As the pressure for ROI becomes more intense for CMO, it’s trickling down to media owners (e.g., TV networks, OTT platforms) as well.
First of all, brands pay for the entire ad economy. That is why, in theory, demands from the brands will eventually be accepted by every part of the media value chain (brands to agencies to media owners and all other ad-tech/mar-tech companies). Of course, there are a few exceptions.
Nielsen has been the only shop selling TV ratings for the last 30 years in the US. And its revenue doesn’t rely on brands at all. On the other hand, we have at least 500 brands participate Upfront every year and 1,000 brands spend over $10M annually on TV. Another example is that Google/Facebook own significant chunks of digital media … and they are growing faster than the rest of the open web. That is clearly one reason why they are reluctant to accept some requests from brands and why people call them “A Walled Garden”.
Unfortunately, these exceptions don’t apply to TV networks. Despite recent M&A efforts, the TV industry has much less concentration as compared to the digital industry. In addition, the TV industry has been taking a huge hit from the digital industry for years. The TV industry has no choice but to change itself.
As we can see, ad spending on traditional TV is decreasing rapidly. More interestingly, if we look at Time Spent by TV and Digital, TV’s share was only 28%. Meanwhile, the share of Ad Spending dropped 43%. So, it’s not only that people are watching less TV. In addition, brands want to pay less $$$ per minute for TV ads. Why is that?
Because brands demand ROI but TV cannot prove ROI at all. Traditionally, GRP has been the only KPI for which TV networks are responsible. On the other hand, digital media platforms are held accountable by various metrics (e.g., viewability, CPA, CPI, % of target audience). As the pressure for ROI grows, brands have decided to shift their budgets to digital media, which can help them prove ROI.
To flight back, TV networks started to invest in OTT platforms (e.g., Hulu, HBO Max) to increase the time spent on TV sets. In addition, they have started working on new measurement and pricing metrics. The most aggressive initiative is the outcome-based guarantee, especially the sales guarantee. Since 2018, a few TV networks have decided to guarantee the sales lift when they sell TV inventory. I think it’s a great idea to measure sales lift for TV campaigns; however, it’s too risky and unfair for TV networks to guarantee sales. TV is only one of many inputs of the marketing channel, and marketing is just one of many factors to influence. Certainly, brands can ask TV networks to measure sales lift but it’s not fair to use it to hold them accountable.
In the following post, I will explore the right metrics for a TV network to use in tracking its ROI: brand marketing vs. performance marketing.