
TV Advertising - dforrestwilson
https://stratechery.com/2016/tv-advertisings-surprising-strength-and-inevitable-fall/
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exelius
I absolutely agree with his take on this; and I've echoed a similar sentiment
in my comment history.

The advertisers who advertise on TV are the biggest, slowest, oldest
companies. They're largely just interested in "brand advertising" and they
don't understand how to properly do digital advertising.

TV money is absolutely going away -- the future of TV is commercial-free
subscription VOD (like Netflix). But we haven't replaced TV with anything that
the marketing managers at these companies know how to measure and report on.
For all its faults, the cause-effect relationship in TV advertising is well-
understood. That's not the case for digital, so advertisers aren't as
comfortable spending $300 million on digital ad spend. They don't believe that
they have to change the balance of media buys and creatives; it's been an
invaluable rule their whole career so why change it now?

The big question is "What does TV advertising get replaced with?" I'm not sure
digital is the answer; and I think the need for traditional advertising
somewhat disappears along with their use cases. As we start to rely more and
more on AI to make decisions for us, promoting one product versus another in
AI applications will become a new form of advertising (which is why Google is
all-in on AI).

But we don't know what form those products will take because the market hasn't
taken shape yet. The next 5 years will be really interesting on the AI front
with regards to advertising.

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rargulati
"What does TV advertising get replaced with?

Snapchat. Recently, they’ve been injecting ads into their stories (these clips
are on average about 10 seconds). A few things I found interesting about the
implementation and observing others interactions with the ads:

1) At being 10 seconds, the ads are relatively short and contextually
relevant. They flow more naturally in the stories than a television ad in
linear programming. There’s likely strict quality control being enforced by
Snapchat. It will be interesting to see them scale this.

2) As a user progresses further along in a story, does a user become more
invested in the story (this is a thread of related snaps that Snapchat
curates) or are they more likely to bounce before the end. In television,
you’ve got the hook of the narrative keeping the user until the end. That
would dictate ad placement. Recently Snapchat has done something interesting
to combat this: giving the user different story paths to go into (from a given
story point).

3) Most importantly, as a user, you’re able to skip the advertisements if you
want (and go on with the story). This creates a pressure on the advertiser to
create engaging and contextually relevant ads. The feedback of length of time
played, number of times skipped, etc all create signals on creative
performance (historically difficult to judge on television as it’s not an
interactive medium).

This is markedly different from the typical television advertisement. There’s
the element of engagement of the user (skip or stay), the constrained view
time, and constraint of being relevant to the surrounding content. This
creates a competitive pressure that television ads haven’t faced.

Edit: This isn't to say that Snapchat is final platform for this medium of
advertisements. These learnings (and more) will likely be applied to most
social networks that enforce constraints on short-form video advertisements.

~~~
faizanbhat
_There’s likely strict quality control being enforced by Snapchat. It will be
interesting to see them scale this._

Given that a small number of companies are responsible for a large proportion
of brand advertising spend, I would posit that it isn't too difficult to scale
quality control if you focus on building relationships exclusively with heavy
spenders. Quality control becomes a bottleneck at the long tail end of the
market, where ad budget per creative is much smaller. At the top end, you can
behave like a TV channel and reuse established quality control practices. If
you have 100m+ active users and a video-heavy medium, this shouldn't be
impossible to accomplish.

That said, I have heard several reports about Snapchat's eagerness to build
programmatic ad expertise, which (in the context of this discussion) _may_
pointing to one of the following possibilities:

1\. Large brands are not exhibiting TV-style buying behaviour (i.e. large
upfront buys) on Snapchat. This would make sense as it mirrors trends in the
rest of the industry. If you, as the buyer, have access to technology that
lets you better control and manage your spend, gather intelligence, and
understand ROI, then why wouldn't you? This is the buying mechanism that
programmatic technology enables, and its more or less incompatible with TV-
style upfront buys.

2\. Snapchat wants to open their doors to mid-market and long tail
advertisers. The goal might be to boost spending, drive up prices, or to go
after performance advertising dollars. If I were a Snapchat investor, I'd find
this second scenario slightly worrying, as quality control becomes very very
difficult.

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shostack
Agreed with most of your points. I commented elsewhere in here, but a lot of
their options here seem somewhat hinged on implementing better tracking (which
, which seems to go against their brand promise of anonymity.

How do you see their recent policy updates[1] in this context?

[1] [http://marketingland.com/snapchat-changed-terms-service-
priv...](http://marketingland.com/snapchat-changed-terms-service-privacy-
policy-170899)

~~~
faizanbhat
The only thing that stands out in that piece is that they're collecting
advertising device IDs. Those IDs are anonymous and resettable. Snapchat
doesn't need them internally since they have a more persistent identifier,
i.e. snapchat user ID.

It might be that they want to pass this ID into programmatic platforms. Some
systems treat them as pseudo-cookies for frequency capping, measurement, and
basic targeting.

