For more than two decades now, programmers and operators have wanted to emulate digital publishers’ ability to offer dynamic advertising to targeted audiences. The notion of applying sophisticated targeting on top of linear TV’s appeal and mass reach has been the holy grail, and it’s starting to come to fruition.
Linear addressable TV CPMs, which can be 10 to 20 times higher than the effective CPM across the rest of a seller’s linear portfolio, are extremely attractive. But it doesn’t follow that sellers should offer as much linear addressable inventory as they possibly can.
There are significant minefields when sellers go to market with addressable that aren’t always self-evident—which, to be fair, is also the case with managing a traditional linear business. Here are three common mistakes sellers may be making with their addressable business and some suggestions about how to address them:
1. Treating linear addressable as if it were a digital business
At first glance, linear addressable may seem like a totally new product in the vein of digital, CTV or OTT, but it’s not. It’s important, for portfolio optimization purposes, to consider addressable as a core part of your traditional linear business.
This is critical to grasp for planning purposes. Linear addressable should be included in your revenue P&L targets for your traditional linear business. And here’s why: When you’re setting pricing for your inventory in real time (determining, for example, whether to sell time on a CPM or spot basis), you need to have a standardized way of valuing it under different scenarios. And that starts with having a holistic view of your entire portfolio.
Sellers must understand the value of their linear business and inventory holistically to ensure they can measure the true net value of addressable inventory.
2. Lacking awareness of potential revenue cannibalization
Since most ad decisioning is rate rules-driven, impressions are often delivered in the available inventory that can fetch the highest price. When that decisioning is applied to linear addressable inventory, it consistently sells out as a result of the high CPMs it commands.
But taking this approach can be a costly mistake. It puts sellers at risk of cannibalizing other profitable inventory and diminishing the value of their portfolio as a whole.
Consider this example: A network’s Nielsen-guaranteed spots for primetime are highly valued in their linear TV business, but the network still proceeds to sell as much addressable as it can, amounting to 20% of total inventory for the night. As a result, the remaining 80% is no longer Nielsen-eligible, and those spots have to be reallocated to less valuable inventory types, resulting in less total revenue.
The point here is that sellers need visibility into how addressable-eligible inventory would perform if packaged and sold under different scenarios to understand opportunity costs and avoid cannibalization. Every single linear addressable sale has a traditional linear “opportunity” cost, and sellers need a line of sight on that to make informed decisions.
Sellers must enable fluid and near-real-time inventory allocation decisioning. This requires investment in new processes and new skills, and a new layer of analytics software, since revenue cannibalization wasn’t a challenge previously faced by traditional linear TV.
3. Failing to aggregate your addressable audiences and offer unduplicated reach
Given the smaller, targeted audience available through linear addressable advertising, it hasn’t consistently enticed the likes of Coke, Pepsi, P&G and other national brands, which buy TV for mass reach. But the growth of other addressable platforms, such as OTT and CTV, may help to change that—provided that sellers are able to effectively bundle their audiences.
Sellers need to consolidate sales, operational and ad-serving workflows and reporting to deliver unified campaigns across addressable platforms and ensure that they’re offering unduplicated reach. Given the complexity of serving campaigns with buyers’ first-party data or leveraging data matching against anonymized subscriber information, this is still somewhat aspirational from a technology perspective. But it’s a goal to energetically work toward.
Sellers must have the right “plumbing” in place to offer unduplicated reach across all addressable platforms, including a single DMP that underpins linear addressable and CTV/OTT platforms.
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