Brace yourself: A flood of news, conjecture and eminently quotable material about television’s future and the contribution of advanced advertising is about to be unleashed from San Francisco, where Interactive TV Today’s TV of Tomorrow conference gets under way today.
No quibbles here with the conference, a high-quality gathering that brings together a “who’s who” of the interactive television sector. Luminaries taking the stage include Comcast CTO Tony Werner, Roku CEO and DVR patriarch Anthony Wood and Aaron McNully, who head’s Google’s TV Ads unit. On the cable/advanced ad side, there’s Visible World founder Seth Haberman, Canoe Ventures marketing guy Chris Pizzurro, former Cablevision Systems advertising sales honcho Barry Frey (he left in May) and Chip Meehan, Regional VP for Comcast Spotlight’s Integrated Media Group.
ITVT’s peripatetic founder Tracy Swedlow has been putting on the TV of Tomorrow show for six years now, which begs the question: When does “tomorrow” actually become “today?”
It’s not just smart-aleck rhetoric (although we’re hardly innocent on that front). More to the point is that this particular conference, along with a sea of blog posts, press releases, analyst-firm pronouncements and white papers, contributes to the illusion that television is being overtaken by a sweeping revolution in the way advertisers target and reach viewers through inventive new targeting and interactive platforms.
It’s the “sweeping” part that’s misplaced, and a little arithmetic shows why.
Running the numbers
Let’s start at the top: The U.S. television advertising market produces around $75 billion in annual revenue. The majority goes to national networks, with about $20 billion spent in the regional and local spot broadcast markets, according to BIA/Kelsey.
Drilling down to the cable operator world, there’s roughly $4 billion in local ad spending, the large majority of it accruing to traditional 30-second TV spots inserted locally into cable network signals. A trickle goes to new-media extensions like dynamic VOD insertion and interactive enhancements to traditional :30s, but nobody we’ve talked to has yet suggested advanced ad platforms are generating even 10% of cable’s local ad revenue intake.
Giving weight to a more macro view, we’ve seen estimates that suggest the much-ballyhooed video-on-demand advertising sector generates less than $150 million in annual revenue, or as Black Arrow CEO Nick Troiano likes to put it, “about one-five hundredth of television ad revenue.”
There’s more promise so far on the Internet video front, where the Interactive Advertising Bureau estimates the placement of video advertising on U.S. web sites produced $1.8 billion in 2011 for participants like Hulu.com and YouTube, plus ad syndicators (Interactive Advertising Bureau). Even making the assumption that the Internet video ad category represents a directional indicator for TV, though, it’s going to be awhile before television catches up to the more standardized and accessible ad formats and campaign management principles at work on the Internet. Thus, an estimate of $500 million in revenue for the “interactive TV advertising category” at large in 2012 seems heady at the moment.
Not trying to be the buzzkill here, just pointing out the raw economic reality. Interactive and advanced television advertising is exciting, promising and possibly destined to become the standard one day for reaching and persuading viewers. It’s just that right now, we’re not there – not even close. And that’s worth keeping in mind as a steady stream of hyperbole – as alluring as it may be – springs forth this week from San Francisco.
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