All of that data talk around this year's upfronts is paying off, to the tune of nearly $1 billion in addressable advertising spend this year—and that number is likely to more than double by 2018, according to a new Video Advertising Bureau report.
Addressable TV advertising—based on audience and demo targeting, as opposed to specific networks or programs—now reaches 42 percent of U.S. households, representing nearly $900 million in advertising spend during 2016. It's on track to reach $2.2 billion in 2018, and its household penetration should rise to 74 percent of TV homes by 2020.
That's according to a new Video Advertising Bureau report released today, Say Yes to Addressability: A Guide to Precise TV Targeting. The VAB study was intended to assuage advertiser and marketer concerns about addressable TV's growth and impact.
"Even though this is a dynamic segment that's growing, there's very little publicly available information," said Jason Wiese, vp, strategic insights at the VAB.
The report defines addressable advertising as household-level TV advertising via the set-top box based on a audience target developed using first-, second- or third-party data. Under these ad buys, advertisers target specific audiences and demos, as opposed to network and program-specific buys.
The VAB found that addressable TV ad spend is projected to increase by 443 percent between 2015 and 2018, and double from its current level—$890 million in 2016—by 2018, when it will reach $2.17 billion in ad spend.
As of mid-2016, there are 49.8 million addressable TV households in the U.S., representing more than 42 percent of TV households. That includes 38.9 million households through linear TV, and 11.9 million more through VOD and TV Everywhere apps.
"A lot of what we hear out in the marketplace is, addressable doesn't really have that much of scale because it's 'only' 42 percent of TV households. We thought it would be more fair to look at relative scale between addressable TV and other digital platforms," said Wiese, noting that its household footprint is larger than that of Netflix, Amazon, HBO and Hulu.
"When we look at audience, we always hear that the footprint of addressable is 40-50 million households, but people don't talk about the audience size of it: 128 million," said Wiese. "Addressable is bigger than LinkedIn, bigger than Instagram, bigger than Wikipedia. So we tried to flip the scale question on its head to be more relevant to the true meaning of what addressable TV is and what it offers.
It's not surprising that a Video Advertising Bureau study would present addressable TV advertising as a superior option to digital advertising, given the concerns about bots, ad blocking and viewability issues on that platform. "We have the 100 percent premium space, and addressable TV offers the accountability and offers the measurement. But addressable doesn't have the traditional ad-tech issue that they have to battle on that side," said Wiese.
60 percent of advertisers surveyed in the report said they are currently using addressable TV or plan to run addressable ads within the next year. 71 percent of advertisers said they're willing to pay higher CPMs, relative to linear TV, for the precision of addressable TV's targeting across live and on-demand TV.
The VAB report deliberately doesn't include the word "programmatic," though programmatic advertising would fall under the addressable umbrella. "There still remains a bunch of different definitions for programmatic, so we didn't want to continue muddying the waters with that," said Wiese. "So we kept it as addressable TV without mentioning programmatic in this."
Wiese hopes the report will educate agencies and marketers about the benefits of addressable TV advertising, and encourage more of them to embrace it. "If you're an advertiser, this can be implemented," he said. "Every major category is in this. There's brands in every part of their brand maturity and life stage that are using this."
The VAB's complete report can be accessed here.