Advertising is an investment: an investment that organisations make into their future success, to grow their business and secure their future. And those organisations, just like any other investor, must have a thorough understanding of how the market – and their investments – will fluctuate, in order to understand the eventual value delivered.
That’s why we at ECI Media Management we release our annual Inflation Report in Q1 every year, with an update in Q3. Our experts analyse data drawn from our global network of offices, cross-referencing it with industry sources in order to make the most accurate forecasts possible. We provide media inflation predictions for seven media channels – TV, Digital Display, Digital Video, Newspapers, Magazines, OOH and Radio, at a global and regional level as well as for 61 countries across North America, Latin America, Europe, Africa, the Middle East, Asia and Oceania. As media inflation is intrinsically linked to global economies and events, and developing technologies, our reports provide the context that is so critical for brands making important advertising decisions.
Our 2020 inflation report, released earlier this month, revealed the key finding that, while global media inflation in 2020 will remain largely consistent with 2019 figures, video media will experience a significant increase in inflation this year. TV will reach 7.1% and Digital Video will increase to 6.7%.
What’s behind this increased inflation? Given the technological and media context, it doesn’t really come as a surprise. Of course, 2020 is set to be a year of sporting and political drama, with the Olympics, the UEFA European Championships and the US presidential election, to name just a few key events taking place at the start of the new decade. Major events of this nature always inflate TV pricing but, more fundamentally, audiences are fragmenting and ad dollars are following tend to consumer eyeballs to digital video, particularly the growing amount of premium content that digital vendors are producing. As a result, TV vendors have fewer viewers, but increase their prices to maintain advertising revenues.
Despite rising costs, TV remains the best way to deliver mass, quality audiences. Digital inventory is of course plentiful, but it is of varying quality and is susceptible to ad blocking and data privacy laws. The decline of the cookie will exacerbate advertisers’ difficulties with digital advertising, forcing them to rethink how they reach audiences with relevant advertising. We believe that in the medium term this could herald a golden era for digital advertising, with a focus on high quality opportunities such as contextual marketing. In the meantime, TV offers advertisers a brand safe, brand appropriate way to reach quality audiences, build their brands and, with the advent of addressability technology such as Sky’s AdSmart, target specific audiences.
It’s imperative that today’s advertisers take advantage of and respond to the changing media and global landscape in order to drive the highest possible value from their investments. In a context of rising media prices, we at ECI Media Management empower our clients to make the right investments by providing forensic analysis of their media activity, and actionable insights so they can successfully navigate the complex digital market and maximise TV effectiveness. The ultimate goal is to drive higher media value, and media-led impact on business performance.
You can read the ECI Media Management Inflation 2020 report here.
Advertising without digital is like transport without engines. Yes it’s possible and yes there is something quite charming about it, but it’s old-fashioned and less efficient: once you’ve tasted modernity, you can’t go back. Digital advertising has brought us capabilities beyond the 20th century marketer’s dreams: individual targeting based on behaviour and preferences, as well as cross-device tracking, programmatic buying and real-time optimisation.
Much of that was made possible by the humble cookie, but after 25 years its very existence is under threat. Indeed, tracking online activity is a house of cards that has been slowly but steadily collapsing over the last few years thanks to ad blocking, browsers blocking cookies, the rise of walled gardens and cookie-free environments such as apps, connected TVs and the Facebook stack, and privacy regulations. But what does that mean for advertising? In truth, no one really knows. Should marketers be quaking in their boots? Will programmatic die along with the cookie? Is the cookie even dying? In all the uncertainty, we can be sure of one thing: digital advertising will change and the successful marketer will be the one who adapts.
Cookies can still be used to track and control reach and frequency in Google’s Chrome browser, which still has a majority market share in many countries, although its key competitors – notably Firefox and Apple’s Safari – have smart cookie-blocking technologies activated by default. This means that all browsers except Chrome are a black hole for measuring reach and frequency based on cookie data. Furthermore, Google is moving towards an opt-in version of cookie blocking, making the future of cookie-based tracking precarious.
