Television Advertising

Television advertising is the sending of promotional messages or media content to one or more potential program viewers. The viewers are influenced by the messages, resulting in actions that benefit the advertiser. In 2010, many new TV advertising services will be offered by TV broadcasters, compared to the simple linear ad insertion practices used in traditional broadcast systems. Some may even be as simple as inserting ads into video on demand programming systems.

Advertisers benefit most by providing messages to people with an interest in their products or services. Media companies (such as broadcasters) are paid by broadcasters to send promotional messages. Advertisers (or their ad agencies) coordinate the selection of broadcasters and the transmission of promotional messages using advertising campaigns.

Broadcasters operate systems that gather, organize and provide people with the content they want to see. They may purchase license rights for the content through their systems, or create new (original) programming, and then merge it with advertising media. Viewer types, such as teens, adults, women and men, may be determined by the types of content being watched.

Viewers select the programs they want to view, most of which contain promotional messages that motivate them to take actions that satisfy advertiser's business objectives. Some such actions may include purchasing a product, signing up for an email campaign or subscribing to a service. 

Figure 1.1 shows how the television advertising model works. The advertiser pays money to the TV broadcaster for the insertion of a promotional message. The TV broadcaster mixes in advertising messages with content that the viewer wants to watch. After the viewer watches the advertising message, they perform a desired action (buy a product or subscribe to a list), which earns revenue for the advertiser.

TV Advertising Marketplace

As the mix of media promotion types is shifting from broadcast television to Internet marketing, television viewing habits are changing, and TV advertising web portals are changing how companies submit and manage TV ads.

Advertising Shift to Internet Marketing

Since 2005, advertising spending for TV broadcasting has not increased much while 30% of advertising budgets shifted to Internet marketing. It makes sense. It's easy, measureable and effective (targeted). 

TV Viewing Habit Changes

Television viewing habits are changing. Viewers have developed ad blindness and widespread integration of digital video recorders (DVRs) has enabled them to bypass commercials. To overcome some of these challenges, some TV advertisers are migrating to paid placement advertising. Product placement within content prevents viewers from skipping past the ads, as they're embedded within the programs. While this is good for TV networks that produce and sell the programming, it can be bad for broadcasters because they don't make money on the paid placement advertising. 

TV Ad Bidding Web Portals

Television ad bidding web portals are web sites that allow companies or people to submit promotional media, such as television commercials and logos, and bid on the insertion of these ads into TV broadcast systems. In 2008, Google quietly entered into the TV advertising industry.

In addition to optimizing the ad revenue that can be generated, their web based advertising system streamlines the ad submission process. Some TV broadcasters can have content submission guidelines that are over 100 pages and many people at the broadcaster level are part of the approval process. TV broadcasters may require that ads be scheduled in ahead of time, sometimes weeks in advance. Web based TV advertising portals may allow advertisers to instantly adjust their ad campaigns (provided their ads are pre-approved).

Figure 1.2 shows a comparison between TV advertising and Internet advertising in 2009. This comparison shows that advertising

during the Superbowl in the United States costs approximately $2.7 million per slot, which translates to 2 cents per viewer. This can be compared to pay per click Internet ads which earn approximately 54 cents per click.

TV Broadcasting Revenue Sources

Some key ways to earn revenue in TV broadcasting systems are to sell content, earn advertising revenue, or generate revenue from direct sales.

Content Revenue

TV broadcasters earn revenue from content through subscription fees and pay per view fees. In general, content costs from networks have been increasing. What is more challenging is that viewers can get content through many new media channels, which reduces the value of TV 

networks. To keep and grow their viewership, TV broadcasters must get content that is more valuable to their viewers. 

Advertising Revenue

Each year the amount of money that companies spend on advertising increases with the gross national product (GNP). Unfortunately for TV broadcasters, advertisers are shifting ad spending to the Internet. Today, approximately 1/3rd of the amount of TV ad spend ($47B per year in the United States) is now being used for Internet marketing ($17B per year). The growth in TV ad spending since 2009 has been approximately 0% [www.TVB.org], while the growth in Internet ad spending is well over 10% [www.IAB.org]. 

