Perception Versus Reality: What’s Possible with Addressable TV Today

[A version of this post originally published on Ad Age.]

There is a reason why 90% of advertisers that use addressable television in their media plans repeat the strategy for future campaigns–it works.

The promise of addressable TV–delivering relevant ads to individual households–has been here for a while. The biggest challenge the marketplace faces now is identifying what’s truly possible with the medium. Like the early days of digital, there is a lot of confusion.

Many discuss addressable without a full understanding of the opportunities this new medium brings. My advice to marketers: don’t let this opportunity pass you up because you don’t understand the full range of possibilities that addressable presents.

Addressable TV myths in the marketplace:

There isn’t scale. There are 120 million TV homes in the U.S., according to Nielsen, and by our count, more than 65 million of those households have the technology to receive an addressable ad. The largest addressable multichannel video programming distributor (MVPD) delivers only 16 percent coverage against U.S. TV households. By aggregating inventory, we give advertisers access to the full footprint: more than half of total U.S. TV households—more than enough to reach relevant audiences at scale.

The average campaign is targeted to 15% households, allowing brands to reach only relevant, high-value households for a specific campaign. An estimated 40 billion addressable TV impressions will be delivered this year.

Addressable is not an efficient medium. Addressable TV does have a higher CPM than traditional television. While a more targeted approach warrants an increased CPM, many advertisers get sticker shock and assume addressable is too expensive. A little math can help brands determine the most efficient way to reach relevant audiences. If the national household CPM is $5, and the brand is only targeting 10% of households, once you factor out the waste, the brand is really paying a $50 household eCPM to reach that specific audience. As long as the addressable CPM is below the $50 eCPM, it is a more efficient vehicle to reach the specified audience. While addressable is an efficient means to reach audiences, the ability to close the loop on television effectiveness delivers immeasurable incremental value.

Addressable TV exposure cannot be directly linked to business outcomes. In fact, addressable TV is the only environment in television that we can control for exposure. Using a test versus control methodology, all households are in target with the only variance being the incremental message frequency, therefore all the other noise is cancelled out. Because addressable TV is not the only medium running during a campaign’s timeframe, many people assume we can not cleanly measure its impact on driving consumer purchase activities. This is false; marketers can measure direct impact to sales.  Post campaign, we are able to isolate the incremental impact of the campaign against a brand’s KPI (i.e. ROAS, lift in penetration, share shift, web traffic, foot traffic, etc.).

Cross-screen targeting and attribution is not yet possible. Data has been used for targeting in the digital space for decades. With the addition of addressable TV, marketers now can deliver unified targeting at scale, across all screens (linear, VOD, OTT, Mobile). As audience viewing behavior moves across screens, data and technology have created the opportunity for unified reach. The linkage created by identity graphs creates visibility into whether a consumer saw an ad on a digital screen, television or both. With unified targeting and measurement, optimizations can be made for future campaigns after we understand the channel allocation to maximize ROI.

Addressable is a test. The truth is that addressable TV allows brands the opportunity to reach high value audiences at scale and connects ad exposure to business outcomes – it’s a proven media plan component that gives marketers the ability to understand the effectiveness of their campaigns by providing data to optimize future campaigns. Addressable is not a test. We know data works, we know the technology gets the messages in front of the right audiences. While addressable is not perfect, it presents a real opportunity for advertisers.

Fact, if your brand is not yet using addressable TV, you are are missing out.  Educate yourself on this real opportunity. The future of TV is already here.

Read more on addressable TV advertising from Jamie Power.