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geodel
> Relatedly, big box retailers that offer little advantages beyond
> availability and low prices are being outdone by Amazon on both counts. In
> the very long run it is hard to see why they will continue to exist.

I have lately noticed amazon is increasingly more expensive and return
policies more restrictive. Yes, it is good for their business but I find
amazon is getting less compelling offering for me.

And the 'very long run' part is cleverly phrased obviousness. I mean in the
very long run I do not see why human with so many shortcomings would not be
replaced by some superior digital form of life.

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jgv
Beyond the dinosaurs being the big spenders on TV, there's no way digital
advertising as we know it today will replace TV advertising. Creatively, you
really can't even compare the two. A TV spot is the opportunity to make
someone laugh or make someone feel something – anything. A banner ad or a spot
with a "skip now" button is not going to do that. You really can't tell a
story (as cliche as that sounds, its true). Digital advertising has less
creative opportunity for the people making it and basically no reason for
anyone seeing it to care.

This is why Snapchat and Facebook starting to really figure out video is so
huge in adland. As attentions shift there and it starts to house real content,
advertisers will have an actual digital channel to create content people might
actually care about.

~~~
dswalter
I would posit that Snapchat and Facebook are working so hard on videos because
video ads have a much higher payout in the current ecosystem. I don't know
that it's necessarily because of efficacy.

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jgv
The higher payouts for video exist because those units are more effective.

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shostack
The higher CPMs are because it is a "new" format that has less ways of
avoiding it (ie. prerolls) compared to banner ads.

Effectiveness is totally dependent on a variety of variables, and as someone
very well versed in these things, I can confidently state that most
advertisers have no clue about things like "cross channel attribution," how to
go about finding a proper value for view-through conversions (hint: it sure as
heck isn't 100%), viewability, etc.

For example, right now FB counts a view as a video that plays for three
seconds[1] (could have sworn it used to be 2). A lot of advertisers, myself
included, would laugh at that in terms of properly conveying the value of most
messages (Geico ads aside--they really know their medium).

Combine that with Facebook also counting view-throughs as conversions with
100% credit (albeit with a short lookback window) by default, and you have the
recipe for overvalued CPMs on video. And that's just on FB--other sources can
be much worse.

[1][http://marketingland.com/whats-a-video-view-on-facebook-
only...](http://marketingland.com/whats-a-video-view-on-facebook-
only-3-seconds-vs-30-at-youtube-128311)

Part of me wishes Ben had guests on Exponent. I listen to every episode, and
would LOVE to dig into this stuff with him from an advertising perspective as
he actually has a somewhat solid sense about it. But what I've been
disappointed in is his inability/refusal to dig deep into these key points.

Performance for video and display overall is super hard to measure effectively
given the nature of the beast. Just because there's lots of data available
doesn't mean it is the right/best data, and he should point that out more.
Attribution is a hairy beast, and ad sales people take full advantage of
people's lack of knowledge on this.

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fumar
One perspective I try to keep in mind is that all media will one day be
addressable. That means whether an "ad" is video, social, mobile, desktop, or
VR, it will be accessible to marketers. That turns television commercials into
video ads and the ads will be powered and purchased in real-time depending on
the end user. I agree traditional TV buying will decline, a new more holistic
approach (digital buying) will replace it. For the end user this means more
targeted advertising. There are several companies that have embedded their
tracking into modern televisions.

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PaulHoule
Ad spend will be up in 2016 because of the elections, that is what makes the
dead cat bounce.

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ilamont
_No one is going to click a link in their feed to buy a car or laundry
detergent, and a brick-and-mortar retailer doesn’t want to encourage shopping
to someone already online._

Automobile manufacturers have been working with digital advertising for years
and their methods are quite sophisticated (1). Every day tens of millions of
people see their campaigns on Facebook, mobile games, SERPs, etc.

Brick-and-mortar retailers are also using ads to drive people to their
websites or to their stores. One example that springs to mind is the Best Buy
campaign in the runup to the Superbowl to get people to come in and buy a
wide-screen HDTV before the game. I don’t know how effective it was, but
surely some people clicked on the ads.

1\. [http://www.adweek.com/news/technology/car-brands-are-
startin...](http://www.adweek.com/news/technology/car-brands-are-starting-get-
marketing-data-theyve-always-wanted-162762)

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kylec
No one clicks on a link to buy a car not because no one wants to, but because,
unless you're buying a Tesla, you can't, you have to buy through a dealership.

~~~
drumdance
There's no reason that link can't redirect you to a local dealer.

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B1FF_PSUVM
Interesting fact in the linked page:

"Looking at data since the 1920s, the U.S. advertising industry has always
been about 1 percent of U.S. GDP. It’s surprisingly consistent, mostly
tracking between 1 percent and 1.4 percent—and averaging 1.29 percent."

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markbao
Mods should update the URL to [https://stratechery.com/2016/tv-advertisings-
surprising-stre...](https://stratechery.com/2016/tv-advertisings-surprising-
strength-and-inevitable-fall/)

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sctb
Thanks! We updated the link.

