Advertisers Are Spending More in Addressable TV, But Some Aren’t Convinced It’s Worth It

Many are struggling to figure out what it means for their brand

Spending in addressable is expected to hit $3.3 billion by next year. Alexei Vella
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Ask any media buyer, tech company or cable provider about addressable TV, and they’ll ask a question in return: How do you define it? Because while addressable TV simply means using data—rather than content—to buy audiences, the industry as a whole is still playing catch-up when it comes to the concept of serving different ads to different viewers watching the same programming. At least, parts of the industry are playing catch-up.

“Addressable is a term that was invented by the TV business to describe data,” says Scott Rosenberg, general manager of Roku’s platform. “You don’t hear digital people who sell digital media use that term because it’s just baked into the assumption that their media is targetable.”

Addressable TV has been hailed as a win-win-win that enables brands to better target consumers, networks to better monetize placement and consumers to receive ads they might actually want to watch. According to the Video Advertising Bureau, spending in addressable is expected to hit $3.3 billion by next year, up from $2.5 billion this year and $2.1 billion in 2017. Among advertisers already using addressable TV, 55% plan to increase their investment.

But, as 360i chief media officer Doug Rozen notes, “Is the juice worth the squeeze?”

Bridging the gap

Though media buyers say that linear TV still works for reaching mass audiences, a sizable number of viewers are being missed.

“If you think about television as a road, there are cracks in the road, and those cracks are audiences shifting to other screens or not even watching TV anymore,” says Mike Piner, svp of video and data-driven investments at MullenLowe’s MediaHub. “And over time, those cracks become bigger.”

The idea is that addressable TV can bridge those gaps, delivering targeted ads to audiences that were either being missed or were tuning out. And media companies have taken note of this potential. In March, Viacom acquired ad-supported streaming service Pluto TV for $340 million, giving the company access to Pluto’s 15 million users—half of whom are ages 18 to 34—and the data that comes with them. (John Halley, Viacom’s chief operating officer of ad sales, says he expects that viewership to grow to 20 million in the “near term.”) Just last week, telecom Altice USA announced the acquisition of the digital news company Cheddar, with advertising plans that include additional scale and local targeting through dynamic ad insertion.

Companies like Roku and Hulu, meanwhile, have already been using first-party data, which provides a direct line to their respective 27 million and 25 million monthly users—not to mention whatever data of their own that advertisers want to bring in.

Brands from CPG, auto, insurance and financial services companies have been among the most willing to embrace addressable advertising, says Doug Fleming, Hulu’s head of advanced TV. These brands have traditionally reached viewers through linear TV, and the irony, he says, is that 81% of current viewers are in the living room—where they’ve always been. So it’s not a matter of going where the viewers are but rather personalizing what you show them. “The phrase we use a lot is about choice and control, and it’s about putting the viewer first,” Fleming says of the appeal of addressable TV.

“I believe that [viewers] want messaging that is more relevant to them and their lifestyle and the emotional connection for that moment,” says Donna Speciale, WarnerMedia’s president of ad sales. “It’s all about relevancy in that moment.”

Hershey’s, for example, has begun buying TV audiences based on data from purchase- and affinity-based audience segments that are combined with individual identifiers from various linear and streaming providers.

This week, the brand’s marketers will begin pitching ideas for 2020 media-buying plans, and part of that process will be potentially restructuring the way it operates to better navigate the shifting world of TV. Vincent Rinaldi, Hershey’s head of addressable media and technology, says there’s so much overlap between linear and digital that it makes sense to have them work together.

“I think the challenge is more around our capabilities than it is our agencies and people,” he says. “We’ve almost built too many DSPs and not enough focus around how to solve planning and billing processes.”

Tuning in to addressable TV

As addressable TV gains traction among advertisers, ad-tech companies are also taking note. Just last month, OTT startup Tru Optik, which helps media buyers and sellers measure the reach and impact of campaigns, announced it raised $10 million in a funding round aimed at expanding its offerings in TV. (That same week, DataXu laid off dozens of staffers whose roles didn’t fit with the company’s new focus on the TV market.)

