It’s no secret that the pandemic accelerated consumer adoption of streaming platforms. A recent study, for instance, suggests that viewers are streaming 70 percent more — or about three hours per day, on average — than they were last year. The Trade Desk caught up with Jim Nail, principal analyst at Forrester, and asked him how brands and agencies are approaching CTV; the impact streaming will have on the future of the upfronts; and pitfalls the industry can avoid as they shift away from linear and toward CTV. This interview has been edited for brevity and clarity.
Are you seeing a convergence of advertising planning and buying across TV and video?
The convergence for consumer viewing habits happened years ago and the advertising industry has lagged badly. But, yes, there are clear signs that the advertising world understands that in order to reach their audience today, linear alone is not enough. On the sell side, the programmers are beginning to treat all their inventory — streamed, broadcast, live, on-demand — as one source to draw on to help advertisers meet their needs. Advertisers and agencies are coming along though most are still viewing this world through either a traditional or a digital lens.
What can we learn from the past? How does streaming TV advertising avoid repeating mistakes from both traditional TV advertising and digital advertising?
First is to rid ourselves — individually and collectively — of this notion that "traditional" and "digital" exist in separate universes. That branding is somehow fluffy and unmeasurable or digital is tactical and performance-driven, that one is somehow superior to the other. We all have the goal of getting our brand in front of the consumer, lodging our value proposition in their mind, and deriving revenue from our success at this. For each individual consumer, there will be some mix of live, streamed, big screen, mobile screen, etc. and so there are many, many opportunities both traditional and digital to do this. So traditional TV planners need to raise their sights above which networks and programs to buy while digital video planners need to get above the level of devices and services to buy impressions. This leads to today's situation where traditional TV people talk about GRPs and brand lift while digital people talk about impressions and attribution. Instead, they need to start from a shared understanding of the strategic audience they want to reach (that is, not adults 18–49) and the video habits of that audience to lay a foundation of how to allocate budget. Next agree on a goal (or probably a balanced scorecard of brand lift and performance KPIs). Then, yes, you need specialists in both traditional and digital to find the best placements and execute the plan/buy/traffic/reconcile/measure activities as appropriate in their respective spheres.
How are the upfronts changing? How will the event continue to change to adapt for the future?
First, let me say that I don't believe the upfronts are going away. Certainly not in the foreseeable future and probably never. They serve an important function for both buy-side — to ensure they have inventory to reach their audience — and sell-side — to know they have revenue to fund production of the programs. Video inventory, and especially premium video inventory, still has less supply than demand, so as a brand you don't want to risk buying in real-time and have no desirable inventory available. What brands really objected to was being locked into a specific schedule up to a year in advance with little ability to change as the year went along. As we know, the pandemic upended last year's upfronts, and no brand had a crystal ball to know how the year ahead would turn out, thus would not make this kind of commitment. The sell-side responded and the watchword became "flexibility", giving advertisers much broader latitude to change or cancel flights based on conditions at the time of airing. The sell-side took the lesson that this was OK, it didn't crater their business. Sell-side will still want big dollar upfront commitments, but then the negotiations will shift to the terms governing the ability to move that money around as the year goes forward.
How are brands and agencies approaching TV buying today? How has it changed from the past?
Quite frankly, brands and their agencies aren't changing enough. I see some leading examples, but they are the trailblazers, not the mainstream. Too many are planning CTV as a reach extension of the age/gender/GRP strategy and are locked into their legacy mindset of negotiating the lowest cost per thousand. I understand there are 50+ years of experience, benchmarks, best practices, etc. behind this, but it no longer is the most effective approach. Few if any brands need 70 percent reach against adults 18–49; every brand needs 100% reach against their strategic audience. I use the diaper example a lot because it is pretty self-explanatory: diaper brands don't need to reach women 18–49, they need to reach households or individuals with children age 3 or younger. When I say this, I get push back that grandparents buy diapers too; let's not go down that rabbit hole right now other than to say, fine, then do a targeted buy against that strategic audience.
What’s the biggest draw to shift budgets to CTV and what messages resonate with advertisers you speak to?
I want to broaden this away from just CTV to the term I christened in 2016 "audience-based and data-driven" TV buying. The audience-based part is the diaper example above: defining multiple audiences and investing according to their value to the brand. Even in linear where you still have to buy an aggregate audience, you can use this approach to increase the coverage of your strategic audience within the same budget. (The little talked-about benefit of the much-bemoaned fragmentation of the audience is that these smaller audiences show much greater variation in their composition than a large audience which naturally regresses to the mean). So you greatly reduce waste by eliminating people who have no need to ever buy your product. The data-driven part of it drives greater measurability of results, whether the ad is on linear or CTV. Whether your goal is to maximize unduplicated reach or drive short-term sales. The data sets for this are still incomplete and the approach to weighting and balancing the samples to be representative are inadequate, but organizations like CIMM and the WFA are getting the industry to focus on it and fix it.