March 27, 2017
One of the key concepts I learned as a geology major at Williams College comes in very handy when analyzing the changes in the TV advertising business over the past few years. Plate tectonics describes giant slabs of the earth's crust that contain the continents and are propelled by the upwelling of molten layers deep in the earth's core. As plate boundaries grind against each other or are pulled apart by these forces, the mega-structures of the earth are formed: mountain ranges, undersea trenches and ocean basins. The San Andreas Fault is probably the best known example of a plate boundary. For decades, or even centuries, there is no apparent movement but once the massive forces can no longer be contained, the plates can move a dramatic distance within seconds, such as the 1989 Loma Prieta quake which exhibited a 7 foot shift in the position of two plates.
What the heck does this have to do with TV advertising? Just as this plate movement builds up tremendous pressures, so have the forces of technology, advertiser demands for better targeting, and the drift of dollars away from TV to digital put pressure on the TV networks. But just as the plates initially resist moving, there has been little movement in TV advertising: The upfronts last year recovered from the down years of 2014 to 2016, there has been little progress in addressable TV, and Nielsen still reigns as the currency of the market. We've seen the TV business resist these technology-driven pressures for at least a decade, so the question is whether the business will gradually change over the next five to 10 years, or will a San Andreas style quake transform the industry in a matter of months?
Major plate shifts are typically presaged by tremors. And we have seen such tremors in the TV business: In 2015, networks including NBCU, Viacom, and Turner announced that they built databases to provide deeper viewer information than simply age and gender. Last year, a slightly larger tremor occurred when several of the networks announced they would pilot ad buys based on audience definitions beyond Nielsen age/gender ratings.
This year, NBCU has announced it will sell $1 billion worth of advertising during the TV Upfronts based on these more detailed audience guarantees. Then Fox, Viacom, Turner announced that they are collaborating on a system called OpenAP, a platform enabling the advertiser to buy the same audience across all three networks, rather than using separate datasets on each network.
I'm not sure which is the larger foreshock: NBCU announcing it will sell what is likely to be more than 10% of the broadcast network upfront revenue based on audience guarantees, or three fierce competitors that typically aggressively duel over whose audience is higher quality cooperating on a single audience platform.
But the increasing frequency and intensity of these foreshocks surely indicates the accumulated stresses underneath the TV ad industry can no longer be contained by the countervailing force of inertia. Just as with earthquake detection, the exact timing and magnitude of the seismic event can't be predicted, but marketers should prepare ahead by shoring up the structure of their TV planning with better audience analysis and data management skills.