June 13, 2012

Q&A, David Kaplan, video and publishing editor, AdExchanger.com

Posted by: in North America

David Kaplan was one of the experts and influencers we talked with for our May trend report, “10 Ways Marketers Are Using the Second Screen.” At AdExchanger.com, he tracks how new technologies and viewer behaviors—e.g., the rise of the connected home, the acceleration of time-shifted viewing—affect the buying and selling of television advertising. He talked to us about how this has been changing and how it’s likely to evolve as marketers start to experiment with innovative cross-platform approaches.

What do you cover at AdExchanger?

I primarily focus on the intersection of online video and TV advertising buying and selling methods. Essentially, online advertising is all about targeting and interactivity; now, it’s coming to TV through the set-top box, through connected TVs, through people watching TV programming on their smartphones and tablets and computers. We’re also looking at the effect of social TV apps, the idea of people checking into shows. Also the introduction of over-the-top services like Roku, Boxee, and how that affects advertising.

Do you see 2012 as a turning point in the evolution of television and TV advertising?

The past few years, there’s been a lot of talk about cross-platform advertising, the idea that people aren’t just TV viewers, and then there are cable viewers, or then there are people watching videos on YouTube and online. They’re the same people, and the idea of being able to watch what they want when they want is something that advertisers and the networks increasingly recognize.

Rather than looking at viewers in one silo, now they’re looking at viewers and how to reach them with advertising across all those different platforms. The ability is now there to really track viewers, especially as they check in through social TV. Set-top boxes have gotten smarter, more people are using connected TVs and their smartphones and tablets to watch programming. So that has made it all a little bit more real as opposed to theoretical. Now it’s actually happening.

It’s still obviously a small part of [the industry], considering that TV is about $70 billion a year, online video is maybe $2 billion this year. But networks and advertisers are trying to think more about it, as things like the Super Bowl gets streamed. I think [this year] NBC had something like 20 or 30 advertisers or ads through that event, and there were only eight advertisers during the streaming Super Bowl—but that was the first time.

So it’s still small, and still experimental, but it is actually happening. Now the conversations are “This is happening, and this is growing” as opposed to “We don’t know what it’s going to look like when we try to do some seamless cross-platform advertising.”

It seems like the attitude right now is just to experiment.

Most of the money, when we talk about TV advertising, is in the traditional 30-second spot, but Hulu is growing, there’s a lot of this “TV everywhere” going on where the cable companies have started putting their programming on the iPad, on some Android tablets and allowing people to watch on their tablets. So the advertising proposition is more there as people are watching. [Advertisers are] trying to capture them, but they’re still not sure what a TV ad means when it’s done in a time-shifted way on a DVR or VOD. They’re not sure what a TV ad means when it’s placed on Hulu.

So far it means it’s shorter. It’s still trial and error and repurposing what’s being done on TV as opposed to creating something original for streaming video that’s not tied in any way or driven by the main show, which is still the 30-second spot on TV.

So that’s where things are now. They’re still figuring out what do you do that’s different when you advertise in a DVR/VOD medium or online but still trying to create that brand awareness, which is what most premium TV ads are about, as opposed to the direct response medium that online video has generally had, carrying over from the usual search and display advertising.

Beyond the U.S., are there other markets that are ahead on this?

One of the problems that the [U.S.] cable companies have had over the past few years in terms of trying to get more interactivity and addressability into TV advertising is that the cable systems here are a patchwork of wires, and they can’t run national advertising seamlessly. Whereas a satellite company like DirecTV and EchoStar, a dish network here, have been able to very quickly assemble national interactive advertising and local interactive advertising because they haven’t had to worry about connecting wires—it’s just over the air through satellite. They don’t have to create whole new systems from scratch.

So that’s why Europe is having a little bit of an easier time, because BSkyB is the dominant satellite company there, and they’ve been able to pursue the model of interactive, addressable advertising for TV a lot more quickly.

What do you think about the potential for second-screen advertising?

