Thursday, 23 June 2011

Cord-cutting: An Opportunity for Advertisers?

Cord-cutting: An Opportunity for Advertisers?


Every day more TV viewers are becoming “cord-cutters” by ditching their paid TV subscriptions for streaming video delivered to computers, tablets and televisions over the internet. At least that’s a story that is commonly told in magazines and TV broadcasts about the end of television as we know it.

Industry executives have declared cord-cutting to be a myth, but the evidence is mixed. In February DirecTV announced that Q4 of 2010 saw the company’s largest customer growth in ten years, yet a Consumer Electronics Association report released in May revealed that 10% of survey respondents said they were “very likely” to cancel their pay TV subscriptions. That number is not huge, but it indicates a trend towards forgoing cable and satellite services in favor of Internet-based television.

The infrastructure for such as shift is certainly falling into place, as almost all new televisions and DVD players include Internet TV functionality. Subscriptions for such services are projected to rise from 46.2 million worldwide in 2010 to 131.6 million in 2015, according to a report released in March by Pyramid Research.

This transitional phase presents an opportunity to advertisers. Only 16.2% of of advertisers are now buying ads on Internet TV platforms. Marketers should consider taking advantage of this by moving into the space, where they can enjoy a larger share of voice with a smaller investment. Brands can also bolster their image as innovative, forward thinking companies by working with Internet TV platforms while they are still an emerging technology.

An increased ability to target a specific audience is another benefit to advertising on Internet TV platforms. Hulu has recently unveiled a new feature called “Ad Tailor” which asks viewers whether or not each ad is relevant to them. The responses are captured and attached to the viewers’ profile so that future ads can be adjusted to their preferences. Hulu also uses complex algorithms to profile users based on the selection of shows they watch. In contrast to traditional TV, which must look at all viewers of a particular show as a big, homogeneous audience, Hulu takes into account the entire portfolio of shows a viewer likes and targets advertising based on their unique mix of tastes.

For any marketer that has produced video ads intended for traditional television, shifting a portion of their media budget to Internet TV platforms is a smart move in the near term and an investment in the long term. Better targeting, a larger share of voice and an association with an innovative new technology will be their immediate rewards and the experience they gain will better prepare them for when Internet TV becomes a mainstream delivery system.

Greg Steen, 06.22.2011

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