As an American who just spent my second Christmas in the UK, I find it fascinating that for Brits, TV is as essential to the holiday season as eating, drinking and exchanging gifts. In an age of cross-platform viewing, it's perhaps the one time of year that households come together and watch TV in the good, old fashioned linear way. But for how long?
It should surprise no one that TV viewing habits are changing. In fact, Nielsen concluded in 2015 that the shift of content consumption to tablets, smartphones, and other internet-connected devices means we have likely already reached the peak of traditional TV viewership. Moreover, even when we opt for the (not-so) small screen over our mobiles and tablets, the way we watch TV has changed. The rise of DVRs and on-demand content means we can watch the exact programme we want, whenever we want to watch it.
When will TV advertising catch up?
But while consumers have dramatically changed the way they watch TV, the ad experience has remained largely static, forcing brands to show the same ad to every consumer in every household. Sure, much has been made of the concept of Addressable TV - the insertion of household targeted ads in live TV feeds - but immense technical and commercial barriers have meant uptake has been slow across the TV ad ecosystem.
Many progressive agencies and brands have argued that broadcasters and cable providers must pick up the pace in deploying and adopting new technologies to support addressable TV and the digital-like targeting capabilities it enables. This will take real investment. Getting addressable TV to scale means repurposing or replacing decades-old technical infrastructure and remaking successful TV commercial models. No small effort.
But are we bickering over the TV model of the past, when we should be shaping the TV model of the future? I believe so.
From "cord-cutters" to "cord-nevers"
The fact is, we're in the middle of the most significant reinvention of television consumption since the cable box replaced the antenna. According to market research firm IHS, more than half of households in Europe will have an internet-connected TV by 2019, up from approximately 5% a decade prior. Devices like Apple TV, Google Chromecast and even gaming consoles can now deliver a rich array of media content via your Connected TV set.
For all the talk about "cord-cutters" - consumers who cancel cable subscriptions in exchange for a diet of Netflix and Amazon Prime - the more likely future scenario may be the rise of "cord-nevers" who pass on cable or satellite altogether. Look no further than cable operators now offering cord-less packages of their own: both Sky and US-based AT&T and Charter now offer "over-the-top" streaming services that deliver live and on-demand TV content via the internet, no set-top box required.
This has massive implications for both TV content and advertising. Unlike the set top box in your living room, "over-the-top" devices, Connected TVs, and the internet are designed to deliver highly personalised experiences for each and every consumer. Instead of retrofitting old technology (as is the case with Addressable TV), the Connected TV comes ready for personalised content and ad delivery right out of the box.
What does this mean for advertisers and consumer ad experiences?
First, expect more ads on Connected TV content than currently in place today. Although consumers have embraced over-the-top content, ad-supported video content is relatively rare, as most of the popular applications use a subscription model. However, as more TV networks begin distributing content through these devices, we should expect distributors to follow the lead of companies like Hulu and Yahoo! and increase the number of ad supported applications - and overall ads per minutes - to levels closer to (but less than) those of traditional TV.
Even more dramatic though, will be the steady shift away from demographic-based buying and towards targeting based upon consumer interests and past product purchases, with the GRP (Gross Rating Point) as the dominant currency.
As with digital, the move to more targeted TV advertising will first come from publishers looking to monetise undersold inventory, only later to be adopted at scale by advertisers. A lot of content - especially that via on demand services - is not monetised because it doesn't reach the specific demographic definitions and time spans that are required to be rated appropriately. Media owners are realising that there's an opportunity to commercialise that content by selling it on a more targeted basis, using advanced audience data, just as they do on tablets and mobile devices.
And finally, expect a fundamental change in how brands think about developing ad creative. Whereas more targeted digital ads today often come as "matching luggage" to a single, demographically focused TV ad, consumers can expect more tailored and personalised ads not just on desktops, tablets, and mobiles, but on their TV sets as well.