What Can the Evolution of TV Teach Us About the Future of Advertising?
Since the invention of television, the TV business and TV technology have evolved with increasing speed. There have been a few exceptions to this pace of change, and the question of the moment is whether programmatic TV will be one of them. First, a little context.
In 1939, after over a decade of legal battles, Philo Farnsworth sold his patent and the rights to sell one of the greatest inventions of his lifetime—the fully electric television. In 1947, only 178,000 television sets were manufactured. But by 1953, production had skyrocketed to over 7 million.
Yet all of those were black and white. The color TV would come along a few years later, but it would take another couple of decades for sales to catch up. So why, compared to the relatively quick adoption of the black and white TV, did color take so long?
As with all market designs and redesigns, there was a chicken and egg problem. Few TV executives wanted to create expensive color content for a nation of gray TVs, while few consumers were willing to drop the 2015 equivalent of over $10,000 for color if there wasn't anything to watch. Color TVs represented a wholesale overhaul of a complex business and media ecosystem that had only recently come into existence, which is why they remained a costly curiosity until the 1970s.
The rise of color was slow, but once it came onto the scene it spurred an ongoing evolution in the medium. By the 1980s we had more color and more stations. Saturday mornings were for cartoons, and commercials were unavoidable. Today we've added hundreds of stations, satellite TV, DVRs, streaming boxes, on-demand, high definition, LCD and smart TVs, to name only a few improvements. No kid today knows the anxiety of looking at the TV guide to see if they missed a favorite show, because there's no such thing as missing a show anymore.
TV is great at creating advertiser reach, but the targeting has never been that good. The advent of programmatic TV, aka advanced TV, solves this problem. It's the only way to take advantage of addressable TV and all the benefits digital advertising has experienced in smaller channels.
So here's the $1 million question: Is programmatic advertising in TV going to be adopted slowly, like color, or quickly, like nearly all other major changes over the past two decades of TV?
Those who argue that it's going to take awhile make some valid points. Perhaps the punchiest is that, as with color TVs, rebuilding the farm doesn't happen overnight. Yet I'm convinced that there are fundamental differences here, and that these differences will result in a rapid switch to programmatic TV ads.
First, consumers are clamoring for on-demand, addressable content. Further, they've rebelled against paying more than $10 for streaming services, which means they're indirectly demanding relevant ads. The streaming boxes and smart TVs themselves are also relatively affordable—a streaming stick goes for less than $50. Also, more relevant ads are worth more to advertisers, of course, but consumers welcome them, too. In turn, content owners will make more advertising revenue.
In 1955, the economics were prohibitive for everyone to change to color TV. In 2015, the economics are an incentive for everyone to change to programmatic. Television is being reinvented, and smart money sees programmatic as an opportunity, not a threat.