By: Jim Poh, SVP, Communications and Media Director
Now that 80% of US households have high-speed internet access, digital video is really here, and it is blowing up traditional approaches to delivering messages to consumers. Despite the angst felt in anticipation of the irrecoverable fracturing of TV audiences in the past, it turns out to be a good thing for advertisers, especially those who couldn’t advertise on television due to high costs or strategic constraints.
Video delivery options have exploded, so it’s not just about TV anymore. 70% of US households have smart TVs, and 25% of all TV viewing is now streaming content. 30% of US households have cut the cord to traditional TV, and that number is on a steep ascent. Although many cord-cutters are viewing paid digital services, 47% of all households are watching at least one ad-supported platform. In addition, 86% of us have handheld devices capable of viewing video, and there’s a video player on just about every website and app.
Digital video offers advertisers several advantages over traditional TV: smaller geographies, greater targeting, greater accountability, and lower cost. Let’s just say you are a retailer with one store in the New York TV DMA, and people typically drive 10 miles or less to get there. In your case, this might mean that only 15% of the TV market has a realistic shot at showing up at your door. If it costs $200,000 to make an impact using TV in New York, you might be out of luck. But if you could shrink the market to your trade area and only have to spend $30,000 for the same impact, you might be able to afford that. Digital video makes that possible since it can be confined to pretty specific locations.
Demographic targeting is about the best we can do when putting ads on TV, but demographics have always been a ham-fisted surrogate for our true target: people likely to buy our product or service. Yes, we can nudge the needle using 3rd-party data and psychological insights to inform program selection, but usually, we still end up including way more people than we need to. For example, if you sell mascara, a product that 34% of the population uses, your demographic target would probably be something like women 18-49, which covers about 73% of mascara buyers. You could select programs really targeted to mascara users like The Bachelor and Keeping Up With The Kardashians, so that if you were paying $24 for every 1,000 women 18-49 reached, you’d be paying just $19 for every 1,000 mascara users. That sounds cost-effective, but 42% of the program audience would still be people that don’t use mascara, and you’re also paying for them.
In contrast by using digital video, you could create a campaign that would only target actual mascara users based on contextual and behavioral characteristics. The cost of that would be more like $5-$10 to reach 1,000 mascara users, so you’d reach 2x+ as many for the same budget. You’d also have a clearer understanding of how many people actually saw your ad and how many took some action as a result.
All this is not to say that TV is dead – many advertisers still have needs for broader reach, but even those advertisers can benefit by adding digital video to the mix. Digital video can add leverage in negotiating TV buys because it is a credible alternative for the $. It also provides a lower-cost vehicle for adding frequency to a campaign.
So how do you win in the new world of video?
- Approach video as a single element in your media plans,
- Focus on your true target audience: people likely to buy your product or service,
- Compare alternatives in terms of cost-effectiveness and communication objectives,
- Map out a rough allocation that will achieve your goals,
- Negotiate/set pricing with the flexibility to move $ between platforms,
- Set up pertinent KPIs for evaluating digital activity,
- And include measures attributable to offline media as well as intermedia comparison.
Want to leverage digital video advertising for your business? Contact us to discuss.