One of the big problems with online advertising in general or any interactive advertising is that people are always worried about their privacy. So here’s the ultimate opt-in that’s worry-free for marketers, because they’re just getting consumers who they already have. The idea is they can strengthen that relationship. It’s still difficult for these companies to use interactivity to find new consumers in a way that will not alienate them.

So for now, it makes sense that they can just build on their existing audiences and existing customers and go from there. The toughest part is still finding the ones who can be either enticed to a greater degree or made to switch their brand. That’s where the big challenge still remains.

Is there a bit of a chicken-and-egg thing with apps like GetGlue or Viggle? That is, advertisers are waiting till they get to scale, but then consumers likely won’t sign up till advertisers have interesting initiatives.

GetGlue just hit 2 million users. It’s growing pretty rapidly, but they say they need 20 million to really make it scalable so that they can have significant advertising. Others say you don’t really need that much, but you definitely need more than 2 to 5 million people. Once that starts happening, then advertisers will say, “We can do something with that.” GetGlue says that for a very popular show like Walking Dead, they’ll get 40 to 50,000 check-ins, and 40 to 50,000 people doesn’t mean a lot to an advertiser who’s used to getting mass scale.

It’s definitely going to take a while to get scalable, and even then, it’s still difficult because it’s not certain how people will ultimately use social TV apps. Will they stick around to get more information? Will they have conversations on there? Will they check in and they’re done? So that’s the challenge there.

Are people skeptical about that, or is it a wait-and-see attitude right now?

I think it’s wait-and-see, because it hasn’t really proven itself as a premium advertising space. Shazam is leading the way for the most part on that, and people will look to what they can do. But it’s still very early, and it’s still seen as an add-on, if anything, to even online advertising.

Shazam has a lot of people and they’re adding a lot, but it’s going to take a consolidation, which is expected this year, in that space where you’ll have a number of these guys either team up in a certain way, some will acquire others, some will go out of business. Once the winners have emerged in a clear way, that’s when advertisers will start to really say, “This is something we can support.” Right now it’s seen as interesting but something to watch.

An exec at Samsung recently observed that commercials are becoming more like trailers for extended digital experiences. Do you think we’re going that way?

That’s what Shazam has been banking on. But again, it’s still mostly for people who have an affinity for a certain brand. For someone to make that leap of “I want to see more,” they have to have an existing interest in it. For the most part, people are clicking through and getting up, doing whatever they can to avoid watching an ad. So that’s still probably going to be a small part of things in terms of people wanting more.

Do you think there will be a lot more real incentives to start using Shazam and social TV apps and the like?

Definitely. The one advantage all this new stuff has is it does tell you in real time what’s working. People checking into a show, you can tell what’s really moving people. The thing with social TV apps right now, to use that example, it’s not about early adopters anymore. It does seem to have a mainstream, if maybe still a younger demographic appeal. But if you can move a certain amount of people on that, it does show who are influencers in a certain way, or people who reflect a certain segment of the population in a more defined way that you can base any judgment of whether your marketing is working or not.

It does give you an instant signal, literally in real time, as opposed to waiting a few days or even weeks for the reports to come in from traditional ratings agencies. And all that data being collected from set-top boxes and online is worth something. Marketers can change their marketing plan in midstream.

We’ve mentioned Shazam, then there’s also Viggle, which just launched in January.

Their proposition is a little bit different in terms of, it rewards loyalty. People will Shazam an ad because they already have an affinity for it. This is a way of building that affinity through these loyalty programs. I think that’s something you’ll see more of, and that’s one thing that Viggle has immediately differentiated themselves from because they’re not waiting to get scale. They’ve already done something different and tried to hit up the advertisers already, mainly because the company comes out of that mainstream TV experience, with the guy behind it: Robert Sillerman, who helped create American Idol. That gives him an instant connection that other startups don’t have.

But it’s still a challenge—whether or not people will get tired of checking into these rewards, because they are hard to get. You really have to check in a lot. So while it appeals at first, it could also turn people off if they feel like “I’ve been doing all this checking in to try to get this, and it’s miles away until I can even hope to realize any of these rewards.” I’m sure they’ll be coming out with shorter rewards as it gets more popular, but for now, that’s the main challenge there.

