How the Covid-19 Crisis Is Reforming TV’s Supply Chain

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As an industry, we are at a crossroads: Do we continue down the path we’ve been on or use this moment to ask ourselves if there is a better way?

We all know the trends. Linear TV viewership is on the decline, down roughly 15% pre-Covid-19, while streaming viewership is up 117% year over year, per Nielsen. And while shifts in spend have followed this trend, the majority of video dollars continue to flow to the usual suspects.

Is this because of the TV’s ability to achieve scale and reach of large audiences relatively efficiently? That is what many believe.

Digging deeper, however, reveals an issue that is largely not spoken of: linear TV’s excessive frequency problem. Analysis of more than 50 campaigns reveals that, on average, 80% of TV impressions are delivered to roughly 25% of the heaviest viewing households. Furthermore, nearly 20% of TV households never even see the ad.

This is only getting worse, not only because of linear TV viewership declines but because clients continue to seek to pay less and less for the same inventory. It stands to reason, too. If the same ad can be purchased at a 10% lower cost per thousand (CPM), then the productivity or return on investment for that ad buy increases. It is a logical procurement argument.

The problem is not that clients and their agencies seek to reduce costs; it is the continued focus on CPM, and by default, gross rating points (GRPs) as the primary currency.

However, not all GRPs are equal. Let’s take the example of buying 100 GRPs on sports versus cable. Using an adult aged 18-49 rating of 11.0 for Sunday night football, it would take only nine spots to achieve those GRPs. The buy would reach an average of 28% of the viewing audience 3.6 times. By contrast, to achieve the same 100 GRPs through cable would require nearly 200 spots, assuming an average adult aged 18-49 rating of 0.1.

With this latter approach, the buy would reach 38% fewer consumers, but those that it did reach would see the ad approximately 60% more times on average. Furthermore, the cost difference between each buy would be significant, with the latter providing a far more efficient CPM.

Knowing that growth comes from exposing a brand to more prospective buyers, reach and cost per reach point should be the focus—not CPM. In fact, an absolute focus on CPM and GRPs over reach will only exacerbate the excessive frequency issue in linear TV.

The power of “and”

With the rise of more premium content across advanced TV platforms like addressable TV, over-the-top (OTT) and connected TVs, there are also more opportunities to extend reach among prospective buyers while mitigating the increasing issue of excessive frequency.

The addressable nature of these platforms enables advertisers the ability to complement more traditional linear TV schedules by directing ads to households that would not otherwise see those ads. By doing so, we have seen significant increases in net unduplicated reach while also reducing the excessive frequency among heavier viewing households, all without any increase in budget.

As the Covid-19 pandemic accelerates the evolution in people’s video-viewing behaviors, now is the time for marketers to grasp the opportunity to adopt an “and” strategy to redefine their approach to video advertising and to grow sales.

The new metric for success

To accomplish this, we also need to redefine our video metrics. We must look beyond individual CPMs associated with various video options. This isn’t to say CPM is unimportant, but rather, it is not the only metric. And if viewed in isolation, it can be the difference between sales growth and loss.

This requires reform in measurement as well as the definition of media value. While some media owners and agencies have developed proprietary tools to enable cross-platform reach optimization, it is still far from the norm. This prevents a new conversation about value, moving us away from chasing lower and lower CPMs to having meaningful conversations about the cost to reach new audiences for growth.

While Covid-19 continues to disrupt so much of the world we live in today, it may just be the accelerant necessary to address these barriers to growth. Reform is needed. Let’s not waste this opportunity to do something different—let’s do it better.

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