Let’s face it: We all know the traditional TV ad model is damaged. The industry is working to counter this, with talk of reducing ad loads and stopping viewer erosion while proving that traditional advertising still works. The problem is that viewers who want to avoid ads are finding new ways to do so much more quickly than networks are solving the problem. Add to that the growth of ad-free programming services, and the signs are staring us in the face—or, in the case of TV networks, hitting the pocketbook.
Already, 61 percent of viewers globally say they skip ads when possible, according to a Kantar Millward Brown study. At the same time, 64 percent of U.S. households subscribe to at least one video-on-demand service, such as Netflix, Hulu or Amazon Prime, up 10 percent in just one year, according to Nielsen, which predicts that 9 trillion ad impressions—nearly half of all ad impressions on ad-supported cable TV—are expected to disappear in the next five years.
To address this problem, some networks are planning to cut their ad loads. Fox Networks recently said it will trim commercial blocks to two minutes per hour by 2020, while NBCUniversal is reducing its prime-time ads by 20 percent and overall ad time by 10 percent. But this isn’t a long-term fix for a financial model based on selling so many minutes of 15-, 30- and 60-second spots per hour of programming.
Another factor at play is content. SVOD services Netflix and Amazon, along with pay cable’s HBO, dominated the recent 2018 Emmy Awards with high-priced content. Shows such as Netflix’s “The Crown,” at a reported $13 million per episode, and HBO’s “Game of Thrones,” at $15 million per episode for its final season, offer viewers high-quality content but are expensive to maintain. Yet Netflix caused a stir earlier this year when it tested video promos between series episodes, prompting outraged viewers to threaten to cancel if ads were introduced.
At the same time, ad-supported networks maintain viewership when their content is compelling, such as sporting events or blockbuster programming events—but this raises the question of whether they can compete with pay services in offering high-quality content, especially if they change their ad model.
Dealing with ad avoidance
TV services obviously need to find a way to make advertising work, and that will involve new, creative ways of thinking about the advertising model. A new survey by Mirriad finds that 72 percent of industry respondents are concerned about ad skipping; that breaks down to 79 percent of agencies and 76 percent of marketers vs. 62 percent of content distributors and networks. As for the solution, 81 percent said it’s important to very important that networks improve viewers’ experiences with ads rather than simply cutting ad loads.
Industry players have been banding together to come up with solutions—such as providing deeper insights showing their ads work.
Yet, according to the Mirriad survey, they may be spinning their wheels. When it comes to fixing the problem of ad avoidance, respondents rejected ad load reduction in favor of improving the contextual relevancy of advertising:
- 41 percent said contextual relevancy is the top solution to focus on.
- 57 percent of brands and marketers favored contextual relevancy vs. just 33 percent of networks and distributors.
- 25 percent said creative lengths and variation would improve the viewer experience.
Overall, 74 percent said networks will reduce their ad loads but only 20 percent said it’s the best solution.
Making up for lost revenue
Of course, with this comes the issue of ad revenue. In the Mirriad survey, 82 percent of respondents said that reducing ad loads will create a revenue hole for networks. To make up for this drop, 56 percent of respondents said integrating brands into content is the best solution to make up revenue, followed by dynamic ad insertions at 52 percent. In-video advertising company Mirriad and others are already offering these options, giving marketers the opportunity to embed products and brand messaging naturally into programming when viewers are already emotionally engaged.
For example, products can be digitally placed on countertops, or signage can be added into scenes with campaign messaging. This also allows different products and campaign messages to be embedded for different audiences in different markets, expanding the traditional age and sex demographic model to reach more targeted audiences.
Mirriad works with leading audience measurement companies to create viewability methods for these insertions, establishing a secure and transparent format for advertisers going forward.
So far, testing of its 10-second In-Video Ad Units has had excellent results.
Ad avoidance is a big problem that is growing faster than the networks are responding. Reducing ad load is one answer, but it raises even bigger questions: Will viewers still avoid a reduced ad block, and how will the lost ad revenue be replaced? For marketers and networks alike, natural solutions such as In-Video Ad Units and Dynamic Ad Insertions offer creative, practical solutions now, not years from now when it may be too late.