TV Ads in Flux: $60B in Limbo Amid Changing Viewer Habits and Nielsen Upheaval

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To hear TV executives tell it, the advertising business couldn’t be better.

“The upfront was historic,” Fox Corp. CEO Lachlan Murdoch said Sept. 14 during a Bank of America conference, calling the market “tremendously strong.” Discovery touted its “most successful upfront ever,” and NBCUniversal trumpeted double-digit pricing and volume growth. But the endless superlatives obscure a business in transition as consumers and companies shift from linear television to streaming. Then there’s the measurement fiasco: the networks’ war with Nielsen, which has provided TV ad currency metrics for 60 years.

Though total TV advertising is set to top $60 billion this year, according to media agency Zenith, the market is expected to shrink by 4 percent in 2021, which creates an incentive to stop digital giants from stealing business.

The TV giants’ big advantages are quality and scale. “There’s a huge demand for advertising in quality programming, and there is a glut of advertising on social media screens where people can skip them in seconds,” says Kevin Krim, CEO of EDO, a data firm that tracks TV commercials’ performance. “But when you get to good programming that you want to watch and you can’t skip the ads? Advertisers love that.”

The shift in viewing patterns is splintering the video ecosystem even further, with broadcast networks, cable channels, major streamers and smaller ad-supported ones (like Tubi and Pluto) all fighting for shrinking slivers of consumer attention.

“I’m convinced that streaming revenue per hour for advertising is going to blow away what is on linear right now,” says Michael Beach, CEO of advertising analytics firm Cross Screen Media. “It is going to take a couple years, but the first battle for the existing group is to keep the audience in their ecosystem. None of them is doing a great job at that.”

The networks’ unbeatable scale particularly comes into play with sports programming. Krim notes NBC’s Sunday Night Football reaches so many consumers that there is no way for an advertiser to match that simultaneous scale on digital, where platforms remain tightly focused on advertiser targeting. While Facebook has Toyota pay a premium to target users in the market for a new SUV, NBC reaches a huge chunk of the population, including those in the market now and those who may be soon. “These owners of the media who are selling this ad inventory, they are smart,” says Krim. “They understand that the way to take on the Googles and Facebooks is to play to your strengths, but also to respond to the appeal your competitors are offering.”

That likely means a two-pronged approach: event-driven programming like sports and awards shows that provide scale, and on-demand video that anchors a long tail of targeted advertising. “[Streaming] has a targeting advantage, and it actually strengthens our reach equation, particularly when you pair it with linear,” ViacomCBS CEO Bob Bakish said Sept. 22 at Goldman Sachs’ Communacopia Conference. Indeed, companies like ViacomCBS and NBCUniversal reporting increased reach as a result of bundling their streamers and linear channels is one reason the 2021 upfronts were so strong.

Before they get to that light at the end of the tunnel, though, they have to deal with the measurement problem. Networks, led by their Video Advertising Bureau trade group, are fuming at Nielsen, arguing its depleted viewer panels during the pandemic led to skewed data and that it takes too long to incorporate more comprehensive streaming and viewership metrics (now expected sometime in 2022). Meanwhile, the Media Rating Council revoked Nielsen’s accreditation, and NBCU is seeking new measurement partner proposals.

In a Sept. 9 letter, Nielsen CEO David Kenny apologized to the company’s partners about taking too long to explain how COVID-19 safety protocols were affecting panels, adding, “We have and will continue to respond to the MRC and our clients on areas we can improve, as their audiences are changing at a rapid pace.”

But those changes in consumption habits, combined with digital giants chasing a piece of the pot, have TV companies scrambling for alternatives, with Comscore and VideoAmp among those now offering measurement options. Despite (reluctantly) accepting Facebook or Google measurements at face value, marketers are unlikely to embrace any option wholly owned by one of the big TV companies, given the long history of TV ads being bought and sold using a third-party currency. “No advertiser will ever trust the publisher who is delivering the media and also giving you the measurement,” says Seraj Bharwani, chief strategy officer of digital ad firm AcuityAds. “You are not going to grade your own homework. That is a cardinal sin.”

So the TV ad biz finds itself in a state of flux. Viewer habits are changing, measurement is changing, and the technology that powers it all is changing. Traditional players maintain one critical advantage: They still know how to make good TV. For a marketer seeking to reach a huge swath of the country in one hit, there isn’t a better place to get a return on investment. Says Krim, “It is inevitable that quality TV programming is going to be one of the best places to advertise into the distant future.”