Karen Raugust finds that TV ads arent going away, but they will evolve as they find their place among a multiplicity of marketing venues.
With the rise of digital video recorders, the fragmentation of the television landscape, and increased competition from other media, some pundits have predicted the demise of the traditional TV spot. But most analysts and experts believe TV commercials will remain a dominant part of the marketing mix. Its not like TV doesnt work, says Peter Kim, senior analyst at Forrester Research.
Traditional television commercials arent going away, explains Barbara Bacci Mirque, evp at the Assoc. of National Advertisers. Yes, theres media fragmentation and theres technology. But TVs still the most cost-effective way to reach a mass audience. The more fragmentation, the more attractive it is as the only mass medium.
Yet TV commercials will have to evolve in the face of the changing media environment. The keys, experts say, will be to make the spots entertaining and eye-catching, so people will want to watch, and to increase their effectiveness in leading viewers to become customers.
Impact of DVRs
Digital video recorder usage is on the rise. Forrester estimates that 12% to 13% of the U.S. population subscribes to a DVR service today, and that there will be 30 million such devices in use by 2007. The adoption of DVRs which is occurring faster than many analysts had predicted could impact TV advertising negatively in the short term; a recent Forrester survey showed most advertisers expected to reduce the portion of their budgets devoted to TV spots by 11% to 20% as soon as next year.
Harry Wang, research analyst at Parks Associates, estimates that DVRs will ultimately be as pervasive as DVD players are today (e.g., in nearly 90% of households), perhaps as early as 2010 or 2012. When that happens, consumers habits will change dramatically, Wang says. Parks found that U.S. DVR penetration was 12% to 14% last year, and predicts it will rise to 18% to 20% this year.
Although DVRs are often associated with ad-skipping, only 53% [of DVR users] identify themselves as active skippers, according to Jupiter Research analyst Todd Chanko. He notes that 88% of users primarily use their DVRs for time-shifting, although many also combine that with ad-skipping. In fact, 74% of people who watch time-shifted programming soon, within seven days of its original airdate, say they skip the ads. Overall, time-shifters are just slightly more likely to skip commercials than DVR users in general (54% versus 53%).
Many analysts believe the total number of TV spots will remain steady, despite the growth of DVRs. There wont be significant erosion in terms of the number of commercial spots over time, Wang says. As long as TV content creators continue to provide attractive content, I dont think the number of spots will change.
Others believe demand will rise. The overall amount of spots will grow, as will the types and formats of spots and the delivery media used to get them to consumers, says Richard Winkler, co-founder, partner and executive producer at Curious Pictures. What may well change is the amount of money that clients will be willing to spend on these commercial messages for these new formats and channels.
Whatever the total number of commercials and where they are distributed, their configurations are likely to change. Lengths, for example, may vary. While 30- and 60-second spots still represent the majority of deliverables, 15-second spots are very common. There was a trend in five-second spots a few years back, but it kind of died out, says Dave Waller, co-owner and artist at Brickyard VFX. Personally, I think it would be beneficial to advertisers to work in any length their message requires, even odd lengths. It works on the web and it would work on the air.
The spots will need to be appropriate for the media they are shown in, explains Heather Wright, head of commercials at Aardman Animations. So its very likely that the standard :30 or :60 may change and either become much shorter bursts or even longer, two or three minutes for example, to be watched on websites where people have time and have made an active choice to watch.
Opportunities for Advertisers, Agencies and Production Houses
Unlike with VCRs, viewers who fast-forward through commercials using a DVR actually can see them, albeit at a much faster pace and without sound. This gives advertisers and production companies opportunities to reach even fast-forwarding viewers to some degree. The key frames become really important, Chanko says.
Examples of advertisers who have utilized DVR technology effectively include KFC, which hid a code in a commercial; viewers who discovered the code received a discount on food. You were obliged to watch in slo-mo, frame by frame, to see the code and get the discount, explains Chanko. Similarly, GEs One Second Theater gave viewers who watched one frame at a time, or paused at the appropriate moment, a bonus one-second commercial-within-a commercial. Visuals that work in both environments [live and fast-forwarded] will take the grand prize, Chanko says.
There will be a very significant premium put on the design of television commercials, agrees Mike Donahue, evp at the American Assoc. of Advertising Agencies (4As). He points out that certain ads, such as the AFLAC duck or the Apple Computer spots featuring a hip young man as Apple and a conservative-looking older man as the PC, are recognizable even if a viewer watches them over a span of 9 seconds instead of 30.
DVRs are part of the present, according to Mary Hilton, vp public affairs at the American Advertising Federation. If youre going to advertise on television its going to have to grab the viewers attention enough so theyll watch it on the DVR. It has to be more eye-catching and dynamic to try to involve the viewer in it.
