TV ads need to be better targeted, UCL reports

TV ads must be targeted to individual households to combat viewers skipping the ad breaks new research by University College London (UCL) School of Management claims. Television advertisers could save costs and increase their response rate by better understanding viewer behaviour and providing smarter targeted TV ads.

In the study, Professor Yiting Deng from UCL School of Management and Carl F Mela, a professor at Fuqua School of Business, Duke University, found that it is possible to lower advertising costs per target view by over 90 per cent. The researchers used data from set-top boxes on what people view and scanner data on the viewers’ purchase history.

“The digital targeting of advertising on television is transforming. Digital TV allows the measurement of household TV viewing, to better forecast household advertising exposure, and set-top boxes offer precise targeting of households,” Deng said. “With the growth of catch up TV and the ability to skip ads, broadcasters must change their ways.”

In the study, households were found to watch prime-time TV almost every night – with an average household watching it on 85 per cent of days – and for most of the evening, watching 88 per cent of peak hours from 8pm to midnight. Any gains from targeting largely come from what a viewer watches rather than whether they watch.

Micro-targeting can lower costs and raise profit even in the face of ad avoidance. For example, when buying ads in advance, it is possible to lower costs per target ad view by over 90 per cent taking into account viewers’ viewing behaviour. With real-time buy, it is possible to lower costs per view and at the same time increase viewings.

In one case, views to target households grew by 47 per cent, while costs decreased by seven per cent. Real-time ad buy is also found to substantially increase advertising return on investment (ROI). The best way to increase the profitability of advertising comes from monitoring the same individual or household’s behaviour over time.

It also relates to the ability to buy slots in real-time instead of in advance. The report added that more effective targeting may open new paths to TV advertising pricing by allowing TV networks and cable companies to sell particular households as well as shows to advertisers. These findings will be published in the Journal of Marketing Research.

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