As part of an analysis of how legacy linear media networks are likely to fare in 2023 as the ways in which people consume media evolves, The Information offers this prognostication:
“The consensus view is that ad spending on linear inventory will fall 6% to 7% next year, while spending on digital inventory (including Connected TV) will rise by a similar amount or more. That’s the easiest prediction. It seems like a fool’s errand to guess any other outcome.
“Instead, focus on two key moving pieces in the ad picture for 2023. First, there is Procter & Gamble’s October announcement that it is ‘actively shifting our spending from linear, non-targeted TV into programmatic and into digital spend that is a lot more targeted and a lot more precise in terms of delivering reach.’
“In 2022, P&G spent about $8 billion globally on marketing, about $5 billion of that in the U.S. Marketers value linear ad inventory to drive brand awareness. Brand ads are largely sold to linear networks during the upfronts. Linear networks make as much as 80% of their revenue in upfronts, and they are both behind the curve technologically and lack the scale of competitors like Google, Amazon and Roku. So it hurts those networks when major advertisers shift spend to ads delivered in real time to highly specific target demographics.
“It’s not yet clear whether other major advertisers will follow P&G’s lead, but the 200 or so ‘media-retail cartel’ advertisers that supply nearly 90% of U.S. network television revenue often think alike…
“The second moving piece is the effort by ad-supported streaming models to extract more revenue from each user … The assumption is that digital channels can charge more for targeted ads than for indiscriminate blasts from linear programmers. So far that’s been true in the sense that advertisers will buy some inventory for higher cost per mille (CPM) than for linear. But they won’t buy all inventory for higher CPM than linear.
“The two questions for 2023 focus on buyer preferences and inventory value. First, if advertisers increasingly prefer programmatic real-time buying, how will legacy media compete with the likes of Amazon, Google and even Roku? So far, few legacy media companies have shown they can. Even if they can compete, how will they prove the value of their inventory with smaller scale and less sophisticated technology?”
KC’s View:
The fragmenting of the media landscape, and the trend toward marginalization of traditional linear networks that focus on mass audiences, is something that will benefit streaming services that are turning to ad-supported versions that can create revenue streams, as well as the retail media networks that seem to be popping up all over the place. The ability to target people more precisely and appropriately is huge.
However, I do think that fairly quickly we’ll see consolidation among many of these alternative networks and services – the ability to target won’t be affected, but they’ll be able to reduce some of the costs and achieve stronger ROI.
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