Nets Propose 15%+ Prime-Time CPM Hikes, Cite Direct-to-Consumer Brand Demand

Nets Propose 15%+ Prime-Time CPM Hikes, Cite Direct-to-Consumer Brand Demand

The TV upfront advertising market is busy, with big broadcast networks asking for double-digit percentage increases.

Media-buying executives say TV networks are proposing 15% to 20%+ increases in prime-time cost-per-thousand viewer prices (CPMs). According to media executives, marketers are estimated to be looking to settle for around 12% to 13% hikes.

One veteran media agency executive called the conditions “brutal.” NBC and CBS are particularly active, nearing deals. Representatives from those networks declined to comment.

A number of factors are contributing to rising prices, including competition amongst more direct-to-consumer brands — around 150 marketers — looking to participate in the market. They are shifting some spending to national TV from digital media.

Growing direct-to-consumer brands — pet foods, mattresses, fitness equipment, etc. — are willing to pay near full CPM prices for TV network inventory. They could squeeze out some traditional major TV upfront brands.

In addition, for new D2C brands, traditional TV CPMs can be lower than digital media for premium video. For example, CPMs for premium OTT video can be priced at $25 — versus around $5 on cable TV networks and $12 on broadcast prime time.

At the same time, D2C companies — in buying higher-priced TV inventory — are pushing TV networks to prove more brand lift metrics and other key performance indicators.

Added to this is a move by traditional upfront TV marketers to shift more TV money from digital media platforms back to traditional TV, given ongoing brand-safety concerns. That move began during the last couple of years.

A year ago, the upfront advertising sales period for the 2018-2019 TV season saw a 5.2% increase in revenue to just over $20.7 billion, according to Media Dynamics, a media consulting/publishing company.

Five English-language broadcast networks — ABC, CBS, NBC, Fox, and CW — gained 5.8% to $9.6 billion, while cable networks were 4.7% higher to $11.1 billion. The CPMs (cost-per-thousands) adult viewers pricing rose 10.2% for the broadcast networks to $31.97, and 9.7% for cable networks to $17.49.

Why Marketers Are Spending More In OOH Media

Over the past several years, out-of-home (OOH) advertising has seen strong growth – more than double that of all other forms of traditional media. OOH grew by an average +4% per year over the last nine years (2010-2018), compared to -1.5% for all non-digital media sales (linear TV, print, radio).

Digital ad sales continue to increase, with expected double-digit growth (+12%), making up over 50% of all ad spend. However, linear ad sales are set to decrease by -5% this year. As radio shifts to streaming formats and television contends with OTT and VOD services, out-of-home media continues to expand both supply and demand. In fact, many predict OOH could double its share of marketing spend by 2025. 

While outdoor advertising has always been an awareness driver for brands, the ability to effectively measure its impact was limited in the past. Today OOH plays a far more strategic role for marketers as they plan and optimize campaigns to not only cut through the noise and capture consumer attention, but also drive conversions. This is why out of home makes more sense for schools than in the past.

As media consumption behavior shifts, and more consumers cut the cord in favor of on-demand or streaming services, it’s becoming harder for advertisers to reach their audience.  In contrast to other media, OOH and digital OOH ads can’t be blocked, skipped or fast-forwarded. They aren’t controlled by a newsfeed algorithm or plagued with fraud. OOH has also become the preferred media type for millennials. 

These are the biggest factors driving OOH’s growth, and why more brands are investing in the channel: 

Digital Transformation

The OOH industry transitioned static out-of-home media placements into rotating digital displays, capable of serving eight times the ads every minute. Although, even though digital OOH makes up less than 15% of total OOH inventory, it represents nearly a third of total spend

Not only has this caused supply to increase, but advertisers across industries have shifted media dollars to take advantage of digital OOH’s ability to dynamically serve creative and measure results in real time. 

Access & Automation 

What was once a very antiquated medium has now blossomed with automated and programmatic ad platforms for OOH media. For marketers, planning and buying OOH can be a very fragmented and labor intensive given the number of media types, media owners and logistics to sort through. 

With the latest Out-Of-Home platforms (DSPs)  marketers can analyze and programmatically buy the latest OOH media inventory available across literally thousands of different markets, neighborhoods and media types. 