Television Commerce

Television commerce (T-Commerce) is revenue that is generated from direct sales which are processed through TV broadcasting systems. T-Commerce is shifting revenue from Internet systems (e-commerce), which had already exceeded $1,000 per person per year in the United Kingdom, in 2007 [www.IAB.org]. Unfortunately, in 2010, many TV broadcast systems use proprietary systems that do not support T-Commerce and the costs and barriers to implement T-Commerce can be substantial, delaying its use in TV systems for several years.

Advertisers

An advertiser is a company or person that pays for services provided to others in return for the inclusion or presentation of marketing messages. Advertisers use marketing plans to define their promotional strategies, media communication objectives, and media channels (media mix). Advertisers define promotional projects (advertising campaigns), which determine the messages and audiences they want to communicate with (audience reach).

In general, advertisers want to motivate recipients to take action with the least promotional costs possible, so they test numerous promotional programs to measure both response and effectiveness. 

Marketing Plan

A marketing plan contains the objectives of the marketing process, the responsibilities and incentives of those involved in the marketing process, and the resources that will be available or used for the marketing programs. A marketing plan may also define which media channels will be used (media mix).

Advertising Campaigns

Television advertising campaigns are marketing activities that send promotional messages to people about products, services and options that are offered by a company. TV advertising campaigns define how and when promotional message are provided to television viewers.

Audience Segments

Audience segmentation is the identification of viewers by categories (segments). TV programs may attract specific audience segment types.

TV Broadcasters

A broadcaster is a company that transmits or provides information to users that are connected to or able to access signals on the broadcast network. Broadcasters may provide a mix of linear (scheduled) programming, on demand programming and other services, such as gaming and communication applications. Some of the programming offered may include promotional messages (ad supported networks) and some may be provided without ads on a paid subscription basis.

Content Sources

The content for broadcasters may come from a mix of sources such as TV networks (affiliates), syndicates, content aggregators and original programming. Content often accounts for the highest cost within a TV broadcasting system. 

Ad Supported Network

An ad supported networks is a provider of media programs that accept advertising time or ad spots as a form of compensation for the right to distribute (broadcast) content. Broadcasters may use a mix of direct advertising sales staff and advertising networks to obtain promotional advertising revenues.

Broadcast Systems

Broadcast systems can be a mix of transmission lines, processing equipment, and distribution systems that can acquire media from content sources and provide it to viewers. A TV broadcaster may use several types of distribution systems (such as cable, wireless broadcast

satellite, or mobile telephone) to reach customers. Because it is unlikely that the same company owns all types of distribution systems, broadcasters are integrating their systems with one another.

Figure 1.3 shows a TV broadcasting model in which TV broadcasters link content providers (TV programs) to viewers through a variety of distribution system types. This diagram shows that a TV broadcaster receives content from a mix of sources. The headend selects and manages content that is sent through the distribution network. The distribution network transfers media to viewers and a TV broadcaster may transfer content through multiple types of distribution channels, such as satellite, broadcast, cable, mobile, data, and Internet. Viewers may access programming on multiple types of devices such as home televisions, mobile telephones, or multimedia computers.

TV Viewers

Television viewers are people who watch or access viewable media products (such as television shows). TV viewers consume desired media based on personal preference. They are influenced by the media (content and ads) and perform actions that, without exposure to the media, they may not have otherwise performed.

Target Audiences

A target audience is a section of people who share common characteristics. These people may be more likely to be interested in buying or being associated with products that match audience needs or desires. By identifying desired target audiences, advertisers can pick which programs they desire to insert their advertising messages into.

Interruption Marketing

Interruption marketing is the unanticipated insertion of promotional messages into recipient media consumption activities (such as web browsing or television viewing). With the introduction of digital video recorders (such as TiVO), consumers may be able to store programs and skip through advertising messages that interrupt their programs.

Ad Blindness

Ad blindness is the ability of a viewer to ignore or not notice the presence of an advertising message. Even when the viewer does not skip past advertising messages, these ads may still be ignored by viewers who have become numb to their presence.

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