By: Joe Lamagna
The age of 24/7 connectivity has gave way to some amazing technology advances. 10 years ago who would have thought you could stream full length movies on your iPhone, while riding the bus, or connect to Netflix with your PlayStation. With Millennials constantly using mobile devices or the internet to stream content they spend much less time watching traditional television. This change in the way we consume media has not only lead to falling ratings but has forced the world around us to change as well. Huge corporations who have historically invested billions in television ads are second guessing their strategies and testing out new ones.
The first thing you need to know is that television ads are typically purchased in two ways, upfronts and in the scatter market. The upfronts, as the name suggest is buying time at the beginning of the year so you can lock up the best times, generally for a good price. The scatter market runs as the year goes on you try and buy time – this is typically bought at a premium due to the lack of supply of time slots. The scatter market, often times, offers less desirable time slots as well. The sellers will offer attractive pricing in the upfronts season so they can lock up time slots and not have to worry about time going unsold.
The television ad market is usually broken up into two groups: broadcast and cable. For the last 3 years broadcast TV endured declines in the upfronts market, cable upfronts have declined for the past two consecutive years. Advertisers have pulled back their spending in the upfronts and started investing more in digital media. With ratings declining and the popularity of DVR, On Demand, and streaming increasing, television ads are not as effective as they once were. Advertisers saw this as an opportunity to reallocate some of their marketing dollars to digital media, where they could seemingly reach more people for less money.
Unfortunately, they quickly discovered flaws with their digital media strategy. Advertisers were unable to judge the viewability of their ads, and due to things like computerized “bots,” they couldn’t decipher between real and fake web traffic. Then Ad blocker apps started popping up and the advertisers were unable to reach as many viewers as they had hoped. The bottom line is that digital media is not providing the return on investment (ROI) that it was expected to provide.
This realization was causing advertisers to run back to television and try to hop into the scatter market, where they got burned by premiums up to 20%. In 2016, upfronts are projected to grow up to 5% from last year, because advertisers are not willing to risk getting burned in the scatter market again. A spokeswoman from Proctor and Gamble, which has increased their 2016 upfronts budget by 13%, said “…we see TV and digital not as an ‘either or’ but an ‘and.’”
So although they have not abandoned TV yet, major corporations are taking note of your choice of Netflix or TV and it has forced them to change the way they invest billions of marketing dollars.