US addressable TV ad spend is expected to grow to $1.26 billion this year
Demand for addressable TV advertising—the ability to deliver different commercials to individual households based on specific consumer targeting criteria—has been steady, but may accelerate during the next couple of years. Superior ROI, and the potential for an expansion of both available addressable inventory and the number of households that can be reached could both be drivers of this growth.
“There are many subsets of advanced TV, but what they all have in common is the expansion of TV’s capabilities beyond what was possible with just an analog signal and a receiver. Addressable, programmatic, OTT and interactive are all examples,” said Gerard Broussard, author of eMarketer’s latest report, “Television Update H2 2017: Advanced TV’s Progress.” (Subscribers to eMarketer PRO can access the report here. Nonsubscribers can purchase the report here.)
Addressable targeting aims to improve advertising effectiveness by reducing or eliminating the number of ads shown to people who are unlikely to ever purchase an advertiser’s product or service. Right now, addressable ad buys typically supplement national TV plans, because they can only work with the subset of homes that are addressable-enabled. This additional addressable advertising layer means that ads reach in-target households more frequently, thereby reducing wasted ad impressions and improving the overall advertising impact.
US addressable TV ad spending is expected to reach $3.04 billion in 2019, more than double its 2017 level of $1.26 billion, eMarketer estimates.
The enthusiasm for addressable TV is tempered by some very real barriers. According to “Ahead of the Curve: Addressable TV Insights,” a March 2017 survey of 150 US addressable TV decision-makers that was funded by AT&T AdWorks and conducted by Advertiser Perceptions, cost/price was named by nearly half of respondents as an obstacle to greater investment in addressable TV. Two in five advertisers surveyed named limited scale or reach as an obstacle.
But while addressable costs more, it may be worth it. Most addressable inventory has a higher cost per thousand (CPM) than standard national age- and gender-targeted inventory. However, media agencies and advertisers must weigh this additional cost against achieving a lower addressable, or advanced target, CPM.
For example, a yogurt marketer might pay a $20 CPM to reach women 18-49 as part of a base national TV plan. Paying to reach women 18-49 in addressable households may cost $24, or 20% more.
Using an advanced target of medium to heavy yogurt buyers among addressable households, however, might come in at a $45 CPM, vs. the $60 effective CPM required to reach the same people via a national buy. That $45 CPM therefore represents a 25% discount over what a national buy would cost: A much higher concentration of addressable ad impressions were in-target.