Advertisers are struggling to reconnect with cord cutters — people who have abandoned cable and broadcast television in favor of online streaming services.
As a result, it's become more challenging to get advertisements in front of over-the-top (OTT) content viewers who have shifted to the screens of mobile devices. OTT refers to delivery of audio, video and other media over the Internet without the involvement of a multiple-system operator in the control or distribution of the content.
But Rick Miller, vice president of customer insights at Networked Insights, said this shift also presents opportunities for advertisers who can align their TV media buys with the right online programming faster than their competitors. “We expect the profile of the 'typical' OTT viewer to change a lot as the segment matures, but today these consumers have distinct habits,” he said.
Understanding Cord Cutters
Earlier this week, Dish TV launched an online-only service, Sling TV. The service, selling for $20/month, is designed to appeal to the cord-cutting audience. The company will start offering subscriptions to a select group of volunteers who signed up through its website this week and open the service to the public within a few weeks.
It's interesting from the consumer standpoint, of course. But it may be an even more interesting development from the advertising perspective.
What do we know about cord cutters?
About 60 percent of cord cutters favorite brands are retailers, Network Insights research shows. Think Johnny Cupcakes, Wal-Mart, Bed Bath & Beyond, Home Depot, Costco and GameStop, as well as fast food places like On The Border and Burger King. Other top cord cutter brands: Kool-Aid and a single bank, HSBC.
As mobile advertising explodes, expect more consumer engagement with retailers, who love the ability to connect 24/7. That means more retail advertisers will allocate greater portions of their advertising budgets toward streaming services such as Netflix and Hulu.
What are cord cutters watching on these second screens? Generally speaking, more cable shows than broadcast TV. Shows such as The Walking Dead, Super Soul Sunday, Hardball and @Midnight took up the top four spots of shows that generate top engagement with cord cutters. On the broadcast side, they are likely to watch long-running favorites like The Simpsons, which has been on the air since 1989, and Meet the Press, which been on the air since the infancy of television in 1947. HBO's Game of Thrones is the only show with premium access on the list (meaning no ads), and it barely made it onto the “cord cutter” top 10.
"For brands that resonate well with this audience, there are plenty of media opportunities. Most of the top shows are on ad supported broadcast or cable networks,” Miller said.
That could mean that people don't mind ads themselves on cable or broadcast networks. Rather, they may be tempted to cut the cord out of frustration over things like the ways cable companies are coming together to eliminate alternatives — we recently reported that the Comcast-Time Warner M&A was the biggest in 2014 — and nightmarish customer service by the likes of Comcast and Time Warner . (Did you hear how Comcast renamed a customer "Asshole Brown" when he tried to cancel his service?)
To Cut or Not to Cut
Not all shows are available via streaming. Customers might need additional streaming services to get their favorite TV shows. While that can provide advertisers the chance to generate revenue on multiple streaming services, it isn't economical from a consumer standpoint.
From a technical standpoint, an overloaded Internet connection with multiple devices competing for bandwidth as well as some ISPs' penchant for throttling connections might mean sluggish streaming. Although data speeds are high, bandwidth is limited and many ISPs institute data caps, especially for mobile use.
Finally, there are legal issues. A consumer's favorite show might be on Netflix now, but it could be elsewhere in the near future because of a lapsed licensing agreement or other intellectual property issues.
These are all issues that not only consumers but also advertisers are grappling with in this new era of TV everywhere. The bottom line: “Cutting the cord” doesn't necessarily hurt cable or broadcast TV or their advertisers. However, it does make them rethink their strategies and alternative shifting more advertising to services accessible on mobile devices for a market that's always on the move.