By Mary Kay Evans, Chief Marketing Officer
Despite rumors of its impending doom, traditional television advertising isn't going anywhere, anytime soon. The market for broadcast advertising today in the United States alone is an enormous $70 billion, whereas advertising on premium OTT—that is, live events and episodic shows from major broadcasters—is currently worth approximately $4 billion. Yes, the monetization of OTT is growing rapidly, but it's still far from dominant.
Rather than focusing on how to protect their traditional ad revenue from transitioning to OTT, forward-looking broadcasters and content owners should be thinking about what OTT can add to their revenue streams. OTT technology is evolving, and there is plenty of room for innovators to foster growth in new and interesting ways. The key is to embrace strategies for programmatic advertising and mobile optimization that enhance the consumer experience while also increasing the bottom line. For media companies that move nimbly and quickly, the future of monetization with OTT will be bright.
The OTT world is filled with so much user data, that it is possible to create a personalized experience for every viewer on every device. The question is how quickly agencies, broadcasters and other players in the ecosystem will embrace this opportunity.
Traditional television advertising still works essentially the same way it did when I last worked in an adjacent industry 20 years ago. Back then, agencies would call their major brand clients and ask them what their budget was and who they wanted to reach. They'd match that data with the Nielsen TV Ratings. If they wanted to reach 40-year-old women who lived on the West Coast, they'd find a show for them, such as "Frasier."
The problem with Nielsen's formula is that you don't really know who's watching a given television show at any given moment. They measure audience in very broad terms: They can tell you how many people were watching and in which major market, such as New York, Chicago or Los Angeles, but that's as specific as they can get.
Programmatic advertising is the opposite of that. It lets advertisers target consumers extremely narrowly, making the most of OTT's audiences by serving ads that are hyper-relevant to them. If an advertiser wants to reach a very specific audience—for instance, "women in their forties with two children who regularly order groceries online"—programmatic technology can find viewers with that precise profile and serve a highly relevant ad only to them.
This personalized strategy has been shown to boost conversions, meaning that a small but specific OTT audience can actually be more valuable than a broad one. A targeted ad shown to a few thousand people could be more profitable than a cable ad shown to millions. For media companies used to older ways of doing things, that's an enormous paradigm shift—but one that will yield enormous ROI in the future.
Broadcasters can't afford to ignore mobile video. Millennials and Gen Z are watching an enormous amount of premium content on mobile devices. Even if the family is gathered together in the living room, not everyone is watching the TV—they're looking at their tablets and mobile phones as well. A company that doesn't optimize its content and its advertising for this experience is missing out.
For mobile viewers, there's nothing worse than streaming an episode of a favorite show when an ad comes on that is distorted or choppy. Or there isn't an ad at all—just a blank screen. Major League Baseball, for example, has over a hundred games a week and they don't sell all the ad spots they have available. These gaps are a big missed monetization opportunity for media companies and advertisers alike.
Mobile devices are also key to the future of media monetization because of the useful consumer data they yield. While staying within accepted privacy parameters, advertisers can use data to serve individualized, interactive ads that multiply the impact of programmatic targeting. For instance, a viewer with many recent Google searches for outdoor gear might see an ad for a Patagonia jacket that's on sale, with the ability to click on the ad and be taken to the site to shop for the jacket in their favorite color. The marriage of mobile video and programmatic ads can be extremely powerful and profitable when managed correctly.
Of course, that "managed correctly" is key. Programmatic advertising is experiencing some growing pains—for example, companies that put their ads on a programmatic exchange don't know what content they'll be lined up against, and whether that content will be in line with their branding. Let's say you're selling candy, you don't want your ads placed near content about the health risks associated with sugar consumption. However, the promise of programmatic is enormous. While it's not there yet, programmatic will inevitably remake the entire advertising industry. Forward-thinking media companies would be wise to start prioritizing programmatic ad strategies to maximize monetization now.