Targeted ads won’t mean more budget

The more things change the more they stay the same? Is this the lesson of the last few years and the TV advertising market?

For many years now niche channels have tried to deliver specialist audiences that have a higher value to advertisers than a mixed, mass audience. The results have been decidedly mixed. The vast majority of niche channels could not survive without; a.) A very low cost base, often recycling (again and again) shows made for general broadcast, and b). Inclusion as one of the parts in the ‘sum of parts’ that make up a tall-stack subscription package.

Now, OTT and Connected TV represent a new opportunity for super-low cost entry to the ‘TV market’ allowing narrowcasters to reach a worldwide niche audience. But, as Larry Gerbrandt points out, only the transmission cost has dropped dramatically and, no matter what the transmission path, an audience will only grow – and therefore advertising be attracted – if professionally produced TV is provided, and that isn’t cheap. As the contributors to our niche channel feature recognise, a putative broadcaster needs subscription or donation income in its plans to be a likely contender.

Away from very niche or local TV, demographically targeted advertising is talked of as a mainstay of multichannel, multiplatform provision. Does it really have so much potential? ITV has proved again that its fortunes flood in or out depending on the tide of advertising available to ITV 1, and that’s basically dependent on the wider economy over which it has no influence. Its stated aim to make half its income away from ITV 1 only looks vaguely realistic – or sensible – when ITV 1 is doing very badly.

Netflix has talked about a 50 per cent premium charged for ads that are chosen (from three alternatives) by viewers to their service, and that they are closing the CPM gap on regular broadcast. But the total numbers are still very small and those CPMs are average, while broadcasters make the big money from big audience, prime time, event television – something intrinsically not available to OTT services.

There is no doubt that highly targeted advertising will extract a premium against ‘ordinary’ mainstream broadcast. But when audience numbers are so small, will the cash generated be enough to sustain specialist services? Advertisers will be delighted to save money on some services (where they won’t waste the apocryphal 50 per cent – they just don’t know which 50 per cent), but they’ll probably spend those savings on bigger, less targeted channels, still the only way to reach a mass audience simultaneously. If targeted advertising is relying on extra budget becoming available, it may well be disappointed. If it merely diverts and fragments the budget from the mainstream, then the impact will be felt on the production of the kind of original programmes the long tail, niche providers so rely on.

It is no coincidence that ITV is the only media organisation that continues to make the development of micropayment central to its future revenue plans.

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