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Addressable Television: The Holy Grail of Personalization

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Addressable television advertising refers to video ads that are targeted to the household and sometimes to the individual viewer. TV viewers don’t notice anything different while watching, but some of the ads they see have been automatically selected based on what data content providers or advertisers know about them. That could mean ads selected based on the type of fast food they enjoy, the ages of the household inhabitants, or the type of car they’re shopping for. Using audience data, ad networks match campaign goals with available viewers, delivering tailored ad breaks to any connected TVs or viewing devices. Addressable ads can be served in live or on-demand programming, and they can even be served in videos people download to their devices for offline viewing.

According to the most recent numbers available from the Interactive Advertising Bureau (IAB), there are 64 million households in the U.S. that are capable of seeing addressable advertising. However, that’s 2018 data. The IAB is working on an update for 2019 and expects to publish a revised estimate that’s north of 70 million shortly after this article goes to print.

Addressable is still a new area, and the standards that will bring it into the future haven’t been completed. As an industry body representing ad buyers and sellers, the IAB’s role is to help create those standards and ensure the smooth delivery of addressable ads. It’s not the only body working on it, as Project OAR, spearheaded by Vizio, is working on bringing addressable to linear broadcast, but more on that in a minute. The IAB would like to see a friction-free ad-buying process, in which ads are VAST (Video Ad Serving Template)-enabled and measured in an open framework. It’s a conversation that’s been taking place for a while, and it isn’t finished yet.

For advertisers, an addressable ad is a more effective ad. Buyers can target suitable households, delivering their messages to those more likely to be receptive. They can better plan frequency management, so their ads repeat enough times to get the message across, but not so much that they annoy customers and drive them away. They can develop multiple creatives for the same campaign, targeting them where they’re likely to drive results.

For many campaigns, addressable ads are an improvement over the broad reach of buying TV by the program or the daypart, but the area comes with its challenges. One is verification: Buyers typically buy the household, not the individual viewer. They can combine household metrics with program data to try to get in front of the parent who makes the car-buying decision or the preteen who is interested in animated movies, but they can never be sure they’re reaching the right individual. Mobile video offers more precise targeting, but TV offers greater reach. And reach is another concern. TV ad buyers want to get their message in front of a large national audience, but sectioning off that viewership with advanced targeting makes reach harder to achieve. It’s only recently that addressable has been able to serve a big enough audience to attract the largest consumer packaged goods advertisers. The networks, meanwhile, are worried that selling addressable ads creates remnant inventory that needs to be sold programmatically, perhaps at lower rates. So far, this hasn’t been the case, as strong demand has kept rates high.

What Consumers Want

Advertisers are bullish on the new level of targeting that IP-delivered video makes possible, but consumers are definitely on the fence. As the previous year’s tech headlines show, consumers are just waking up to the fact that they’ve given away an awful lot of personal data, and all that data has been collected and sold. Claims of anonymity have been cast in doubt by articles showing that it’s possible to determine identities from anonymous data: Journalists have shown that the anonymized data used by advertisers is easy to decode, revealing the actual people behind it. Even many in the ad industry don’t trust the industry to respect privacy, and some are calling for legislation. That includes the IAB.

“Addressable TV is a powerful new digital channel with great potential to help both viewers and businesses. IAB believes that the growth of this media channel—and others— requires strong national data privacy legislation and commitment to responsible use of data,” says Dave Grimaldi, EVP of public policy for the IAB. “Addressable TV has the opportunity to become an important part of the digital economy—driving jobs and the larger U.S. economy—and we need to make sure that transparency and consent are a cornerstone of its proposition.”

So as lawmakers feel the heat to pass legislation protecting consumer privacy, it’s worth asking if addressable advertising could be halted before it has a chance to take off.

One executive who doesn’t see the worst coming to pass is Sean Doherty Jr. (right), co-founder and SVP of operations for video distribution network Wurl. He’s seen how terms like “addressable” and “targeted” take on a negative connotation in the media, which is understandable given that massive data breaches seem to make the news weekly. The solution for addressable TV, he believes, is combining proper handling of consumer data with more general targeting. That would benefit consumers, offer advertisers the focused results they want, and lead to a more engaging experience for everyone. As for legislation, while it might impact addressable TV, he doesn’t see it eliminating the area.

“While legislation may slow down the growth of addressable, I do not believe it will ever cease to exist,” Doherty says. “There is always more we can do to protect users in terms of privacy, but a key best practice that the ad community should be acting on more is transparency. We practice transparency with all players and customers because this benefits the entire ecosystem. In order to allow consumers to feel comfortable with the growth and integration of addressable services, education of the consumer must also occur—making sure they understand what information of theirs is being collected, where it’s going, how it’s used, and who is storing it. There is always more we can be doing to safeguard consumer data, but right now in this time of massive growth we must expel the myths and provide transparency between all parties so both the advertisers and viewers can benefit.”

Anyone spending time at advertising conferences has heard vendors declaim that consumers prefer targeted ads because those ads are more relevant to them. Consumers are less likely to see ads for things they’d never buy, so they’re more likely to enjoy viewing commercials, the idea goes. But is this really true? The IAB says yes. The organization ran a study in 2018 specifically looking at how people thought about the ads in ad-supported OTT video, but for anyone trying to make the case that people enjoy targeted ads, the data is less than convincing. When presented with the statement “Some ads can be useful or enjoyable,” 50% of ad-supported video viewers agreed, 37% of subscription video viewers agreed, and only 24% of broadcast TV viewers agreed. Also, 63% of ad-supported video viewers said they didn’t mind seeing ads if they weren’t paying anything. If that’s the only data on the subject, it doesn’t make much of a case that people enjoy targeted ads. After all, asking people if “some ads can be useful or enjoyable” is a low bar.

Challenges to the addressable space include how households are targeted (such as using an IP address or third-party data) and how scalable the platforms are, says Scott Worthem (right), SVP of strategic partnerships at Comscore. For scalablity, advertisers look at how many ads they can run on a given platform per hour or per day and how reliable the technology is that serves the ads. Comscore’s role in the area is providing third-party measurement. That gives credibility to the sell-side and proves consistency to the buy-side.

Another challenge to the nascent area is fraud. All online advertising is a target for fraud, but addressable TV ads with their premium prices are an especially enticing target. Addressable ads sell at two times plus a premium over standard TV rates, notes Worthem. The closed nature of TV ad delivery offers some protection, says Doherty. Targeted TV ads play on closed platforms, unlike browser-based video ads, which makes fraud more difficult. Standards can’t come too soon, though, as standardization and measurement are key tools needed to fight fraud.

“There is a new platform in the free ad-supported space coming out every month in the U.S. alone,” Doherty says. “This practice is brand new and has caused the market to evolve rapidly. Advertisers, with good reasons, remain cautious with all these new platforms, but that caution leads to issues for video producers and these new services getting quality fill at good fill rates. Viewers are migrating faster than advertisers can keep up with, but as advertisers are starting to familiarize themselves with the space and better their practices and services, the possibility and probability of fraud will become even lower.”

Addressable Changes the Funnel

Thanks to the speed that viewers are adopting connected TV viewing, the nature of TV advertising is changing, believes Brett Hurwitz (right), advanced TV business lead for Verizon Media. TV was and still is the ultimate upper-funnel medium, the place where giant properties that want to get the word out to as many people as possible—such as this weekend’s Hollywood blockbuster—buy spots. It’s for properties that want vast reach and aren’t worried about targeting.

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