Wednesday, July 15, 2015, 11:43 AM ETPosted by:Scott Ferber
Chairman and CEO, Videology
We’ve all heard the adage: if content is King, then distribution is King Kong. For years, distribution and content have been the King and King Kong of advertising: the synergistic, dynamic duo that owned the consumer relationship. But, with Verizon’s purchase of AOL and other recent industry moves, King and King Kong are joining forces with new and powerful allies.
It used to be that creators of content, such as television networks, owned the consumer relationship. Back in the day, brands looked chiefly to the television advertising upfront presentations for the demographic info they desired to drive brand awareness. Consumer focus groups filled in the rest of puzzle.
Then, along came digital media. Internet, cable and satellite TV providers that literally carried programming into consumers’ homes, and onto their desktops, tablets and Smartphones. These providers are afforded an additional layer of understanding—a data layer – containing demographic information that, in an anonymized manner, can tell a lot about consumers: which brands they buy at the supermarket, when they’re likely to purchase their next automobile and more. Just the kind of data that brands looking to make connections with consumers are hungry for.
Now, with television viewing becoming more fragmented across a wider variety of screens, content and distribution welcome a third power base, ad technology; in essence creating an advertising triumvirate. Advertising technology wields power in this new group because it controls the distribution of ads, much like cable and satellite companies control the distribution of content. Ad tech’s ability to send targeted ads to consumers across all devices has become crucial to advertisers, who need to build awareness in a fragmented environment, and to media and distribution companies who need to monetize their multi-pronged assets. This new dynamic means that access to the increasingly complex set of ad tech “pipes” is now just as important as access to the content “pipes” (once the sole source of programming to the consumer’s TV set—and hence the sole source of delivering TV ads).
This inter-dependency between media, content and ad technology first became evident in the digital landscape. Google and Facebook are two obvious examples. While they were both technology companies at the outset, today they are squarely in the media business. Their access to both user data and to content, in addition to their technology underpinnings, render them advertising powerhouses with few single organization able to compete in terms of sheer scale. However, there are signs that the tide is shifting.
Take for instance the recent announcement that Verizon will purchase AOL for a reported $4.4 billion. This is a prime example of the new media triumvirate —one part distribution network, one part content, one part advertising technology. In this case, Verizon’s penetration into the mobile marketplace and its reported plans to build a more robust over-the-top TV network, coupled with AOL’s content and ad technology assets, set up a model scenario for a 21st century media company.
Verizon’s access to cross-device user ID data through both its wireless business and FIOS television service is particularly appealing to advertisers. As devices converge, and consumers seamlessly access content across screens, advertisers are increasingly interested in telling sequential stories to the same consumer, over time, across devices. This level of targeting is possible to some extent using third-party data sources, but a common linking ID between devices is generally thought to be the Holy Grail of addressability.
Of course Verizon is only one example of the trend toward the media triumvirate. We can also point to Comcast’s purchase of Freewheel, adding ad technology capabilities to its cable and internet distribution business, as well as its content branch, NBCUniversal. Facebook also strengthened its ad technology chops with the acquisition of LiveRail, as did Yahoo! with the acquisition of BrightRoll. And, of course, there will be more to come as advanced advertising capabilities progress, and competition intensifies to offer these services to advertisers.
As consumers’ viewing options become more complex and diversified, so must the strategies for successfully reaching them. The current trend toward mergers between seemingly disparate players is meant to consolidate the path to the consumer, and provide a more insightful, efficient offering for advertisers. So what at first glance may look like a case of strange bedfellows may actually result in the perfect powerhouse triumvirate of distribution, content and technology.
Scott Ferber is Chairman and CEO of Videology, a leading software provider for converged TV and video advertising.