Home Analysis Advertising Three-quarters of GroupM’s U.S. clients will have tried addressable ads within a...

Three-quarters of GroupM’s U.S. clients will have tried addressable ads within a year

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Michael Bologna addressing the London audience at Future TV Advertising Forum

Summary of this story:

Approximately one-quarter of television advertising budget will be spent on addressable advertising within three years.

Most of the budget being made available for addressable campaigns comes from existing television advertisers looking for cost-effective incremental reach.

Around half of addressable advertisers are new to TV but they only account for 10-15% of addressable spend today.

“The ability to close the loop in television, on the back of this type of targeting, is what we have all been waiting for in television for a very long time.” — Michael Bologna, President, MODI Media.

In one campaign, web cookie data from the client (first-party data) was used in order to achieve the same level of targeting that the client uses in the digital domain – but on television.

Agencies have bought-in to the concept. “We love this; agencies love this. There are no barriers in terms of the strategic approach within agencies.”

Key benefits: Refined messaging, reduced waste and a higher return on investment for advertising campaigns when executed properly. 

$75, $80 or $100 cost per thousand for a select core target segment is not unreasonable if you compare it against the effective CPM of standard ad campaigns. In many cases advertisers will find those prices very efficient.

The smallest segment that MODI Media has helped anyone to target, so far, is 0.6% of the 42 million household-addressable enabled homes in the U.S.

“If your segment is much larger than 30% of the country and your product costs much less than $6 then the value of addressable messaging declines.”

 

 

Approximately one-quarter of television advertising budget will be spent on addressable advertising within three years. That is the prediction from Michael Bologna, President at MODI Media, the business unit within GroupM focused on the application of data and technology to television, and which has been executing addressable campaigns in the U.S. for the last 11 months. Speaking at Future TV Advertising Forum last week and focusing on the U.S. market, he also declared: “We expect 75% of our advertising clients within all five of our GroupM agencies to have at least explored this [addressable advertising] once by the end of 2015.”

Bologna revealed that he plans to spend several hundred million dollars on household level targeting next year on behalf of clients (in the U.S.) but this could be a conservative estimate. He listed a number of developments that would encourage even more spending (and which he is hopeful will be tackled during 2015). In summary they are: 

•    Agencies helping clients to get better at identifying their real core audience, moving beyond broad segments (like adults 25-54)
•    Agencies getting more experience dealing with platform operators (who have the ad tech to enable addressable advertising) rather than just with national broadcasters
•    Marketers accepting new forms of measurement other than Nielsen ratings (e.g. set-top box tuning data)
•    Platform operators aligning their data methodologies (e.g. audience segmentation) and reporting so that it becomes easier to measure results
•    Agencies becoming more experienced at analyzing multiple sources of post-campaign results and making sense of them in plain English for clients.

(You can read more about the hurdles for the uptake of household addressable advertising here.)

Bologna stressed that the concept under discussion is household level addressable television advertising, whether that is sometimes referred to as dynamic advertising insertion (DAI), addressable messaging or hyper-local advertising. It involves taking data, matching it against television subscriber files to understand who is living in a home, sending a TV commercial to that particular household or group of households, paying only for the delivery of those impressions, ignoring everyone else (in the television population) and then ‘closing the loop’ at the backend to determine that a household saw your ad and whether people in this household became customers. 

“This stuff is here and now, available and we are using it,” he declared, referring to the U.S. market where he operates. “It takes a bit of time and work to understand and use it, but we have seen a lot of success with addressable messaging.”

Most of the budget being made available for addressable campaigns comes from existing television advertisers, although if you count the number of advertisers, around half are new to the medium. “If you count the dollars, it is definitely weighted towards existing advertisers. Maybe 10-15% of addressable advertising is from new-to-TV advertisers [in dollar value]. The big television advertisers want a couple of extra points [Gross Ratings Points – the measure of reach and frequency] into their core target audience without the extra burden of buying all the waste.”

Household level addressable television advertising works and because it works the practical hurdles will be overcome. That was Bologna’s big message for the London audience, which represented brands, agencies, broadcasters, channel owners and platform operators from across Europe and North America. “On the back of each campaign we get reports in close-to-real-time that determine that the impressions were delivered at the right frequency and within the appropriate content to the households that we wanted. 

“We get conversion reports. When have we ever had true conversion in television? We are really beginning to close the loop and show our advertisers the direct impact that an addressable ad has on their business.” This direct impact can be determined whether the addressable ads are delivered alone or in conjunction with a wider campaign in order to provide incremental messaging.

