Steve Dempsey: Beware of geeks bearing gifts as tech giants bid to turn goggle box into Google box
TV advertising revenue has remained relatively unscathed by the onset of the internet, the mobile revolution and the rise of other forms of video viewing.
Sure, YouTube, Netflix, Amazon Prime and Co have made waves, but they're not making huge inroads into traditional TV ad revenues. PwC has predicted that online TV advertising will amount to $10.19bn (€9.5bn) in 2020, but that will still only make up 4.8pc of global TV advertising revenue.
But things are changing and traditional TV stations and networks need to approach change with caution. They need to be particularly cautious about measurements and methodologies coming from the online space. Yes, they need to beware of geeks bearing gifts.
One initiative with the potential to go wrong is OpenAP, a tool that's being developed in the US by Turner, Fox and Viacom. It aims to help advertisers target specific audiences across the above companies' channels; the likes of MTV, Cartoon Network, Fox, FX, Nickelodeon and Comedy Central. OpenAP will allow advertisers to buy ad inventory in a way that's similar to how they buy digital display ads. So using their own data, they'll be able to create consistent audience targets that can be used across channels and get reports on campaign performance in relation to its target audience.
Pretty neat. But also potentially dangerous. Why? Because something like OpenAP could open the door to programmatic trading of TV ads, and therefore the commoditisation of TV's ad inventory.
But the networks are wise to this threat, it seems. They've made sure that OpenAP is a data and analytics solution, not a buying platform. Agencies still need to negotiate deals directly with publishers. Also, well aware of the lack of transparency in programmatic trading (Mark Ritson called it "a black box of turds and spiders"), the networks have enlisted Accenture to build the platform and audit the reports.
But while broadcasters are working on the likes of OpenAP, the online upstarts are concocting their own plans. Perhaps these are more indicative of the challenges that TV is to overcome if it's to stay on top.
The most intriguing recent development on this front was Amazon's purchase of 10 Thursday night games of American football for $50m. This is interesting on a few fronts. The first is that Amazon hasn't bought exclusive rights. CBS and NBC will be broadcasting five games each, and Amazon will stream these channels' coverage of the games - including their ads - on its subscription service Amazon Prime. Amazon does, however, have the rights to sell some advertising of its own. The second point of note? The bidders that wanted to show these matches. Amazon beat out competition from Facebook, Twitter, and YouTube.
The third reason this is interesting is inflation. Twitter paid $10m for the same games last year. So why has the price increased fivefold? It's because live events -sports and entertainment - now account for the largest linear TV audiences. This means the ads and the rights are worth more.
But what is Amazon going to do with the ads it has the rights to sell? Aside from running the biggest ecommerce site in the world, Amazon is also a player in the programmatic display advertising business. It sells ads based on its 20 years of observing how people shop online. The company is also courting publishers with a server side header bidding business for publishers. Barclays has estimated that Amazon's advertising revenue could top $2bn next year. It will almost certainly use the games to figure out which Amazon Prime customers watch NFL games on a Thursday night, to track if any particular ads they see lead to online purchases, and to build improved profiles of its subscribers. It could also use its data to serve different ads to different consumers based on the its subscribers purchasing patterns and brand affinities. There's even been speculation that Amazon will run ads that link in some way to Alexa, its voice-controlled home assistant. "Touchdown! Alexa, order me a pizza."
This sort of stockpiling and recycling of data by and for one of the digital giants is exactly what the TV industry needs to eye with caution. The TV powers that be should be wary of any initiative where Facebook, Google and Amazon bring their data-rich approach to advertising into the TV sphere. It's still the goggle box, but if they're not careful, it will end up being Google's box.
Sunday Indo Business