Week In Review: Fox, NBC Promise Fewer Ads; Facebook And Instagram’s Engagement Are Down

1. Fox, NBC Promise Fewer Ads

Both Fox and NBC promised to start running fewer ads this week, with Fox’s Joe Marchese vowing to reduce ad loads to a radical two minutes per hours by 2020, according to the Wall Street Journal. That’s a dramatic decrease from the current standard of 16 minutes per hour that many networks maintain. 

This comes on the heels of NBC’s promise to reduce ad loads in prime time by 10%, while reducing the number of ads in a commercial pod by 20%. (Marchese is promising a reduction of 88%, by comparison.)

Why It Matters

There are a few big reasons why the networks are doing this, all centered around the notion that the holy grail for TV advertising is a world where networks run fewer, better targeted (e.g.,  addressable, dynamically-inserted) ads that brands will pay more money for.

This is not a new idea. We've had this discussion with Marchese for at least five years now, if not longer.

The problem was always the “that brands will pay more money for” part.

Their relucatance was, at many levels, baffling, because common sense would seem to indicate that being one of only four ads that ran during a popular hour-long drama would be far more beneficial and gain the attention of far more viewers than an ad sandwiched in between four other ads in one of eight commercial pods.

But this may just be TV’s moment.

As laid out earlier this week, thanks to marketers like P&G’s Mark Pritchard and Unilver’s Keith Weed speaking out, brands are starting to realize just how much they’ve been hoodwinked by social and digital platforms. Fraud, ridiculous metrics, brand safety issues and the like (along with continued fallout from the 2016 election that shows how naive many of the social platforms are) have contributed to making marketers especially wary of digital and social advertising, which in turn has made them appreciate the value of TV, which is free from all those issues. (All sorts of TV too, connected/OTT and linear.)

Which means they’re finally willing to pay TV networks for a degree of exclusivity.

The other big factor in this shift is Netflix. Viewers spend lots of time on Netflix watching television without ads. They may spend an entire afternoon bingeing old episodes of The Office or Lost without seeing a single commercial. So imagine how jarring it is when they return to network TV and over 25% of every hour is given over to commercials.

Sending many of them right back to Netflix.

There are other factors too: Hulu, which has a reduced ad load has been very successful with its ad-supported product: despite the fact that a subscriber can pay a few dollars more to get the ad-free version, most don’t. That’s proof that a smaller ad load with relevant ads is something most audiences are okay with.

The other culprit is pharma advertising. This rarely gets discussed, but we believe it is a significant reason viewers are so put off by ad-supported TV these days. With a few notable exceptions, most pharma advertising is awful. The ads are often for diseases you’ve never had or never heard of. They make you think about death and dying, and that’s before they get to the 20 seconds of disclaimer copy that actually is about death and dying. And as pharma commercials have proliferated across the ad-supported landscape, they’ve played a major role in driving viewers to Netflix where they need not fear ever encountering anything like that again.

What You Need To Do About It

If you’re a network ad sales chief: Be Like Joe. Reduce your ad loads to something like two minutes an hour. (Think of the incredible competitive advantage Fox is going to get from that move.) Use branded content and native advertising and product placement to offset some of the revenue you’ll lose, but trust that advertisers will pay more money. It’s the law of supply and demand: when demand remains constant and supply shrinks, prices go up.

If you’re an advertiser: Be Like Mark and Keith. Get woke to how much you’re wasting on digital. Demand real metrics. As for television you 100% want to pay more money to be one of four or five advertisers on a prime time show. With that much focus on your ads, you can start taking creative risks again too, looking for those Big Ideas rather than Ideas That Translate Well To Mobile Banners. And with multitouch attribution now available for TV,  you’ll even be able to justify your increased TV ad spend.

2. Facebook And Instagram’s Engagement Are Down

Because being the red hot center of Russian election manipulation attempts wasn’t bad enough, now comes news that (a) Facebook and Instagram are seeing significant decreases in time spent on the platform, and (b) production companies and studios who have worked with Facebook on Watch are saying that Facebook doesn’t know which end is up and they’re making all the same mistakes they made with Live.

Why It Matters

Facebook had let on that average time spent on the platform was down, but damn, those numbers are even worse than they'd indicated. (Not that that should be surprising anymore, but still ....)

As the WSJ’s Lara O’Reilly reports today, Nielsen’s latest batch of data shows that Facebook lost 18% in aggregated time spent in December 2017, a 24% decline per person.

A 24% decline per person.

That ain’t nothing.

And the news just gets worse: That Snapchat-killer Instagram, the Crown Prince of Facebookland, Attractor of Gen Zers and Collector of New Advertising Revenue, is slipping too. While aggregated consumption grew by 7%, consumption per person on "Insta" dropped 9%. Which means people are spending less time on Instagram as well, even if more of them are starting middle school signing up.

The exodus from Facebook was point #1 in our 2018 predictions and yeah, we like patting ourselves on the back. But seriously, it’s not surprising, given all the negative publicity around Facebook, coupled with the inevitable boredom with the platform after ten years in the public eye. (Even Madonna could only reinvent herself so many times before that stopped working. Or to put it another way, remember when FarmVille was a thing?)

Then there’s Watch, Facebook’s latest attempt at video. Our buddy Sahil Patel reports from Digiday, that producers and studios are starting to feel the same frustrations that they did with Facebook Live: constant changes in direction and a sense that no one really knows what’s going on. And here again we will pat ourselves on the back for predicting this because Facebook has yet again failed to hire people with any real Hollywood experience, people who actually know how to make hit TV shows, and then they’re left wondering why, despite their brilliant targeting, no one’s really watching except maybe to see if Tom Brady really made out with his son. (He didn’t.)

There’s also the lack of awareness.

Ask anyone you know outside of the industry about Facebook Watch and we guarantee you most of them will respond “Is that like the Apple Watch?”

So there’s that.

What You Need To Do About It

If you’re an advertiser, think long and hard about what you want from Facebook and what sort of metrics you’re getting in return. Facebook can be a great platform to advertise on, but you need to make sure your reasons (and ads) match the reality of what the platform can do for you and what response you’re planning to get from users. As for Facebook Watch, we’d say you may want to continue to avoid it until they figure it out. (Patel notes that advertisers have not exactly been flocking to it.)

If you’re a network or MVPD, well, you may as well take a few minutes to engage in a bit of schadenfreude. Just not too much.

Nobody likes a gloater.