TV commercial black-box – or the pen and paper industry

I am not an expert of the TV advertising market, but my colleagues from Match-Maker Ventures certainly are. Four months ago we had an intense discussion on the market and my partners revealed a (to me) surprising fact: Prices for TV commercials are increasing (see graph below)! Counterintuitive for me at first, as I believed that more and more eyeballs are moving to the 2nd screen…?

The real surprise for me came though when we dived a little deeper and I understood the real challenges of the industry.

Lack of real-time (usable) data

There are no real-time data of TV advertising. You want to know what your competitors are doing now? Which channels they are using? Whom are they targeting? “Sorry, give me a week (and a huge pile of money).” might your media agency say in the best case.

But the problem starts already earlier: Audience measurement! The single most important metric in defining prices for TV commercials is based on an approach stuck in the 80ies (literally! In Germany there were no changes to audience measurement since 1985!). Back then Germany defined a panel of 5000 households (so roughly 0.0002% of the German population assuming 3 people per household) to define prices of TV commercials (who would mind a small statistical error in a market close to 6bn USD???). Unbelievable to put it nicely!

So millions and millions are spent every day based on basis of 5000 households. In addition marketing spenders allocate their money based on rough assumptions of target audiences and competitor information. Unfortunately you don’t know if your competitor is doing exactly the same – so it might well happen, that the Audi spot is followed by BMW… I doubt that there is any similar amount of money being spent with such little insights! Surprising in a world of which is (supposed to become) becoming ever more efficient…

Immanent conflict of interest

TV advertising is suffering from an immanent conflict of interest. As a major TV advertising spender you usually buy your “slots” from your media agency. Your media agency acts as a broker in the middle, not only having leverage on the buy- vs. sell-side, but also providing you with all relevant results of your campaigns (can you be sure that the 20 slots à 20 sec. were in fact aired…? Of course will your media agency say…).

Inability to align your channels

Lastly advertisers  from a misalignment of their  channels. You remember the last time you watched a 2-hour movie on your TV without looking at your phone or tablet (2nd screen)? At least I can’t. I definitely take my phone when the commercial break starts. Unfortunately (for advertisers) there is no link between your 1st and 2nd screen. I might be pumped up by watching to the 50ies time Rocky and this time I might be ready to spend some serious money on the ever wanted (but never bought) professional punching bag. As my 2nd screen doesn’t know this, I get an offer for some great new hair restorer (as anyways advertising on mobiles is much harder – more on this on a different occasion). So guess what – no deal done!

Source: Nielson Connected Device Report Q4/2014

So where does this lead us? For me (again as a newcomer to the advertising industry), it seems the industry is more than ready to be disrupted… It’s really surprising to see such a digital-savvy industry still being stuck in the pen and paper age…

Luckily we from Match-Maker Ventures already found a solution. We are working with a great startup called AdScanner. It’s a Austrian/Croatian startup dedicated to overcoming today’s challenges of the TV advertising market.

If you want to learn more, check: http://www.match-maker.ventures/blog/adscanner-and-match-maker-ventures-announce-collaboration-joint or contact me directly!