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Are Online Video Ads Eating the TV Advertising Marketplace?

Are Online Video Ads Eating the TV Advertising Marketplace-.png

Picture this: It's 7 pm on a Saturday night in 1990. A family of four is just settling down to watch their favorite game show. It's the highlight of the weekend's viewing and a big draw for advertising companies hoping to cash in on large TV audiences. The show may be scheduled to last one hour, but in fact, its running duration will be closer to between 42 to 48 minutes. The rest is taken up by ad breaks.

Fast forward to the present day where digital streaming services have taken their place alongside traditional TV. The digital audience is growing in size and the ad space has changed dramatically as a result. Traditional TV ads are still present, but they have been joined by a wealth of digital ads that the viewer can choose to watch or skip or which the channel or service can set for compulsory viewing.

With the rise of digital media and the subsequent changes in ad distribution, is there a threat to TV advertising as we know it, or is there enough room for both formats to coexist in harmony?

The Growing Appeal of Online Video Ads

In a recent study released by Brightroll, ad agencies were asked which portion of their RFPs included a video ad component. In 2011, 25.6% responded in the affirmative. In 2014, this number increased to 48.3%. That is a growth of 88.6% in just three years.

These findings also correlate with research carried out by Forrester about online advertising. The report showed that spending on video advertising is expected to grow by 21% year-on-year.

There are many reasons why advertisers are starting to shift budgets towards online video ads. Perhaps the most compelling is linked to the viewing habits of millennials.

18 to 34-year-olds are starting to move away from traditional TV and opting for online video services such as YouTube and Netflix. This shift has caused advertisers to keep pace with the younger demographics and take ads where they are likely to spend the most time at.

Advances in technology have also influenced video capabilities. With high-speed internet connections, advanced video techniques, better image and sound quality, and more web-enabled devices, online videos are more accessible than ever before.

The Contributing Factors to Online Video Ads' Success

According to a study by the Interactive Advertising Bureau, 48% of online video viewers in 2016 said they were more likely to remember online video ads, compared to 27% a year ago.

What are the reasons for this digital shift?

Digital Presents Better ROI

One of the biggest contributing factors in the rise of online advertising is the return on investment. A digital ad costs significantly less than a TV ad, but if distributed across the right channels, could have much more reach and impact.

A TV ad is usually confined to the channels in which a slot has been secured. Online video ads, on the other hand, can be shared across a wide range of digital media channels, including social media and websites.

Specific Targeting

Unlike TV advertising, which broadcasts the same ad to the same audience at the same time, digital ads enable advertisers to personalize the experience by delivering ads based on individual behavior, characteristics, and interests. This is all made possible by data insights that help marketers make more informed choices when producing and distributing ads.

Tracking Capabilities

In the same way that marketers can use data to help create ad campaigns, you can also use data to track and analyze actions your target audience makes. TV advertising offers some analytics capabilities but has limited scope compared to its digital counterpart.

Is It the Beginning of the End for TV Advertising?

Today's consumers appreciate watching their favorite programs without being bombarded with interruptions every 10 minutes. The surge in viewing on ad-free platforms such as Netflix, Amazon Prime and Hulu prove this. In 2015, Netflix alone accounted for approximately half of the 3% overall decline in TV viewing in the U.S.

TV executives are taking note of the downturn in traditional advertising by reducing their ad frequency in a bid to lure people back to TV. TNT and truTV have reduced their ad frequency to a total of 10 minutes of ads during an hour's worth of programming. Viacom has reduced prime time commercials from 18 minutes per hour to 14.

While reducing the commercial load is good for viewers, it's a challenge for advertisers looking to get the best return on your advertising dollar. With gross rating points shrinking due to the decline in ratings, the price of TV advertising gets driven up higher.

However, TV hasn't quite had its day just yet. Innovations such as the recently announced OpenAP will allow advertisers to target subsets of consumers more accurately than ever before using segmented data. This data helps advertisers find your audiences, reaggregate them and perform more accurate and meaningful measurement of your ad campaigns.

Technology is also driving the survival of TV. Today's living room consists of TV, laptop, tablet and mobile phone. When viewers need to leave home in the middle of a broadcast TV show they can simply pick up where they left off on their mobile phone.

Also, one in 3 people in the U.S. today own a connected TV, and that figure is likely to grow exponentially as more connected devices are released. It is essential that advertisers look to capitalize on these advanced distribution technologies and embrace a multi-channel approach to get the best returns on your marketing efforts.

TV and Online Video: Better Together?

As we are already starting to witness, it is data and technology that hold the future of advertising. Online videos are vastly changing the way people consume ads, and with access to huge stores of valuable data, advertisers can target consumers at a significantly granular level.

Technology is transforming marketing, and brands are continually striving to find the perfect marketing mix. As advertising naturally goes where the audience goes, TV advertising is starting to follow, creating a multi-channel marketing era that offers new possibilities to marketers.

This new era perfectly combines the traditional and effective methods of the 20th century with the capabilities of 21st-century digital advertising. What's more, multi-channel analytics help to make the decision-making scenario for advertising executives that much easier.

In addition, advertisers can further optimize TV ads by showing repurposed ads online across streaming and social channels. In their successful "Life Comes Next" ad campaign, financial company John Hancock integrated online, social media and TV ads encouraging viewers to visit their website to find out what happened next in their campaign story. Their integrated approach not only encouraged viewers to engage online with their brand but also helped them to capitalize on broadcast airtime.

While online video ads may not completely replace TV advertising just yet, it is certainly a powerful ally. In a multi-channel era where data, services, and devices govern how ads are produced, targeted and distributed, it is the cross-channel campaigns that will capture hearts and minds both offline and online.

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