One solution for ensuring that reach, frequency and frequency capping are still tracked effectively is the use of audience verification services, for example Nielsen DAR and ComScore vCE. These services validate delivery, reach and frequency for real human audiences with much less reliance on cookies. However, very few advertisers outside the US invest in these products – we expect this to change as the cookie continues to decline.
Targeting is another area that will be dramatically affected by the change in the tracking landscape – and nowhere is this truer than in programmatic buying. Much of what we recognise as programmatic buying relies on the cookie and is therefore likely to decline. That doesn’t however mean that DSPs will become useless: marketers will still be able to efficiently handle direct, high-quality publisher deals, as well as buy lower cost, mixed quality data-free inventory across select sites on the open web.
While the ability to target individuals on the open web is likely to decrease with the collapse of the tracking house of cards, contextual targeting is set to explode. Contextual targeting is based on the content the user is looking at, rather than their behaviour profile, meaning that ads are more likely to be relevant to their current activity. It puts an emphasis on the placement of the ad, so is similar in that respect to traditional print advertising – the focus is on producing and distributing relevant content. This approach allows advertisers to deliver marketing messages to consumers when they are in a specific situation or frame of mind; as consumer behaviour becomes more fragmented and unpredictable, taking the guesswork out of advertising can only be a win.
Contextual targeting is not just an answer to the demise of the cookie: it is also an antidote to many of the issues around brand risk and safety, and is a way to be less dependent on the personal data that is so heavily regulated by GDPR and CCPA.
While the collapse of the digital advertising house of cards may seem catastrophic to brands who have relied on precise targeting in their advertising strategies, in reality it opens as many doors as it closes. Indeed, with consumers now spending more time in apps than in longtail websites, making programmatic audience-targeting even more challenging, many marketers will already be exploring ways to bypass programmatic altogether. The resultant high quality, content-focused advertising is pushing out and replacing click-bait strategies. Perhaps the decline in the online tracking ecosystem will herald a golden age for digital advertising because, ironically, the shift away from targeting individuals will lead to a better user experience.
The New York Times recently observed that Hollywood experiences a seismic shift every three decades or so. In the 1920s it was the shift from silent films to ones with sound, while in the 1950s it was the rise of broadcast television and the 1980s saw the cable boom.
As we draw to the end of the 2010s, a new seismic shift is rapidly increasing its pace. The streaming revolution is upon us, and the big three of the entertainment industry – Disney, Warner Media and NBC Universal – have either recently launched their streaming services, or will do soon. On the whole this is great news for consumers, particularly wealthier ones, who have a huge amount of high-quality content and their fingertips, although it comes at a cost, of course. It is, however, less welcome for the traditional broadcasters and cable channels, who are seeing their viewer numbers decrease at an alarming rate. In the US there was a 5.4% decrease in cable subscribers in Q2 of this year.
TV has for at least 70 years been at the heart of the advertising strategies of advertisers big and small around the world: where does this latest shift leave them? And should they be worried?
The modern consumer has more choice and control than at any other time in history, and they are more connected than ever: 50% of the US and UK populations have a connected TV, and that figure is expected to continue growing. These consumers are increasingly choosing to consume video content from the new streaming services over the more traditional broadcast channels. Why? There are two key reasons: the quality of the content available, and the fact that the majority of them are ad-free, so they can watch their favourite shows without interruption. A huge 60% of adults in the US were subscribed to a streaming service in 2019, while in 2018 Netflix use alone surpassed cable and satellite TV for the first time. With the glut of new streaming services – mostly ad-free – launching at the end of this year and the beginning of next, those figures will only increase.
As consumers leave traditional TV in their droves, advertisers are having to work out rapidly what it all means for them. Of course, if consumers are flocking to ad-free services, that makes reaching them much more difficult. This is particularly the case for wealthier consumers – a key target audience thanks to their buying power – who are more able to pay to rid their viewing experience of ads. The high-quality ad spots that do continue to reach large numbers of consumers – think live sport and of-the-moment experiences such as the Oscars – will increase in cost dramatically. Indeed, many TV media owners will be rethinking their inventory strategy and may well have fewer, higher impact ad spots for which advertisers pay a premium. This is also more likely to be acceptable for viewers as it will likely mean shorter ad spots with higher quality advertising.
