In case you haven’t noticed, TV’s are going wireless. According to research from the Leichtman Research Group, 24% of all households have a TV connected to the internet. What does this mean for advertisers?
All Wireless Connections are Not The Same
Users differ in how they’re wirelessly connected. Some are connected thru a video game system, some a Blu-Ray player, and others are connected directly thru the TV set itself. In fact, some firms are projecting 40% household penetration by 2013.
Are Consumers Disconnecting?
According to the same Leichtman research, 11% of adults watch a full length TV show on-line weekly. But surprisingly, very few consumers (4%) say they are likely to disconnect their TV service to watch TV only on-line.
This is supported by broadband service penetration level trends; the top 19 service providers added over +4 million subscribers last year. So, don’t expect a wireless revolution against the carriers anytime soon.
Barriers to Adoption of Wireless TV
Some analysts are skeptical about the growth potential for Wireless TV. For example, Carl Howe of Yankee Group says:
“Somebody needs to work really, really hard on creating a very easy-to-understand and easy-to-use interface that not only the technically savvy could use, but also your grandmother could use.”
And a few players are making efforts to address viewer usability. For example, Verizon FIOS offers widgets for traffic, weather, and sports scores via their “Widget Bazaar” store. More recently, they’ve opened the platform to 3rd-party developers and Facebook and Twitter apps have appeared. And you can bet more creative, user-friendly apps are on the way.
Another issue is content rights. Web operators or service providers will need to acquire the content rights for these services. There is already a legal framework in place that will support this, but it will require both time and money.
Finally, there’s bandwidth–or the lack thereof. Some people, such as Larry Hettick, an analyst at Current Analysis, have argued that the current service providers simply don’t have the capacity for millions of simultaneous users of on-line video:
“[Cable companies] didn’t build their connections with the capacity to download a huge amount of HD videos at one time…. If everybody starts to do that, the cable Internet connections will melt down.”
All of these issues are real, but they’re also solvable with enough time and money. We should assume that they will be.
Wireless TV — Potential Changes in Consumer Behavior & Advertising
As TV’s become increasingly wireless, I see at least five broad-scale implications:
1. Consumer usage of on-line video will accelerate. As noted above, about 1 in 10 consumers already watch video on-line on a weekly basis. The expansion of on-line video to large screen wireless TV’s will accelerate growth.
Consumers want to watch content on the best screen available–and a large, high quality TV beats a PC, all things equal. So, enabling on-line video on the best home screen–the TV–will equal more on-line video consumption.
2. Consumers will increasingly control how and when they consume TV. With wireless TV, consumers will have even more control of what and when they watch. They will increasingly browse video content for viewing on their own schedule, and traditional ads will be at risk.
It’s increasingly clear that consumers value on-demand video more than Linear TV, except for a select few programming niches like sports and news where live broadcast makes a difference. So, the balance will shift from big Linear TV/small on-demand to big on-demand/small Linear TV over time.
Simply put, wireless will continue the trend of making it easier and simpler to watch the content you want, when you want it, and on the best screen possible.
3. The on-line video advertising load will increasingly resemble Linear TV. As I wrote in a previous post, “Linear TV versus On-Line Video Advertising – Which is More Effective?”, we know that the same ads in on-line video beat Linear TV ads across almost every ad effectiveness metric. This is because of both higher engagement programming and less clutter on-line.
Wireless TV will likely erode these advantages. The program engagement advantage is due in part to the “lean forward” 1:1 consumption of PC based content–which will disappear when people are in a “lean back” viewing mode with their TV. As well, on-line video’s lower ad clutter advantage will likely decrease as service providers like Hulu improve their economic model with more ads. Most experts agree that on-line video economic viability requires some combination of ad supported revenue with higher ad loads + subscriber fees.
4. New ad formats will become more important. Wireless TV makes it easier for consumers to consume content when and how they want, which will continue to make it easier for consumers to skip ads. As well, it’s likely that content models will emerge which are a combination of subscription and ad supported. For the subscription content, it’s possible that there will little or no traditional ads, while ad supported content will carry Linear TV like ad loads.
In any case, this means that “hybrid” ads which bridge program content and commercial ads, along with in program product placement, are likely to become more important.
5. Advertising effectiveness measurement will need to account for Content Form Factors. In the future, there will be a myriad of ways to view the same program: via Linear TV, On-line PC, On-line via wireless TV, by Smartphone, etc.
Each of these content form factors will impact ad effectiveness. Advertisers need to know how their ads perform across these different forms (i.e. is my ad in “Lost” on Linear TV more or less effective than on wireless enabled web viewing on TV, etc.) and also how various combinations perform.
All of this points to an inexorable trend–advertising is going to get a lot more complex in the future, not less. The broader implication is that this increased complexity–driven in part by wireless TV–will require CMO’s to develop far more sophisticated approaches that require advanced algorithms, quantitative skills, and organizational savvy that doesn’t exist in most Marketing organizations today.