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Television At A Crossroads

It’s a curious time for the television industry. On the one hand, things are moving forward rapidly, with new innovations and new players coming into the space. At the same time though, we’re seeing a fresh round of efforts aimed at propping up outdated systems, sort of an “anything but change” approach.

We’re currently witnessing the rapid growth of OTT TV, both subscription (SVOD), ad-supported (AVOD) and hybrid models (e.g., Hulu). The audiences tend to be younger and more tech-savvy, and, because ad loads on OTT are still considerably shorter, far more likely to stick around to view the ads: a recent study by Beachfront Media showed a 97% completion rate for OTT ads.

And yet the old guard is not going down that easily.

Many network ad sales teams are still pushing something called “indexed” or “data-driven” advertising. Call it a baby step in the direction of full-on dynamically-inserted addressable or just more smoke and mirrors—either way, the goal for many seems to be to prevent disruption of the current system, which is based on networks selling the bulk of their ad inventory during the upfronts and the rest in the scatter market.

The notion of adding in additional data points to ad buys sounds like a great idea on the surface, but the actual changes it brings are fairly minimal. Or, as one seasoned ad sales vet recently said to me, “It’s not as if women 25-54 wake up one morning and think to themselves, ‘Gosh! I’m in the market to buy a car! I should start watching a whole new set of prime-time shows on NBC!'”

His point was that the delta between the old school Nielsen demos and the indexed or data-driven demos are not very significant. And that ad agency planners and buyers have been factoring those additional data points into their buy recommendations for years–they’d just forgotten to refer to them as data-driven.

Meanwhile, on the forward-looking side of the street, ad sales on OTT are starting to take off. The digital nature of OTT allows for a high level of customization on the ad products, which is key at a time when consumers have little patience for what’s become disparagingly known as interruptive advertising.

OTT ads can be personalized by demographics and by device and location (e.g., addressable). Advertisers can even add personalized overlays to ads that allow for deeper interaction or even t-commerce. And thanks to new OTT advertising platforms this approach to targeting can actually be done with a national buy across TV network OTT offerings, versus household addressable buys in the non-OTT world that were constrained to local avails.

It’s part of an overall pattern of greater personalization on OTT, which is bringing TV into a whole new era. Programming is personalized too, from the recommendations listed on apps like Netflix to the more personalized menus that ask “who’s watching?” on apps like Hulu.

Jacqueline Corbelli, the cofounder, Chair and CEO of BrightLine, which has been leading the charge to introduce advanced advertising tactics to OTT providers, says that consumers are now accustomed to — and fully expect — commercial messages tailored to their personal preferences.

“Consumers have been more or less trained by the internet and mobile to expect to see messages that are relevant to their particular needs and interests,” she says. “ It’s critical to the future of television advertising that it delivers the same level of personalization.”

Digital-based OTT apps have the ability to learn a viewer’s likes and dislikes and apply that to the list of programming they see on their home screen. They can further distinguish between viewers in the same household (at this point simply by asking who is watching, down the road through facial recognition.) Once the system has determined which household member is watching, it can serve up ads—and enhancements to those ads—that are relevant for that actual viewer, creating a truly unique experience that’s far more advanced than data-driven 30-second ads on traditional linear TV.

And it seems to be working.

At a recent TV advertising and measurement event hosted by Nielsen, Peter Naylor, SVP Advertising Sales for Hulu, had this to say about BrightLine’s approach, “We’ve run several dozen campaigns this year on Hulu, and whenever we do the research we see that the results of those studies are always well above their conventional 15- or 30-second counterparts. Things like message association, brand recall and, most importantly, purchase intent always go up when a brand has a personalized or interactive message.”

Traditional TV isn’t going down that quickly, however. ATSC 3.0, the advanced standard for over the air broadcasts was recently approved by the FCC and will help to bring broadcast television into the twenty-first century. It’s a very well thought out, well-designed system with digital capabilities and one critical flaw: it’s not backward compatible with current TV sets.

That means it will be some time before ATSC 3.0 (frequently referred to by its more consumer-friendly name, “Next Gen TV”) gains mass adoption. When it does, it will allow for many of the same personalization features found on OTT, including addressable and advanced advertising units.

The difference is that ATSC 3.0 supports local over-the-air broadcasters, giving them the ability to add as many as one dozen sub-stations to each broadcast. That sounds great in theory, but in practice, there’s not a lot of great programming available for all those sub-channels, mostly older, less desirable library content. The best thing you can say about it is that it’s free.

Which is why, while ATSC 3.0 is definitely a solid accomplishment, all it really does is prop up an outdated technology and prolong its life for a few more years. Local broadcast isn’t going anyplace in the next five to ten years—it’s a $20 billion business right now—but long term, industry trends are not in its favor.

OTT, which does have the proverbial wind at its back, would seem to be the wave of the future, thanks to its ability to create personalized viewing experiences and its ability to integrate both linear and library-based systems.

“Television remains the most powerful of all media for advertisers with unmatched reach,” Corbelli says. “When ad personalization is added to the mix, it takes TV to a whole new level and helps ensure a bright future.”

What OTT does need to do though is figure out a clearer monetization scheme, a way to make all that personalization work, while generating the same amount of revenue (currently around $75 billion) that TV generates today.

Success will depend on advertiser’s willingness to buy into the notion that fewer, better targeted, more personalized ads that lay claim to a larger share of the viewer’s attention are worth paying more money for. That’s television’s holy grail, and less clutter combined with better targeting and more personalization will indeed make an ad-supported OTT-based system more viable and more palatable for both advertisers and viewers.

Branded content and native advertising will help round out future OTT monetization schemes, and it may take a few more years for the industry to get there, but when it does, the one clear winner would seem to be the viewer, who’ll get a more advanced, less cluttered interface to watch TV.

Originally published at Forbes.