Mobile & Geolocation Data 

Mobile phones act as the new survey for the OOH industry. Every day, billions of location observations are captured and shared as consumers use their smartphones, and opt-in to receive accurate information regarding weather, news or surrounding events. 

Location observations also play a valuable role for brands, making it possible to report (in aggregate) how many consumers are exposed to an OOH ad, what their daily journey is like and whether they visit specific locations. In addition, as marketers begin to understand their audience and who’s being exposed to their ads, they can better personalize and optimize their campaigns – further increasing reach, relevancy and effectiveness. 

OTT Is Key For TV Marketing Plans

Investment in digital advertising (Google, Facebook, etc.) has been higher than traditional media for a few years. Historically, however, viewers have spent more time with traditional media (broadcast TV being No. 1) than digital.  This metric has generally driven linear media plans but now consumers are spending more time with digital than traditional media.

The shift to digital, including digital video, is a result of billennial maturation and the entrance of GenZers into the coveted 18-49 demo. As a result, it’s a great time to establish a foothold in OTT media now while competition and rates are still relatively low.

Why does OTT matter? 

There will be over 24 billion connected devices globally by 2020, per Business Insider. This presents both a challenge and an opportunity for advertisers. The distraction of multiple devices has reduced the effectiveness of one-size-fits-all TV.

Sophisticated advertisers with higher ad spend can use this distraction to their advantage by creating content specifically designed to connect across all screens, with unique content for each device (broadcast, live social feed, exclusive mobile content, promotional landing page, and AR-embedded print material).

The Video Advertising Bureau says OTT delivers 42% market exposure on its own, and one-third of all OTT households have three or more subscription accounts. The reason for the rising trend away from traditional bundles isn’t the number of channels. Actually, demand for content is higher than ever. But historically, linear multichannel subscriptions bundle too much content for too much money, and require too long of a commitment.

OTT removes these barriers and responds to the needs of an ever-growing population of consumers: freedom of choice, personalization and convenience.

Reaching Millenials and GenZ

The millennial generation has been widely identified as the most coveted demographic for marketers, but catering to this segment requires a shift in content provisioning.

While the majority of baby boomers and Gen Xers gravitate to broadcast television, 86% of millennials and GenZers watch their favorite programming via OTT.  OTT’s projected annual growth through 2022 is more than three times higher than traditional TV.

Despite this trend, only 15% of advertisers consistently include OTT, reports Adweek. That represents a tremendous opportunity for companies marketing to the growing population of younger viewers.

Fixed vs. variable pricing

Broadcast advertising is fixed cost and priced according to ratings. Streaming costs are based on the number of total viewers (bandwidth used), as well as the number of views per person. When infrastructure, business models, and paradigms are entrenched after decades of selling TV advertising one way, it’s difficult to change.

Formula for success 

While OTT grows, it is most effective when combined with the proven results of linear television. Consider the following from the Video Advertising Bureau:

• 70% of OTT households also have a linear multichannel subscription 

• When linear TV and OTT are combined, brand favorability doubles to 99%

• Message reinforcement and incremental reach are increased 

• More premium ads are delivered

Search Low Priority For Marketers In 2020, Video Tops List

Top trends for 2019 and 2020 marketing strategies show that
search is low on the scale of priorities, according to recently
released data.
Only 21% of the 1,000 creative and digital marketing decisionmakers surveyed in a report by Mondo cited visual search as
a priority to their marketing strategy through 2020. Only 10%
cited voice search.
The survey was conducted from May 14 through June 14 via
email, by SurveyMonkey.
On the other end of the spectrum, video marketing topped
the list. Some 76% said video marketing will be important to
their 2020 strategies. GDPR compliance followed at 55%, and
artificial intelligence and machine learning tech or services
came in at 41%. Experiential marketing ranked No. 4 with 38%,
followed by reactive design at No. 5 with 31%, micro moments
at No. 6 with 28%, and motion design at No. 7 with 24%.
Voice search remains a low priority for digital marketers. Only
17% said they have optimized their website or plan to optimize
it for voice search within the next 12 months.
For visual search, 35% have already optimized or plan to
optimize their websites.
Audience targeting at 86% tops the technologies that have
supported search strategies most during the next year,
followed by keywords at 83%, remarketing at 76%, video at
55%, interactive content at 41% and automation and artificial
intelligence at 28%.