How broadcast companies manage the current economic crisis over the next 12 months will be just as important to the sector as the issues of convergence were over the past five years. As advertising budgets shrink, pure play-online campaigns are growing ever more attractive due to lower costs and, importantly, higher measurability. In the advertising world, a better understanding of audience behavior is increasingly essential, and the traditional broadcast sector, which struggles to accurately track audience viewing patterns, is at considerable risk from falling advertising revenues. In order for broadcasters to retain a share of the advertisers’ spend, it is essential that they use advanced audience and campaign management systems, spanning live TV, time-shifted viewing and interactivity, to track, adapt and profit from evolving consumption habits.
Traditional broadcast advertising is in a precarious state. Declining revenues in the automotive and financial sectors, advertising’s two largest contributing industries, will have a significant impact on ad spend through 2009. Preliminary estimates suggest that ad cancellations could reach as high as 25% during the first quarter of next year, and as the economic crisis continues to unfold, these estimates could increase even more. For broadcasters, which in many cases have around 60% revenue exposure to advertising expenditure, tackling concerns of the looming ad spend decrease is essential for survival.
Broadcast networks are not the only sectors to feel the pinch. Pay-TV and online services will also take a hit, while online advertising will grow, albeit at a lower rate. Goldman Sachs analyst Mark Wienkes forecasted that while 2009 US broadcast advertising revenues would decline by 10%, cable network advertising revenue will decline 1% and online advertising will slow to single digit growth.
In order to mitigate the industry-wide decline in advertising revenues, broadcasters must deploy systems that provide better insight into evolving consumption habits in order to demonstrate effective audience targeting for advertisers. Traditionally, measurement companies like Nielsen used panels and select chip-based systems to gain insight into a household’s linear TV viewing habits. However, as new technologies and services expand the way people obtain and consume content, such as through personal video recorders (PVRs), interactive features and video on-demand, traditional audience measurement methods fail to give an accurate insight into a modern household’s TV usage.
Given the imperative of mapping viewing habits, set-top-box middleware systems vendors are in an increasingly attractive position to provide measurement tools that span a variety of the new TV service types. Essentially, middleware systems are able to effectively track and report the consumption of content across new television services, as well as feed data to advanced advertising analytics and business intelligence tools. For instance, middleware-based audience measurement tools are able to analyze the consumption of a PVR-recorded television program every time it is accessed over an entire week.
Gaining insight into audience behaviors will generate the transparency across multiple television services much needed by advertisers. Broadcasters that use multiplatform campaign management tools to complement audience measurement systems will fare the coming negative advertising market conditions far better than those that do not. As online advertising looks increasingly attractive due to its measurability, it is crucial for broadcasters to demonstrate their ability to create comprehensive profiles of their customers’ viewing habits, and help integrate these into an effective multiplatform ad campaign. If broadcasters do not deploy advanced audience measurement and multiplatform campaign management systems, there is a very real risk that they will not be able to attract or retain ad spend, in what is already an increasingly challenging marketplace.