Offering an example, Bologna explained how his team can take data from multiple sources to identify households that are in the market to buy three particular brands of luxury car, then send them a commercial for a fourth luxury marque, then see which households saw the ad and which of those households bought as a result. In the case of cars, customer interest can be tracked by visits to dealerships as well as actual sales.

In another campaign, set-top box tuning history was used to define households that had watched a past season of a particular show, or similar shows, so that a content owner could promote their latest programme to them. Reports then showed who saw the promotional ads and also who then watched the new programme (again, using set-top box tuning records). The result: 73% higher tune-in among targeted homes where the ad was seen.

“This stuff does work when it is done properly,” Bologna commented. “The ability to close the loop in television, on the back of this type of targeting, is what we have all been waiting for in television for a very long time.”

Bologna illustrated how first-party data is being used in targeting, using the example of credit card data matched against Pay TV subscriber files to see which of the 42 million U.S. homes currently covered by household-level addressable advertising technology platforms did not hold a particular brand of credit card. Then the target was narrowed to homes making over $200,000 a year with a credit score over 750. 

In the case of a casual dining advertiser, the MODI Media team actually used web cookie data from the client and therefore applied the same level of targeting that the client uses in the digital domain but on television. “That is one of the most exciting factors for agencies, being able to combine ‘analogue’ and digital advertising for the first time.”

In another example of how household addressable advertising has proved its worth over the last year, households that had purchased a specific brand of toothpaste in the last three months were targeted with ads from a rival toothpaste.

In terms of geographic targeting, U.S. advertisers now have a choice of 210 designated market areas (DMAs) which are each split into approximately 2,200 zones. You can target different ads to these zones and 70 million homes nationally can be targeted at least to this zone level today. 42 million homes can be household-targeted out of 114 million US television homes, meaning over one-third of the market is already household-addressable enabled.

Bologna emphasized that whatever practical hurdles there may be in scaling household addressable advertising, there are no barriers in terms of agency attitudes or ambitions. His presentation was titled, ‘What will ensure that agencies ‘buy-in’ to the DAI revolution’ and he made it plain that GroupM at least has completely bought-in to the concept. “We love this; agencies love this,” he declared. “There are no barriers in terms of the strategic approach within agencies.”

He confirmed that the market will be driven forwards because of the key benefits of household addressability: Refined messaging, reduced waste and a higher ROI for advertising campaigns when executed properly. “In order to prove the value of the targeted approach we do first have to expose the waste in national television,” he warned. 

CPM (cost per thousand impressions) is the currency that matters in the addressable marketplace but more precisely, effective cost per thousand (eCPM) is needed to properly compare the cost of household addressable ads with standard campaigns. An advertiser may be paying $25 CPM for a broad target segment of adults aged 25-54 but if they defined their true target audience more carefully the real cost might be $250, Bologna noted. 

“Therefore $75, $80 or $100 cost per thousand for a select [core target] segment is not unreasonable, and in many cases advertisers will find that very efficient. We have found that as we gently expose the waste in traditional advertising to our clients, based on the core hyper-segments that we have worked hard with them to create, the more they see the value in this.”

The smallest segment that MODI Media has helped anyone to target, so far, is 0.6% of the 42 million household-addressable enabled homes (i.e. approx. 250,000 homes). The CPM on that campaign was $750.

Despite all this, household addressable advertising is not suitable for everyone. In fact, Bologna’s team has already drawn up a rough formula for whether an advertiser should stick to mass-market messaging or use household targeting in the U.S. “If your segment is much more than 30% of the country and your product costs much less than $6 than the value of addressable messaging declines. 

“Beyond 30% [target segment] national television is by far the most effective and efficient way to get the message across. There are two-cent impressions out there within the best inventory. Not all waste is waste and we can afford a lot of waste there [at those prices]. The success of addressable campaigns depends heavily on how large or small your segment is.” 

You can read elsewhere how Richard Brooke, Media Operations and Strategy Director in Europe for Unilever, one of the world’s biggest sellers of fast moving consumer goods (FMCG), questioned the value of household addressable advertising at Future TV Advertising Forum. Bologna confirmed that in one-third of cases where MODI Media is advising on household addressable campaigns, the advice is that, based on the size of their segment and the cost of their product, addressable is not the right strategy for the client.

More reading

You can read about the long list of challenges facing agencies that want to make household-level addressable advertising part of their general offer to advertising clients here


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