A Defense of Old Fashioned Television as an Advertising Medium

Originally posted on New York Business Journal

You hear it a lot, including from this very website: Advertisers are slowly but steadily moving their message and money from television to the Internet, and big reason why is high-quality online video.

But at least a few investors and entrepreneurs are making a rather large bet against the trend, and Dave Morgan, one of the leaders in that movement, laid out his case at a discussion this morning in New York City hosted by ad services company Mediaocean.

“The idea that digital video subsumes TV and TV budgets isn’t practical,” said Morgan, who founded Simulmedia, an ad-tech firm with software that helps companies target specific demographics and other groups in their television campaigns. Backed by Union Square Ventures, Avalon Ventures and others, Simulmedia say their data can give marketers the tight targeting promised by online ads without sacrificing the scale and impact of TV.

In short, Morgan argued, coastal executives overestimate the pace of entertainment’s digital shift. For instance, only 15 percent of his hometown of Clearfield, Pa., has broadband Internet access and people there still watch six to seven hours a day of regular TV there, including commercials.

Furthermore, he says, even in modern, tech-enabled cities, online video viewing is still a niche phenomenon, with 20 percent of consumers viewing 90 percent of the content. A McDonald’s executive told him there’s no choice but to keep spending on TV; the fast-food chain sees a 3 percent market share decline in local markets if they cut back their television budget by 10 percent in a given week.

“Judge Judy is going to accumulate twice as many audience [impressions] in one half hour as YouTube will all day in all of America,” Morgan says.

While the Interactive Advertising Bureau and others say we’re closing in on the day when ad budgets tip over into a digital-first mindset, altering the way ads are bought and sold, Morgan says that won’t even come close to happening in TV until broadband access is nearly universal. The online ad world has created an industry of real-time bidding platforms and dynamic pricing based on what audiences and inventory are available, but TV spots still mostly sell on the old upfront model. As long as that still works, he said, it’s proof TV is still in hot demand.

“The reason TV hasn’t changed is that it’s never been so broken it had to be fixed,” he said, but that will change as the TV industry adopts digital audience-targeting practices. (A self-serving prediction for his own company, which boasts it’s got the data and software to pinpoint the women who watch ESPN, for instance, or the men who watch Lifetime, rather than relying on blunt generalities about audience.)

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