Other data companies are focused on building broad collaborations across industries in order to allow for better cross-campaign attribution. Last month, Fox, NBCUniversal and Viacom, along with FreeWheel and Accenture, announced plans for a marketplace for linear and long-form digital video content that beginning this fall will provide cross-publisher analytics such as pre- and post-campaign data. But it’s a bit of wheel reinvention. The platform, OpenAP 2.0, is essentially a relaunch of OpenAP, which debuted in 2017 and which Warner Media pulled out of last month.

TV manufacturers are also finding ways of partnering with media and advertising companies. For example, Inscape, a data-tracking company owned by Vizio, is spearheading a new consortium called Project OAR (Open Addressable Ready) that has already recruited nearly a dozen companies that will be tasked with setting standards for the future of addressable TV. By using Inscape’s technology, which automatically recognizes content displayed on a screen, OAR’s partners will be able to track viewing data across Vizio’s footprint, which will in turn be used by networks and agencies for both measurement and targeting. OAR is also in talks with other TV manufacturers, which could broaden the scale far beyond Vizio’s customer base.

“We sell gasoline,” says Jodie McAfee, svp of sales and marketing at Inscape. “You need gas to make your vehicle go. So take our gas and put it in a Porsche. … Take our gas and put it in a Yugo. Everyone is working off the same gas.”

Some companies are trying a different tack and incorporating their full stack. For example, AT&T-owned Xandr recently began cross-targeting ads based on the wireless provider’s massive data set for networks like Turner to reach audiences that aren’t accessible by traditional linear channels. Meanwhile, 4INFO is taking a more democratic approach. The identity-mapping platform recently inked a deal with TiVo to map a household’s digital devices to its set-top box, which can then be combined with other data to create advertising segments or improve viewership measurement.

“That is good in theory, but nothing is really changing in reality and practice,” says Marissa Jimenez, president of Modi Media. “It’s almost adding an additional level of complexity because they’re still serving as a middleman that still has to communicate to each one individually.”

Growing pains

Addressable TV is not without its limitations, at least for now. Buyers say OTT providers and networks selling data-driven advertising are in some ways becoming the new version of walled gardens. Just like Google and Facebook have prevented marketers from taking data out of their platforms, TV advertisers are beginning to do the same in order to protect their competitive advantage.

“While everyone is creating ways to measure their performance, we don’t want to just look at one channel and one partner,” says Shelby Saville, chief investment officer, Spark Foundry. “We want to look at a campaign as a whole. A consumer doesn’t just consume from one partner.”

One way to solve that, according to Rinaldi, could be to create a “data cleanse room” where brands can see media and purchase identifiers to understand how media is driving purchases in a way that doesn’t threaten various companies’ proprietary data sets.

Advertisers have also expressed frustration with frequency issues on both streaming and linear programming, which have a history of showing the same ad too many times to the same viewers. But that’s starting to change. Just last week, Hulu announced plans to cap ad frequency to four times per viewer per day.

Pricing also remains an issue. Buyers say CPMs are still far too expensive to be attractive to some advertisers. Analysts say brands with a target audience of between 5% and 25% of all TV viewers might be interested in addressable, but anything more than that is likely too pricey. They say any broader of a buy might be a waste.

Vivian Chang, senior director of marketing at Plated, says the company has been “dabbling” in addressable with about 5% and 10% of its video budget. She says CPMs for traditional remnant cable can be 75% cheaper than online video platforms like YouTube. CPMs for connected TV campaigns, however, can be 130% higher, while addressable TV can range from 200% to 300% the price.

“It’s hard to get an audience that’s going to convert that many times better just because you’ve reached them though addressable TV or connected TVs versus more standard inventories,” she says. “That’s something I don’t hear recognized and talked about more often.”

This story first appeared in the May 6, 2019, issue of Adweek magazine. Click here to subscribe.

@martyswant Marty Swant is a former technology staff writer for Adweek.