Addressable advertising may not be the best use of TV ad dollars – yet

Addressable TV promises advanced segmentation, but to the inevitable detriment of scale. Zenith’s Natasha Pelly explores why addressable advertising may not be the best use of your TV dollars ... for now, at least.

Addressable TV has hit the headlines once again in Australia as Network Ten announced its addressable offering. But amidst an increasingly complex array of terminology and acronyms – ATV, PTV, OTT, CTV, addressable, linear addressable, VOD, SVOD, BVOD – we often struggle to understand what’s on offer, not to mention what we actually want.

Over the past couple of years, the Australian TV networks have been developing their ability to target more niche, richer audience segments via their online platforms, data partnerships, and technological investment. Though some of this addressable content is live streamed, it is important to understand that this technology renders the TV content addressable, not the TV itself.

This isn’t to say that such offerings aren’t a welcome addition to the marketing arsenal – on the contrary, they represent a promising step in the right direction. However, the present offering doesn’t really deliver on the promise of ‘the best of TV and digital combined’.

The ultimate prize (or not, depending on your point of view) is linear addressable TV: a TV ad shown on a TV screen to TV-sized audiences, but targeted with the precision of digital advertising. In other words, accurate targeting that still builds scale.

Several technical obstacles stand in the way of Australia achieving this – namely the relatively low (globally speaking) level of penetration of IPTVs and TVs with inbuilt set top boxes (such as Foxtel and Fetch). Very simply put, in order to serve addressable ads to the entire population during a live, linear broadcast, all devices must be connected to something that can serve the ads addressably.

Some may well argue that the linear addressable vs addressable content ‘semantics piece’ will become moot, as the disappearance of linear TV audiences renders the conventional understanding of ‘TV’ obsolete. At some point in the future, this will almost certainly be the case and it’s important we continue to transition our approach planning and implementation to a ‘screen’ perspective. That said, as long as linear TV continues to reach 78% of people every week, it’s not going to become obsolete. Until that happens, we still need to maintain a clear understanding of the scale, reach, and targeting capabilities of linear TV versus online platforms.

But if linear addressable TV were possible in Australia, would we even want it?

For advertisers, the benefits of moving towards addressability are, at first glance, very appealing. Precision targeting would bring ‘wastage’ down to nil. Increased relevance would provoke higher engagement and conversion. Household-level frequency capping would avoid potentially brand-damaging levels of exposure. And advertisers without smaller budgets could benefit from a lower barrier to entry.

However, for Ehrenberg-Bass adherents and others, the rationale for adopting linear addressable TV remains up for debate. Indeed, many have questioned the wisdom of using TV – a tool primed for mass reach – in such a targeted way. As Nev Hasan put it after a Think TV event in late 2018: “I’ve been in meetings and […] you’re like ‘Great. We’re reaching four people. Wow. What a great campaign that is.’” Though there may well be several categories for which this does not ring true, we need to think about it as part of the addressable TV conversation.

The arrival of Virtual Australia (VOZ) has the potential to change this conversation in a positive way. The ability to measure the impact that greater targeting capabilities on BVOD platforms has on linear reach will finally provide us with empirical evidence of the value of addressability in its current form.

Until VOZ comes to fruition though, advertisers should be optimistic, but cautiously so. Addressability at scale is still an elusive creature.

Natasha Pelly is senior investment analyst at Zenith


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