Now that “Smart” TV’s are prompting us to update their software nearly as often as our computers, it’s becoming easier to imagine a world where real-time programmatic television advertising is a reality. This shift, in itself, is a monumental change in the way the advertising ecosystem works – but will this disruptive innovation have any impact on the TV programming we have today?
With this problem on my mind, I sat down this weekend to relax and, well, watch TV. After watching more hours of “Shark Week” than I care to admit I had an epiphany: programmatic TV advertising could mean the end of a large portion of cable TV.
Let me explain:
Thinking back to my media planning days, I remember that the average cable TV show has a rating of 0.5. For those of you who are unfamiliar with Nielsen’s TV ratings, this means that the average cable television program is being watched by ½ of 1% of US households. On the surface, this seems fine – but you have to remember that Nielsen ratings are derived from Nielsen’s TV panel. When you take into account that Nielsen’s TV panel includes ~25,000 metered households (about 0.02% of the 114MM total US households) this means that the average cable TV program is viewed by just 125 metered Nielsen households. By contrast, a program with a rating of .1 (such as an average program on Soap Network, the Science Channel, Speed Network, the Golf Channel and many others) is watched by just 25 metered Nielsen panel households. An increase of only 10 households watching a 0.1-rated program would increase the programs rating by nearly 50%. Needless to say, at this level of granularity, there is a huge amount of sampling bias and inaccuracy in cable TV ratings. Also remember that today there are thousands of cable TV channels – there is no doubt that many of these very small cable TV properties are getting more advertising spend than they deserve just because of the sampling bias introduced by Nielsen’s panel based ratings system.
Now, what happens when we no longer have to count on a relatively small panel of individuals to estimate how many people are watching TV and instead, we have access to advanced metrics, including: how many people actually watched a specific commercial, whether the TV was muted or unmuted, whether the viewer changed the channel part way through the commercial, etc.?
When we have access to all of this rich data, rather than just a rough estimate of one data point (how many people are watching), I think the rich variety of cable TV channels we know today will be no more.