To understand how profound the implications of the recently announced NFL on Amazon Prime or YouTube TV are, it may help to understand the economic engine that drives traditional commercial television.
The goal of the commercial television business is to package a specific, targeted audience and sell it to the highest bidder. The more precise the targeting, the higher the fee, and of course, the bigger the targeted audience, the bigger the fee.
TV Is Data Poor
Because the broadcast television industry is data poor (it only offers metrics about itself), this model has never been a complete solution for brand or lifestyle advertisers. In practice, an advertiser needs to translate ratings and demographic information from Nielsen into knowledge and insights it can link to its KPIs (key performance indicators). Because content is distributed across so many non-TV platforms, this process gets more difficult every day. How effective was your broadcast TV buy? Was there an increase in sales that could be attributed to it? Could we have spent this portion of our advertising budget differently?
FANG Is Data Rich
There are four data sets that help define each of us: attention, consumption, passion, and intention. While traditional broadcast TV tries to measure or attribute some of these to TV viewership, FANG has actionable data that drives KPIs.
Facebook knows what you are paying attention to. You post and share the things you care about, and your Facebook profile makes your attention actionable.
Amazon knows what you consume and what you’re thinking about consuming. If you’ve bought it or are planning to buy it, Amazon knows it and can act on that data.
Netflix knows your passions. You demonstrate how you can be reached on an emotional level every time you watch a video. Netflix knows more about the kind of entertainment that ignites your passions than you do. It continually acts on that data.
Google/YouTube knows your intentions. You never intend to go to Google and stay there; you search for what you intend to do. Your Google profile indicates, with a very high degree of accuracy, what you are likely to do in the near-term future. This is some of the clearest, most actionable data in the world.
We Will Still Have 4 Major Networks, Just Not the 4 You’re Used To
People often reminisce about the “good ole days” when there were four major networks: ABC, NBC, CBS, and Fox. We are transitioning to a world where there will still be four networks, just not the four networks you’re used to. FANG is delivering actionable data to advertisers in ways that traditional broadcasters simply can’t.
The power of Amazon Prime to an FMCG (fast-moving consumer goods) company may be less significant than the power of Amazon Prime to a consumer electronics manufacturer, but Amazon is becoming a complete solution for all types of B2C and many types of B2B advertisers. Its size, scale, and efficacy are truly stunning.
If YouTube TV and other OTT (over-the-top) skinny bundles start to get traction, we are going to see a dramatic shift toward the data-rich, brand-safe, Internet giants. (Yes, Facebook and Google will deal with their current content adjacency and brand safety problems, and you will forget they had them.) FANG will not be alone. Apple is going to get into this game, and there are international powerhouses like Alibaba and QQ that are already well on their way.
What Does All This Really Mean?
For today — advertisers are spending, traditional networks are making money and all of this sounds like stuff you’ve heard before. But we’re only talking about timing. Traditional (linear) TV audiences are declining at a significant rate, and they are practically aged out of key demographics. Cable customers are also declining. So, the question is when this shift will make a difference, not if.
For consumers — more choice, more fun. Consumers don’t care about content transport mechanisms or broadcast business models, they just want their content.
For advertisers — Brands have never wanted to buy CPMs (cost per thousand impressions) or GRPs (gross rating points); they want to sell stuff. The data-rich FANG and other tech giants are offering data that can be turned directly into sales.
For Networks — It’s just a matter of time before media without actionable data will be impossible to monetize. Can traditional TV catch up? Adapt or die!
Named one of LinkedIn’s Top 10 Voices in Technology, Shelly Palmer is CEO of The Palmer Group, a strategic advisory, technology solutions and business development practice focused at the nexus of media and marketing with a special emphasis on machine learning and data-driven decision-making. He is Fox 5 New York's on-air tech and digital media expert, writes a weekly column for AdAge, and is a regular commentator on CNBC and CNN. Follow @shellypalmer or visit shellypalmer.com or subscribe to our daily email http://ow.ly/WsHcb