Advertisers must to an extent accept some of the responsibility for the migration to the ad-free services. Consumers are fleeing ads because they are all too often repetitive, irrelevant and uninteresting. If advertisers can transform their strategies and the quality of their advertising and targeting, consumers will be far more forgiving of an interruption of the programme they are watching.
Technology will help: many traditional TV broadcasters are embracing technology in order to allow them to shift to programmatic, highly targeted buying, for example Sky’s AdSmart addressable offering which has rolled out across multiple markets over recent months. This will help increase relevance but, as we explore in this article, it’s not necessarily the answer for brands seeking mass reach – TV’s traditional USP.
Amid all the talk about the streaming revolution, there are many saying that it’s not over for TV. There are undoubtedly still many people watching scheduled TV; particularly for non-US audiences, local broadcasters have expertise in creating culturally and contextually relevant content that the mainly American streaming services aren’t yet doing. There is also the paradox of choice – with endless options available to them on the streaming services, there is evidence that many feel overwhelmed and gravitate back to traditional TV when they don’t know what to watch. And of course live events such as sporting fixtures will always attract viewers – although whether they remain on traditional broadcast TV remains to be seen.
However, whether people are still watching scheduled TV or not misses the point. Effective advertising is all about targeting, and if a large proportion of your target audience is absent from a channel, targeting becomes far more complex. This is especially true as the future of the cookie looks increasingly uncertain: indeed, Google may follow the lead of other browsers and further restrict the use of third-party cookies on Chrome.
The answer for marketers is, of course, to rethink, to innovate. Where do the new opportunities lie? Are there other channels and strategies that will deliver on your objectives, or will you need to increase your TV budget to secure those high-impact, high-quality spots? Creating, implementing and learning from a great media strategy will become ever more crucial as marketers strive to understand what works, and why.
It is not so long ago that Facebook’s halo shone brightly. It was apparently created with the most laudable principles in mind: to connect people and to create communities around issues that people care about. For advertisers, it provided the holy grail of being able to create highly targeted ads and deliver them to the right user at the right time.
But then it all went wrong. The company has been buffeted by a series of major privacy and security scandals on a seemingly almost monthly basis. Its reputation has plummeted in inverse proportion to the number of negative headlines it has received. Is this the beginning of the end for Facebook? And is it still a brand safe platform for advertisers?
What hasn’t? The real troubles started in 2016, when Facebook faced accusations that it had allowed external forces to interfere in the UK’s Brexit referendum and the US presidential election, as well as allowing the spread of misinformation. Then, of course, came the Cambridge Analytica scandal where a whistle blower claimed that the data analytics firm working with Donald Trump’s election campaign had been given access to the personal information of up to 50 million individuals in order to target them with personalised political ads.
That saw the opening of the floodgates: in the last 18 months there have been multiple scandals, including claims of sensitive data being given or offered to third parties such as Spotify, Netflix and a Russian email service linked to a close associate of Vladimir Putin; the spreading of fake news; the enabling gender and racial discrimination in job and housing ads; the hacking of 30 million accounts; the inflation of video view metrics; and a smear campaign to silence or discredit prominent Facebook critics. Most recently it emerged that Facebook is still leaking data to third parties, and last week it was in trouble for refusing to follow rival Twitter’s lead and limit or ban political ads.
This scandals and controversies have had severe reputational ramifications for Facebook. It now has an exceptionally low reputational score in the Reputation Institute’s US RepTrak ranking, below even a cigarette company. This, according to the Reputation Institute, is because of Facebook’s response to these crises, rather than just the crises themselves: Mark Zuckerberg and his leadership team have always focused on trying to protect their image, rather than their reputation.
