Facebook's plan to disrupt TV advertising may have hit a wall
- The biggest players in tech want a crack at disrupting TV advertising.
- Amazon and Google are taking a more direct approach by paying to control some TV ad space. Facebook is looking to partner and moving more deliberately.
- That means Facebook is likely to face resistance from the ad industry, which could put it behind other players
Facebook wants to grab a big chunk of the $70 billion-plus US TV ad market.
The opportunity is clear. Even as the social network's advertising business has exploded, driven by small and mid-sized companies, major brand advertisers - that is companies that sell soda and cereal and razor blades and beer - have historically spent the largest portions of their budgets on TV ads. Break in to TV advertising, and billions of dollars could flow to Facebook.
The challenge for the tech giant is breaking old habits and fending off resistance from suspicious media companies. Despite the ongoing decline in live TV viewing, large swaths of marketers' budgets have remained stubbornly locked up in TV advertising. And for the most part, TV advertising is controlled by TV companies.
That leaves tech platforms like Facebook with a few options if they want to jam their way into the TV ad world. They can:
- Buy the rights to programming, like Amazon's NFL deal, which affords them the right to sell some ad time during live games.
- They can sell TV subscription services-essentially cable alternatives like YouTube TV and Hulu's coming 50-channel offering. Being a pay TV provider also gives companies like YouTube and Hulu the ability to sell a certain amount of live commercial time each hour, just like cable companies such as Comcast and Charter.
- Or, they can try to convince TV companies to let them sell some of their ad space, or at least help TV companies sell ads using their digital ad software and data. This route is less expensive, but perhaps a lot tougher.
It's the latter route that Facebook has chosen. The company aspires to help TV companies sell ads using their sophisticated digital ad tech and robust data. The focus is on ads that are delivered when people watch content on their TVs via apps, ranging from individual TV networks apps to services that aggregate content from multiple networks. People in the TV business refer to this as "OTT" or "over the top" viewing, where consumers get their TV via a device like a Roku or Chromecast, rather than through a set-top cable box.
Facebook is facing some resistance, however, and its OTT ad play is a work in progress. Meanwhile, rivals such as Amazon, Google and Hulu, a joint venture between Walt Disney Co., 21st Century Fox, Comcast's NBCUniversal and Time Warner, will be well positioned to experiment with more sophisticated TV ad tactics later this year.
The stakes are high. The faster that one of these tech companies can establish that it is the one that can bring innovation to TV advertising, the more TV partners it is likely to land and more advertisers it will be able to work with.
An early foothold will theoretically make it a lot harder for other tech to gain real traction in the TV ad ecosystem.
Facebook is likely to face resistance from the TV business
Last November, Recode reported that Facebook had kicked off a small test with a handful of partners, including Roku, A+E Networks and the startup Tubi TV. Ad buyers say that while those test have continued, the amount of ad inventory available remains limited, and Facebook has moved at a deliberate pace.
Facebook has focused on "OTT ads," or ads that appear as people stream TV on apps via connected TVs using devices like Rokus or Apple TVs. While a huge chunk of viewing on web-connected TVs is driven by non-ad supported content (Netflix, Amazon, HBO, etc.), the ad tech company Videology recently issued a report that found the number of ad campaigns including some amount of OTT ad inventory' jumped sixfold over the past two years. For example, last summer NBCU saw big increases in people streaming the Olympics via connected TVs.
But it's not clear just how aggressive Facebook is actually being when it comes to trying to land more TV partners for this initiative. "It's been more noise than action," said an ad buyer. "There is no real Facebook TV right now."
One ad industry insider said that Facebook appears to have hit a wall when it comes to getting more big media companies to sign on. That's because many traditional media firms view Facebook with suspicion, given its dominance in digital advertising, where some see monopolistic practices. And in general, TV ad companies, despite cord-cutting and declining ratings, don't typically have trouble selling ads in their top shows and don't like the idea of a third party selling their ad space.
"We'll never let them sell our stuff," said one top TV ad sales exec.
TV advertising is ripe for revolution, in theory
Traditionally, TV networks have sold ads during live breaks, and these ads reach the entire country at once. But theoretically, as more people stream TV using apps or cable-alternative services like DirecTV Now, advertisers can show different ads to different people, much like they do on websites.
The idea with this test is that Facebook could sell TV ad space to a wider swath of advertisers, and potentially individual viewers could receive more targeted ads. For example, Facebook could show different ads to men and women watching the same TV content within a network's app, or show specific ads to groups like people likely to be in the market for a new car.
Given what Facebook knows about its users' characteristics and interests, it should theoretically be pretty good at this sort of thing. "Of all the digital platforms, they do the best to use their data for relevant advertising," said Tracey Scheppach, a veteran ad buyer who is now CEO of the consultancy Matter More Media.
But Scheppach also gets why TV networks are resistant. "It's a recipe for that behemoth to control too much data."
So far, Facebook's OTT ad rollout seems to be slow going. Yet Facebook is hiring more people for the initiative and wants to demonstrate the potential of the medium early on before rolling it out more widely, according to someone familiar with the matter.
"Our initial testing started six months ago," said a Facebook spokesperson. " It's still very early. Scale will come soon enough."
Amazon, Google and Hulu are positioned to race ahead, in contrast.
Hulu has long employed more web-like targeting when it delivers ads to people using its on-demand service. Going forward, as Hulu signs up people for its $40 per month 50-channel service, it will be able to play around with more digital ad tactics. Theoretically, these companies could leap ahead of Facebook as more web-like TV ad targeting evolves.
Of course, Facebook is known for biding it's time and then going big on an initiative. Some inside the social network have likened this to when the company planned its push into mobile a few years ago before quickly becoming a dominant mobile player.
There's a big difference of course between mobile, where Facebook controlled its own product, and TV, where it does not. TV is fundamentally a different business, one that can be unwelcoming to outsiders.
"I think it's gonna be hard," said one ad tech executive. "People are scared of Facebook."