their annual meeting this week.
It’s a change from recent years when Facebook, Snapchat, and Google attracted all the attention. Television still has a grip on viewers that looks hard to shake.
While U.S. and U.K. data show 18 to 24 year olds watch fewer hours of live TV than a few years ago, the total amount watched seems to have stabilized at a high level. And some of the weakness in TV viewing may stem from difficulties old-fashioned ratings systems have in capturing online viewing.
But there's a bigger factor at work. Now that internet advertising is about 10 years old, the novelty has worn off and the problems with the medium have come to light. Big brands such as McDonald's and Bayer rightly have concerns over the visibility and reliability of online advertising even as they pour billions into their digital budgets.
Marketers could waste more than $50 billion a year by 2025 on web ads that were never seen by human beings, according to the World Federation of Advertisers. Using “bots” and other techniques, fraudsters can fake page views and clicks, conning advertisers into paying for nonexistent impressions and sapping the effectiveness of campaigns.
The growing popularity of ad blocking software limits the reach of online promotions. Between porn pop-ups, gambling pitches, and annoying auto-play video ads, the web nowadays can feel like a cesspool. (Even worse, a significant number of these ads actually infect devices with spyware and malware).
The consequence: some 15 percent of web surfers in U.S., 21 percent in Britain, and 25 percent in Germany have installed ad blockers, and the phenomenon is leaching into mobiles too.
None of this means that advertisers are yanking their money from online marketing. But they are recognizing that there is still a lot to like about TV ads. They remain the best way for companies to build up a brand's identity and reach a mass audience quickly and easily at a reasonable cost.
One American Express executive recently told Ad Age that when it runs a heavy TV campaign it sees a lift in sales and brand awareness within a week, and it would take two weeks of online campaigns to achieve the same thing. Ironically technology companies know this -- Facebook, Netflix, and Airbnb are pouring money into TV ads.
So while the cable companies have a lot to be complacent about, in this area, they're not. Their new boxes produce targeted ads by mining offline databases of credit card and shopping habits, as well as location data from people’s smartphones. Such “smart” promotions promise the precision available from Google and Facebook, but without the problems of fraud and ad blocking -- the technology to prevent ads from appearing simply doesn't work on television.
WPP’s Group M, the world’s biggest buyer of ad space, is expecting interest to pick up. Its Modi Media unit that specializes in targeting TV ads believes that about 60 million U.S. households out of 115 million will have new set-top boxes that can handle these campaigns in the next year, up from 42 million now. Sky's Ad Smart program will soon expand to Italy and Germany next year.
Don’t count TV out just yet.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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