Then what about this idea of interactivity—that the consumer is talking back and giving you their info?

The feeling is that having someone pick the A triangle or the B square on the remote control isn’t really enough. But you’re definitely seeing more companies get into it. The video ad network, YuMe, has had deals with the manufacturers, avoiding the cable and satellite companies for now. They have deals with LG and Samsung for their connected TVs. Again, the audience for that is still fairly small, so it falls into the experimental phase of where this is all going.

Before, you thought of cable networks as dealing with selling ads, and then gradually you started seeing the cable companies themselves, the MSOs, selling ads, and now you’re seeing the makers of TVs, especially Samsung, which has gotten very aggressively into that. They’re doing a Microsoft Kinect-like experience with their new TVs, which will be able to have a camera on their TVs and be able to watch you in the sense, see when you come into a room. You’ll be able to do a lot of different things there. So I think that technology will change things, and that’s coming out this year, but millions of people aren’t going to be buying new TVs.

One area I didn’t talk enough about is Kinect and what the gamers are doing, PlayStation as well: creating these entertainment hubs that are broadband-based and that are focusing more and more on interactive advertising. That’s where I think you have more of a chance, because those systems are built more like a computer where people can give their information more readily than they can with a remote control, or what the set-top box can tell them.

That’s where interactivity is working right now. But I think as more TVs come out with this way of you talking back to it or it seeing you, that will have a much bigger effect on interactivity.

Looking ahead to next year’s Super Bowl, what do you think we might see that’s pretty new?

There’ll be a lot more advertisers streaming ads, and I think that will become as prominent a placement as being on TV. This year was an experiment. And I think the social TV apps have shown themselves to be able to get to scale, at least around the big events like the Super Bowl, the Grammys, Oscars.

Advertisers will be a lot more serious, and I think by the end of the year the social TV apps themselves will have figured out what they can provide in a much more concrete way than this year, which was “We don’t know, let’s give it a try.” Now they’ve had a starting point, in terms of being used as advertising vehicles, they’ll have a much more definite sense of what they can do and how they can push things even further.

You’ve been reporting on TV a pretty long time. What do you think is true today that you really wouldn’t have guessed maybe five years ago?

Even more important than cable or satellite, set-top boxes, in terms of being a platform for advertising. People just thought of gaming consoles are just for games, and as they started adding more content, it seemed like a way to avoid traditional TV. But that’s where the real engagement is. I think that will have much more of an influence on what’s done on TV and what’s done on smartphones and tablets than anything else. That’s the big thing.

Is there any other conventional wisdom from five or so years ago that now is discarded?

The idea that people wouldn’t opt in to advertising, and that there wouldn’t be any value in the ones that do. Now it’s seen as there is real value in people who will opt in, and they will opt in, in great numbers. And there’s something you can glean from that that will be able to help you figure out what’s working and what’s not in real time.

What do you think we’ll be talking a lot more about in a few more years?

Privacy will be a constant issue and how people will do whatever they can to avoid advertising. I don’t know that the promise of targeted advertising, the notion that this will make advertising more relevant and therefore the dollars will go even further and it’ll be more successful—I think it’s still going to be the dream that people are saying we haven’t cracked yet.

Dealing with privacy and finding a way to make targeted advertising, interactive advertising more valuable and yet not lead to any backlash from consumers or from regulators is going to be something the industry will be carefully trying to assess.

Like anything else, people like the fact that they can get content sent to them that they like, but they also are freaked out whenever they feel like they’re being closely monitored. The other thing is that a lot of targeting is based on what people did before. Targeting is about looking backwards at what someone just did and trying to guess what they’ll be doing six months from now. That will still remain something of a challenge, especially as more data comes in and trying to shift through it.

Finally, what do you think are some of the main themes that you’ll be writing about for the rest of 2012?

I would expect the idea of cross-platform ad measurement, how to measure audiences and how to figure out what’s working, is going to be a continuing topic this year. Especially now that it is taken more seriously in the upfront, and just as all these things converge, looking at how video on the iPad is different from video on the PC, on the phone, and how to tailor ads for that is also going to be more of an issue.

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