If Content Remains King Of TV Advertising, Will Audience Or Performance Be Queen?

Dave Morgan

Founder & CEO

Originally posted on MediaPost

Fifteen years ago, the online ad industry was at a critical point.

It was just starting to rebuild from the bursting of the dot-com bubble two years earlier. It was fighting for legitimacy among measured media like print, radio and TV. And its product set was just beginning to come together, being largely rebuilt from successful elements of initial ascension in the mid- and late 1990s: ads bought and sold by content adjacency, audience targets and CPM pricing.

TV media companies who hope to build their futures on audience-targeted advertising had better be prepared to win in a world where it will be bought, sold and measured on performance.

But then the best-laid plans for the online ad industry to look like the print ad industry, from which much of it had been modeled, went terribly awry. Performance-based advertising, in the form of paid search and cost-per-click and cost-per-action banners, exploded on the market, led by companies like Google, Overture (later bought by Yahoo), advertising.com, and ValueClick. And those expecting that the future of online ads would be driven by precision targeting of data-defined, audience-based campaigns sold at premium CPMs learned a challenging truth: Marketers only buy data-driven audience-based ads as a proxy to what they really want — sales — and will ultimately only pay according to the results those ads can provably deliver.

From 2004 to 2008, online ad spend more than doubled, from $12 billion to $25 billion, but it wasn’t driven by the sale of premium-audience-targeted campaigns. Neither was it driven by content campaigns. The digital ad growth in the mid ‘00s was driven by performance advertising — campaigns primarily bought or sold on the basis of the measured performance they delivered. The industry hasn’t looked back since.

Today, two companies are dominating digital marketing and all its growth for precisely one reason: They outperform the rest of the market in delivering measurable ad results at scale.

Why should the TV industry care about this look back into the online ad industry’s history? Because we’ve seen this movie before, and it’s probably going to end the same way.

The television ad industry knows that big change is afoot. Ratings are declining, audiences are fragmenting, digital competition is fierce, and agencies and advertisers are pushing back hard on their CPM increases. Fortunately, however, TV companies have recognized that the future of their ad business will look a lot like digital’s, which is why many are working hard to develop digital-like, premium-priced, data-optimized ad products. It’s the right move, yet it may not be enough.

Marketers have been extremely willing to pay premium prices for ads placed within premium content when that content is scarce and when the audiences they reach are known and valuable, and no one ticks those boxes like TV. Conversely, however, marketers have only paid premiums for audience-targeted ads when those ads have proven to drive measurable performance: leads, conversions, sales, or other desired business outcomes. For most marketers, buying audiences is just a proxy for buying sales, and is priced accordingly.

Therefore, just as we’ve seen over the past 15 years in the digital ad marketplace, TV media companies who hope to build their futures on audience-targeted advertising had better be prepared to win in a world where it will be bought, sold and measured on performance. The TV ad market is in transition. Its future is going to look more like digital, and that means that king content’s queen will be performance, not audience.

What do you think?