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Will Spurt in Addressable TV Ads Mar FB, GOOGL's Duopoly?

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The advertising industry is likely to get a major makeover with the growing proliferation of addressable advertising in television ad industry. With advancement in technology, television players are looking to offer advertisements that will help advertisers reach out to target viewership with a specific campaign.

The main facilitators of this kind of ad delivery are multichannel video programming distributors (MVPDs) like Comcast (CMCSA - Free Report) , Dish (DISH - Free Report) and AT&T (T - Free Report) .

Notably, they are aiming to address advertisers’ needs, such as targeting, data and measurements that earlier only digital ad platforms could offer to draw audiences.

Moreover, capitalizing on the personalization factor that the TV companies earlier lacked, now the competition seems to intensify for the leading digital advertising giants like Facebook (FB - Free Report) and Alphabet (GOOGL - Free Report) owned Google.

Per eMarketer, spending on addressable advertising in 2019 is going to be around $2.5 billion, up 23% from 2018. Another report by Video Advertising Bureau (VAB) forecasts spending on the metric to rise to $3.3 billion by 2020.

In a March report, VAB estimated the addressable TV audience in the United States to reach 162.2 million, up 30% from the count in 2016. Per Gartner, addressable claims only 3.7% pie of the total TV ad spending chart.

Expansion Efforts in Addressable TV Advertising

In order to make it a win-win situation for both consumers and advertisers as well as penetrate the uncharted market, television biggies are resorting to frequent partnerships, product enhancements and other key initiatives.

Recently, Comcast, Charter Communications (CHTR - Free Report) and Cox Communications brought an innovative advertising strategy to the table called “On Addressability” to better target audiences. By joining forces, the companies look to pool their grasp of understanding from addressable advertising and unite other content distributors to help it gain further traction. Moreover, the same will ensure the usage of the customer data in compliance with privacy standards.

Earlier in May, AT&T’s advanced advertising and analytics company, Xandr, improved its addressable TV solutions to include new ambit and frequency capabilities, widened cross-screen addressability, and enabled broader access to video on-demand inventory.

In March, Disney, Warner Media’s Turner, Comcast’s FreeWheel, NBCUniversal, Xandr, CBS, Discovery, Hearst Television and AMC Networks in collaboration with the US smart TV company, Vizio, formed a consortium called Project OAR (Open Addressable Ready) for defining addressable TV advertising standard.

Frown of Worry for FB, GOOGL?

Digital advertising has become an indispensable medium for brands and markets, given the pervasive scope that it provides. Google and Facebook together make up the top spots in the U.S. advertising market.

Facebook’s focus to develop new ad products has aided it to witness a significant uptick in online and mobile advertising spending in a short span of time. Meanwhile, Google has a creative team called Google Zoo that assists brands to make the best use of YouTube and its ancillary technologies. Moreover, these companies are employing machine learning and automation tools to allow advertisers tap the target audience.

Notably, despite all the controversies related to data security, Facebook and Google’s advertising sales grew 38% and 22%, respectively, in 2018.

While shares of Facebook have rallied 45.8% so far this year, the Alphabet stock has gained 7.7%.

According to eMarketer, by this year-end, total digital ad spending in the United States will for the first time exceed traditional ad spending and grow 19%. On the contrary, the firm predicts TV ad spending to dip 2.2%, mainly owing to the absence of elections and big sports events, such as the Olympics.

However, the firm adds that the combined share of the duopoly might drop for the first time this year. The real challenger is none but Amazon (AMZN - Free Report) , which is taking away market share and is expected to emerge as the “big winner” in digital advertising in 2019, per eMarketer. Stay Tuned as we bring to you more update on the same!

While Facebook carries a Zacks Rank #2 (Buy), Alphabet has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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