Of course, many of these issues are rooted in the fact that Facebook makes the lion’s share of its revenue from its advertising business: last year, 98% of their global revenue was generated from advertising. User data is at the heart of the product it offers advertisers. But will their problems have any impact on marketers? There are queries around a decrease in the number of active users, as well as in the quality, effectiveness and reliability of consumer data – and, of course, whether continuing to use Facebook’s advertising products insinuates that you are ok with their behaviour. However, it would be safe to assume that the many people who still use Facebook – and their number is in fact increasing – aren’t unduly bothered by the scandals that the platform has faced. Furthermore, while Facebook is taking steps to improve privacy and security, they will always ensure that their product offering – their core income – stays useful and relevant to advertisers. Marketers should focus on ensuring that their advertising stays relevant, diverse and emphasises the brand’s commitment to data security and privacy. It is also worth thinking deeply about what targeted advertising contributes to your marketing strategy: are you actually accessing new customers, or just those who would already buy your products?
Thanks to Facebook’s reliance on advertising revenue, advertisers are in a position of great power. They could use this to great effect: by teaming up with agencies and advertising bodies they could make it clear to advertising platforms such as Facebook exactly what they expect in terms of privacy and data usage. In the face of such a unity of strength, could they refuse to comply?
As for Facebook themselves, they must continue to focus on the issues of trust that currently surround its brand: it must be honest and transparent with both users and advertisers, and identify effective ways to eliminate the preponderance of fake news that still litters its platform.
Facebook has undeniably played a key role in the targeted advertising revolution, but to maintain its status it has a lot of soul-searching to do.
ECI Media Management’s US Business Director, Victoria Potter, looks at the changing TV landscape and explores the ramifications.
This week, eMarketer released an article stating that this year, there will be about a 3% decline in TV ad spend from 2018, and that trend shows no signs of slowing. By 2022, eMarketer is predicting that TV ad spend will drop below 25% of total us ad spending. Of particular interest is that, the typical “political year” bump that has been prevalent in previous years will not be as great in 2020, only accounting for about a 1% increase, followed by steady 1% decreases in the following years. Contributing to this decline is steady growth in cord cutters and ratings decline.
Nielsen is showing steadily declining ratings over the past few years. In the desirable Prime daypart, C3 ratings have seen a 33% decrease from 2016 to present. While ratings are declining, networks continue to show increases in pricing – with Nielsen reporting a 7% increase in spend during the same period. And, coming out of the latest Upfront, networks were seeing low-double digit increases, despite lower audiences.
What does this mean for marketers? Linear TV still provides efficient reach build. However, the days of one-size-fits-all tentpole events are over, and not coming back. It is important to adjust the media mix to account for audience erosion and fragmentation.
Meanwhile, as we see Linear TV spend decreasing, another eMarketer report out this week predicts Connected TV spend will reach around $7 billion, a 38% increase vs. 2018, and projected spend of over $14 billion by 2023. Connected TV is defined as TVs, smart TVs and TVs hooked up to the internet via a set top box, game console or similar device.
The amount of new content available is staggering: Hollywood Reporter stated in June that 2019 was on track to top the 2018 year-long high of 495 scripted series. To add to the proliferation of streaming services already available (Netflix, Amazon, Hulu), this month sees the launch of Amazon TV Plus and Disney+, the latest, but not last, entries into the streaming world, with PeacockTV (Comcast/NBCU), and WarnerMedia (HBOMax) to follow next year. However, the day is still only 24 hours long, meaning that all the new content is vying for the same attention, creating more fragmentation. It leaves many asking – what will the new TV ecosystem look like? Subscription services are currently ad-free, but there’s a big question on how much of an appetite consumers have to create their own “bundles” with so many standalone options. While cord-cutting was once thought of as a money saver, it is now a trade-off between the channels in the cable bundle vs. a personally curated streaming bundle.
With the myriad options available to advertisers and consumers alike, the question becomes – how do I evaluate my reach across platforms? Many companies are proposing their solutions, most recently Roku and Innovid, which launched a combined solution currently being tested by several Innovid and Roku clients.
It can be difficult to navigate the changing video landscape – to determine the right balance between scale and targetability. Here is some advice from ECI Media Management’s experts: