In the natural world, “convergence” happens when unrelated species develop similar characteristics in response to the pressures of their shared environment. In the ever-changing advertising space, the definition is much the same: as viewers’ attention is increasingly split between traditional television and digital media, the two spaces borrow features and capabilities from one another in order to cope with the shifts. As our own Randy Cooke put it: “Convergence is the industry’s vision for a day when traditional TV and digital video coexist seamlessly”.
There are several challenges that must be overcome in order for this vision to manifest as reality. First and foremost: traditional and digital media exist in separate economies and technologies, which are more or less invisible to the end user. So—how do we maintain the integrity and value of both traditional and digital inventory sources? That’s what this panel, “Resolving the Economics of Convergence”, sought to discover. Here’s who joined us on the stage:
Three main themes emerged from their discussion:
1. The Value Drivers of Media
Value, like everything else in advertising, is subject to the changing tides of the market. Cooke noted that content was once at the center of establishing value; buyers would clamor for inventory during the Ed Sullivan Show, for instance. The mass appeal and viewership was so attractive that it could command a high price from advertisers. More recently, the details of distribution became more important: “What types of people are going to see this content, and how?” Fast forward to present-day, and data has become a key component of value: Advertisers seek to learn all they can about the audiences available to them so they can target the right messages to the right people at the right time.
So, is there a single answer to the question, “What drives the value of media”? In short—no. Rather, the panel agreed that the value lies in the combination: enticing content that is distributed through channels that attract consumers with relevant interests, needs, and demographics. As Peter Naylor put it:“Even with the rise of data, the question is still, ‘Did we move the minds and hearts of the consumer?’”
To expand on the concept of value, Jonathan Bokor raised an interesting point: What does “premium” really mean? Is it predicated on the quality of the anchor content itself? Does it refer to the ad environment? Perhaps even the ad type? The panelists agreed that the definition is fuzzy, but that it should be based on whether or not it’s driving the right consumers down the funnel. Bokor noted that whatever is deemed to be “premium” will always reap the dollar rewards, but what that means will continue to change as new tools and information become available. Ideally, these will be tools that weigh content quality against available ad inventory—and possibly against the goals of the buyers—in order to reveal the highest value.
3. The Addressability Challenge
Targeting has become the gold standard in advertising. However, considering the oversupply of linear TV ad time in the U.S., it’s unlikely that household addressability will scale to become the predominant tack of campaign audience fulfillment. As the panel points out, total addressability doesn’t make financial sense. There’s a tipping point, beyond which targeting will no longer be cost-efficient. It will be more expensive to reach a perfectly relevant audience with scale than to broadcast to a larger audience and accept some waste.
Traditional and digital media can learn a lot from one another, and convergence shines a light on countless fascinating opportunities. When it comes to the economics of convergence, the short answer is that we’re not there—yet. As an industry, we need to gain a better understanding of which digital capabilities improve traditional media, and vice versa.