Television advertising means broadcast and cable spots. Or does it? To the musical instrument and home theater division of Yamaha Corp. of America, it means devices that mix TV, open Internet access, advanced user interfaces, and consumer-loadable applications on one screen. The company shoots video of music events and instructional material, and then distributes it through a Web site, as well as apps for Google TV, Apple TV, and the iPhone, with an Android app in the works. Why? Yamaha has been able to break out of the limitations—and cost structure—of traditional TV advertising. Just look at some of the numbers.
At the last National Association of Music Merchants trade show, Yamaha wanted to reach out beyond the attendees. "We had an array of HD cameras that we wired throughout our display space," said Jeff Hawley, director of the customer experience group, in an interview with CMO.com. With 12 hours of broadcast on each of three days, audiences were five times larger than internal forecasts. Even better, it was relatively inexpensive. "It would have been easily millions of dollars in air time" to get the same results with traditional TV, he said. Instead, the whole project cost $50,000, giving Yamaha a comparative positive ROI after only one hour of broadcasting.
Increased broadband availability and the growth of video streaming over the Internet has begun to transform the convergence of traditional TV and Internet video--called smart TV—into a mainstream reality. CMOs can promote their brands with new outlets for traditional advertising and creative approaches to creating and sponsoring video content. However, TV and streaming media differ significantly. Such tactical considerations as creative, production, and ad buying take on new strategic significance.
Smart TV Heats Up
Indeed, smart TV is striding well beyond curiosity territory. Market researcher DisplaySearch says that one of every five TVs shipped globally in 2010 had built-in Internet connectivity. By 2014, the market research firm expects the number of units selling to hit 123 million, especially as people replace both CRT and older flat panels with new units at a much faster rate than the 10- to 15-year average it once took to trade one CRT set for another.
Smart TV is a quickly growing segment of this market. Set-top box manufacturer Roku, for example, has sold 1 million units in the three years since the company launched. Apple TV, announced in September 2010, sold 1 million units in three months. Samsung hopes to sell 12 million smart TVs in 2011. Google is working with both Sony and Logitech to ship sets with built-in Google TV. And then there is the explosion of smartphones (IDC expects 49.2 percent growth in 2011) and tablets (currently seeing 400 percent year-over-year growth, according to Gartner).
"There will come a point in time when the average person spends more time looking at video from the Web than from a television network," Larry Chiagouris, a professor of marketing at Pace University, told CMO.com. "That's going to draw the attention of advertisers."
It already has. Online video content, which brought in $1.6 billion in 2010, is up 34 percent from the year before, according to IHS Screen Digest. Internet TV advertising represented nearly 45 percent of that number. Amazingly, online TV saw that kind of growth while the largest media companies have been timid about putting their material online for fear of angering cable carriers.
And yet this is still a nascent market, with online TV viewers having grown between 2009 and 2010 by only 10 percent, according to HIS, and the infrastructure available to marketing is still developing.
"Marketing opportunities around those types of converged offerings are still pretty limited at this time," said Adam Kasper, executive vice president of digital investments at Havas Digital, in an interview with CMO.com. "Google TV, Apple TV--they don't have actual advertising offerings. They're simply focused on consumer experience at this point. I can't at this point just buy connected TV sets in that fashion."
New Approaches To Advertising
But where opportunities do exist, they can be strong. A lower ad density has--for now, at least--brought greater viewer engagement, especially because consumers can't fast-forward the ads. According to Gary Milner, global digital marketing manager for computer maker Lenovo, brand recall from streaming ads can be twice that of TV ads. Message recall is as much as 10 times higher, he told CMO.com
As for standard Flash or banner Internet ads, the comparison is equally striking. "Standard Flash gets 0.7 percent click-through on ads," Milner said, "whereas video can get 10 times [that] or more. The extra cost can be worth it. The extra engagement can drive better results as well."
However, even as the advertising opportunities rapidly expand, marketers must move quickly. Entrenched attitudes, practices, and assumptions built on traditional TV ads could leave marketers behind and at a disadvantage. One of the first necessary changes, according to Chiagouris, is to assume that conventional ad agencies will look to their own interests and dismiss online video. "The agency world lags," Chiagouris said. "They stick with their bread-and-butter that make them money."
Success in converged advertising requires different thinking. Rather than buy time on shows with desirable demographics, marketers need to focus on individuals, said Eric Schmitt, executive vice president of marketing optimization vendor Allant Group, and a former Forrester analyst covering media, interactive and direct marketing, and advanced TV advertising. It means bringing a direct marketer's eye to video ad buying. "If you can skim out the audience you're looking for and not waste money on the people who aren't relevant, you're going to save money," Schmitt told CMO.com.
Even assumptions of how to undertake creative go out the window. Online spots are typically short--maybe 15 seconds--and they circulate as their own self-contained bits of entertainment.
"You can't always guarantee that someone has sound switched on," added Milner, so ads also have to work as pure visuals. A company will need multiple versions of a spot given the variation in screen sizes on different devices. "It's too costly to [translate video formats] on the fly," said Keith Nissen, a principal analyst with market research firm In-Stat, in an interview with CMO.com.
However, there's an undeniable opportunity to take chances and engage an audience. This marries with production costs that are a fraction of what you find in broadcast ads, opening the door to experimentation. But that means giving up traditional tight control.
Denver-based production company Double Edge Films has created spots for clients. One successful ad for Motorola had a pack of raucous Santas terrorize downtown citizens with deafening holiday cheer. Only one woman, continuing a cell phone conversation while wearing a noise-cancelling headset, remained undisturbed. The short received 600,000 hits.
"The goal is to connect with this young audience that is online all the time, that has a short attention span," says Double Edge co-owner Kiowa Winans. “How else are they going to learn and connect with your product if you don't entertain them?" Companies can take the production savings and put them back into additional campaigns, increasing the chance of success.
Because of the low cost of participation and rapid market growth, now is the time to try converged television markets and learn what works and what doesn't—before temporary failure is no longer an option. Learn to get it right, and not only can the payoff be big, but a company can jump ahead of competitors.