April 25, 2017 2 years 2 months ago

TV Advertising: "I've heard a lot of reasons why things can't change. It's all bullshit."

TORONTO – Irwin Gotlieb’s company is in charge of a third of the world’s advertising budget and he came to Toronto last week to tell Canada’s broadcasters to get on with addressable advertising, measure better, and work co-operatively, or his company will soon be spending its clients’ money elsewhere.

In an appearance at the Future of TV Ads Conference Thursday at Steam Whistle Brewery and in an interview with Cartt.ca, the global chairman of Group M implored Canadian broadcasters – especially those with TV distribution arms as well – to follow the lead of much of the rest of the world and deploy the technology for addressable advertising – where TV ads delivered through set-top boxes are targeted to the right demographic through postal codes in conjunction with other anonymized data sets (so that GM, for example, could show a Cadillac SUV ad during a Raptors game in a well-to-do suburb and a Chevy Spark ad in a lower-income region, in the same ad slot, for example).

The excuses that the technology isn’t ready, or that not enough advertisers want to reach audiences this way through their TV campaigns simply doesn’t wash anymore. “I’ve heard a lot of reasons why things can’t change. It’s all bullshit,” Gotlieb told the conference audience. “This industry should have deployed addressability five to seven years ago,” he added in a later interview with Cartt.ca.

The leading technology company in this space, Invidi (in which Group M, through parent WPP Group, has a minority ownership stake, with AT&T being the primary owner), has been a success story. It served up 140 billion ad impressions in 2016 so clearly, it is doing something correctly. For companies using the technology, it has meant a 30% increase in ad revenue and has moved the needle for their clients who have seen, in some cases "massive" sales increases thanks to addressable, targeted ad campaigns, says Invidi as well as Gotlieb

The challenges standing in the way of addressable advertising here boil down to one thing, said Gotlieb. It must become a strategic imperative of the vertically integrated Canadian companies. Essentially, the likes of George Cope (Bell CEO) and Joe Natale (Rogers CEO) and PK Péladeau (Quebecor CEO) have to make it happen.

There has to be an edict from the C-suite in the VI companies because addressable advertising only works when the software is enabled on consumer set tops – and the engineers on the distribution side generally don’t like their networks to be messed with, as it increases the chances of outages and other complications. So, there needs to be a mandate from the top just like how Dish Network chairman Charlie Ergen, former DirecTV CEO Chase Carey, Charter CEO Tom Rutledge and Comcast CEO Brian Roberts all made it happen on their networks.

The difference Stateside, as many know, is that the carriers there are granted two minutes of local ad availability time per hour in each cable channel to sell in their markets. It’s an estimated US$5 billion business and addressable is a successful local ad strategy. In Canada, our regulations do not allow that time to be sold locally as a protective measure for local TV and radio broadcasters. It must be set aside for the marketing of Canadian TV channels or carrier wares only.

“This time if they don't do something, it’s an existential threat.” – Irwin Gotlieb, Group M

However, Quebecor, Rogers and Bell, if they question the efficacy of addressable advertising, could begin testing it with their own consumer marketing. It’s estimated those three companies alone spend nearly $300 million annually pushing their own products. Rogers, for example, with three distinct wireless brands serving three different demographics could easily target TV ads to chatr, Fido and Rogers Wireless clientele or prospective clientele to see how it moves the needle. Gotlieb says cable carriers Stateside pushing new VOD or PPV movies to their own customers with addressable ads has seen sell-through rates “multiple times” better than in the past with more traditional marketing techniques.

For Gotlieb, making addressable advertising available to his clients should be a no-brainer for vertically integrated companies – and it should be easier, given the fact Canadian carrier and media groups are ostensibly under one roof. But it doesn’t seem to be working that way. The VI companies, when it comes to priorities, would much rather spend money on pursuing wireless subscribers or boosting broadband than investing in broadcast advertising platforms, even if the spend is only “in the low tens of millions” to get it properly running, he said. Since the broadcasting arms of Rogers and Bell are either losing money (conventional TV) or seeing revenue shrink (specialty TV), investing in something new in media – and then convincing the wireline engineers to make it a priority – is a tall order.

As well, when it comes to non-VI carriers such as Shaw, Cogeco, and Telus, rolling out addressable on its consumer set tops will involve a revenue share negotiation, which are never easy conversations.

Whatever is holding back the Canadian industry, addressable advertising and proper measurement of all viewing is actually beyond the point of it being a strategic choice, said Gotlieb. It’s now a binary decision. Either do it, or the broadcasting arms of the companies will perish. “Just as the broadcast television community generally sat back and allowed the Facebook and Google duopoly to form (for digital advertising), are they going to allow over the top competitors to gain significant advantage?” he asked. “This time if they don't do something, it’s an existential threat.”

“We would rather do it with the partners we have grown to rely on and trust…” but, “we’ll go to other content owners if we have to." - Gotlieb

What if the Canadian broadcasters don’t heed the warning and continue to punt investing in addressable ads down the road? They could seriously be caught with their pants down if an OTT player like Amazon or Netflix or YouTube began selling TV ads in earnest. If those companies begin buying up the Canadian rights to the U.S. content which sustains so much of the Canadian broadcasting system through simultaneous substitution – and began to sell advertising in Canada – Gotlieb said Group M wouldn’t hesitate switch its budget there.

“We would rather do it with the partners we have grown to rely on and trust…” but, “we’ll go to other content owners if we have to,” he said.

The ad clients themselves, such as Hyundai Canada’s marketing director Lawrence Hamilton, also told the TV salespeople in the conference audience that his company will pay more for addressable campaigns, especially since they know it will drive people to the car lot, if done correctly. Gotlieb committed to spending more with addressable, too.

Finally, the Canadian ad marketplace simply isn’t big enough to pull this off without co-operation between the broadcasters – for the good of the industry as a whole, believes Gotlieb. For addressable, targeted, ads to work, everyone needs to use the same software and collaborate on a common currency – and even share data at some level so that clients can properly target their ads and segment and increase their spend across the board with Canadian TV – but only if the broadcasters get on with it. Someone has to lead, or else.

“In the digital space with Facebook and Google, and (broadcasters) came out on the losing end of that,” added Gotlieb, “but that wasn't the head on collision. The next one is a head on collision.”