What is Addressable TV and how does it work

Sep 22, 2020

In the world of digital advertising – constant change and transformation is a normal process. Some trends come and go, some become a new part of our daily lives, and others can completely revolutionize our approach to traditional things and technologies. One of such trends is addressable advertising – a new word in the good old world of broadcast TV marketing.

With this approach, marketers are getting the opportunity to deliver a personalized message via TV to the specific targeted audience, just like with programmatic desktop or mobile advertising.  While more and more households are getting connected TV sets, it is now a perfect time to jump in and get the benefits of this new trend. But first, let us find out answers to the most common questions around it: what is addressable television and how does it work?

What is addressable TV

Our journey into the world of addressable TV advertising starts with understanding the difference with broadcast TV, where pauses between shows are filled with the same ads delivered nationwide. So what is addressable TV? In general, any TV set connected to the internet that allows watching video-on-demand can be called addressable television. The main thing about addressable television is that it allows marketers to deliver specific ads to specific people based on their interests, habits, and demographics.

For instance, imagine two families watching the same TV program in the neighboring houses. Members of one family have previously shown interest in car dealerships, while in the neighboring household most searches were centered around vegan products and kitchen appliances. For broadcast TV advertising this information would not make any difference, but with addressable advertising, the first household would receive an ad with new automobiles and the second will get an offer from a local vegan café. This way different households are going to receive different ads in between the same set of programs.

How does it work

The main element behind the mechanism of addressable TV advertising is big data. The information about users is collected from different devices and sources and used to discover new customers and define your target audiences. Marketers discover and analyze things like programs watched, owned devices, and cross-device online behavior. This information is used to build a household profile that is then shared with cable operators, OTT providers, and advertisers. Such a profile allows serving specific commercials to specific homes.

For instance, a user is watching their favorite Roku channel from their unique account. With the help of Allroll advertising platform, marketers are getting an analysis of their interests and can deliver a personalized message to that particular user. This way, people are “addressed” with unique content based on the data they share about their preferences.

How big is the opportunity

Because addressable TV is still somewhat a new trend for the digital advertising industry, for some advertisers it is still unobvious just how big the opportunity really is. Just take the following numbers – according to WARC Data, in 2020 global addressable TV ad spend will reach £5.6 billion which is a 38 percent increase year on year.

Moreover, the surveys among advertisers confirm that the trend is only going to rise. For example, 96% of broadcasters feel the increased demand for personalization, so 80% consider including tailored ads to their services. 26% are even more decisive – they report currently working to offer personalized services to their customers. At the same time, 68% of marketers estimate that within five years more than half of TV advertising will become addressable.

What does this mean in practice? With addressable TV, marketers can now target both users of linear TV, as well as those who prefer OTT and digital video. Not only this promises better reach compared to traditional TV, but also provides an opportunity to granularly choose your audiences and target them with customized messages. Besides, it helps marketers to deal with typical digital advertising issues, such as brand safety and relevance. Addressable TV provides premium scale and advanced targeting capabilities which is basically a combination of the best features from traditional TV and online advertising.

To get a better understanding of how all this will fit your particular business case, let us now take a closer look at the pros and cons of addressable TV advertising.

Pros and cons of addressable advertising

As we already mentioned, addressable TV advertising combines some of the greatest benefits of both traditional TV and other digital advertising formats. But how can one make use of such a combination? And what are the concerns?

Here is our list of the 3 most important features of addressable TV and their possible application:

Precise targeting. According to Statista, the granularity of targeting is one of the best features of addressable TV for 65% of the US marketers. To be even more precise, the ability to target unique households is named a leading benefit by 56%. This can be used for many purposes starting from building brand awareness to promoting a selected list of offers. A good example of targeting would be introducing new products within a certain geographical area and subsequent promotion of these products to chosen households via addressable TV ads.

Relevant ads. The second most important benefit, according to 59% of the US marketers, relevant ads are also a crucial factor for user experience and overall brand image. With the help of data collection and analysis, marketers can target users with messages that are relevant to their recent search inquiries or favorites. Users, in turn, are less annoyed with interruptions in-between videos and can often find useful information and relevant offers thanks to tailored ads. 

Better return on investment (ROI). As a result of precise targeting and relevant ads delivery, advertisers naturally increase their ROI. But these aren’t the only contributing factors to the addressable TV ads cost-efficiency. Broadcasting your ads to everyone also means reaching a huge number of people who aren’t interested in your offers. Tailoring your ads to your precise audiences eliminates lots of wasted ad spend, and 50% of US marketers name this the main benefit of addressable advertising.

Of course, the list of the potential benefits is not limited by these 3 points, but we’ll leave the rest for you to discover in practice.

As it often happens with newly developing industries, the landscape is still far from perfect and leaves marketers with a couple of potential issues:

Lack of structure. Due to the fact that the industry is only developing, the main issue with addressable TV remains a huge fragmentation of the landscape. Advertisers have to deal with a huge mess of formats, standards and providers without certain standardization. This creates additional complexity for media-planning and subsequent measurements which somewhat restrains the potential growth of the industry.

Privacy regulations. Although this is a plus for users, heavy privacy regulations are rather a concern for the advertisers who will have to comply with all the rules within a certain area. This is the downside of the precise personalization – the data has to be protected to secure both your potential clients and your brand image. Nevertheless, the price is worth it, so once you get a compliant strategy with your local regulations, nothing would stop you from accessing the full potential of addressable advertising.

To sum up

Addressable advertising is a quite new and promising part of the digital advertising landscape that offers lots of potential benefits for marketers from any industry. It allows advertisers to tailor their message to the specific audiences based on collected data just like within any other online advertising channel. At the same time, impressive reach and granular data collection provided by the addressable TV formats adds up benefits of traditional broadcast TV to the equation, making the industry one of the most promising channels for marketers from all over the world.

Allroll advertising platform is designed specifically to leverage the full potential of addressable TV even if you are only planning to start with media-trading. With this platform, you can launch, manage and optimize the best-performing addressable TV campaigns on Roku while taking advantage of granular reporting tools and staying compliant with privacy regulations.