Hilton points out that particularly creative ads can become watercooler topics, which reinforces the brand, even among people who havent seen the spots themselves. Furthermore, if one of these conversations piques their interest, they can watch the ad later through their DVR or on an Internet video-sharing site such as YouTube. Word of mouth is a good way to advertise too, Hilton comments, adding, Animation seems to be a natural fit for where advertising is going, because of the creativity involved and its ability to break through the clutter.
A Multimedia World
Online advertising, still a relatively small part of the overall mix, has seen its growth outpace that of television. Jupiter Research predicts online advertising will grow from $15.7 billion in 2006 to $25.9 billion in 2011, representing a compound annual growth rate of 10.6%. Cable advertising is expected to expand even faster, growing 12% annually to $42.5 billion in 2011 from $24.1 billion this year. That would put total spending on cable in the same the ballpark as broadcast television, which currently generates $44.2 billion in advertising revenue but is expected to grow only 1.9% per year, reaching $48.5 billion by 2011.
These trends are leading advertisers to experiment with distributing their messages in a wide range of venues, from online ads to spots on portable devices (e.g., cell phones and iPods), social networking sites (MySpace) and user-generated content (YouTube), as well as branded entertainment, advergaming, product placement and the like. TV is the classic backbone of advertising, says Hilton. But there are other avenues being explored to reach consumers in a new way.
With the explosion of YouTube-type broadband sites, the commercial as a pure entertainment vehicle will proliferate, Winkler predicts. In a variation of the long tail, advertisers will benefit by being seen as the sponsors of great entertainment. This will be the opposite of targeted marketing more like a message in a bottle sent to float on the global media ocean.
Your buy may be split between cinema and TV or be totally viral or a combination of all three, but you will be producing spots in some fashion, says Michele Morris, senior producer for ATTIK, a global creative agency.
Some new, alternative channels are already causing advertisers and agencies to start shifting where they spend their ad dollars. In an AAF survey of industry leaders, respondents said they expected online advertising to increase from 15% of their total media budgets in 2005 to 20% in 2006 and 32% in 2010.
Consumer behavior is changing. Its moving from TV to the Internet, says Kim. If both have a consumers attention, the Internet usually wins out. A recent Forrester survey conducted for the Association of National Advertisers found that 78% of that organizations members believed TV ads have become less effective over the last two years.
Meanwhile, consumers are increasingly multitasking, using several different media interchangeably and often at once. That means advertising messages will need to be portable from one device to another, creating more work for commercial houses. Youll need different lengths and types of advertising to go from one screen to the other, Donahue says. There are so many more ways to make consumer contact these days.
Some advertisers are experimenting with driving consumers from the television to the Internet, such as with cliff-hanger TV spots that encourage consumers to go online to see how the commercial ends, or to see a longer branded-entertainment vehicle or infomercial. People are still exploring that as an option, says Hilton.
Some believe this tactic is a fad, however. Linking conventional broadcast TV commercials to longer versions of the same ads on the web is something of a gimmick, and most likely wont become widespread, Winkler believes.
Kim disagrees. Its not happening as much as it should. Were multichannel. Marketers need to move toward integrated marketing. The creative process has to change.
A real marriage between online and television advertising probably wont occur until the two media are linked so that consumers can switch easily from one to the other, using their remote, Wang believes. But Internet Protocol TV (IPTV), through the telephone companies, and Internet/TV set-top boxes, from cable/satellite providers both of which would connect the two media seamlessly are not likely to achieve critical mass until at least 2009 or 2010.
But there are still ways for advertisers to take advantage of multiple media. I dont see why a spot cant exist on multiple formats, and obviously each platform has its own strengths, says Adam Shaheen, president of Cuppa Coffee Studios. Theres no reason not to play to those strengths. For example, while a television spot is very passive, an Internet spot can be interactive, yet the core brand can be the same. Ultimately, the message remains the same, you just get there in a different way.
Video on Demand and Targeted Advertising
Video on demand (VOD) represents another growth opportunity for the future. Through a VOD or DVR service, interested consumers can choose to view a commercial that appeals to them. Short spots during a show alert them to the availability of the VOD version. Consumers are interested in advertising thats relevant to them, Bacci Mirque says.
Some advertisers are experimenting with this tactic now, in part to learn how to create an effective message in this channel. Kim notes that, like the other new technologies serving as catalysts to change consumer behavior, VOD will require advertisers, agencies and commercial houses to rethink how spots are produced if they are to succeed in the new environment.
In the future, advertisers also will be able create different versions of their commercial messages to target individual zip codes or even individual households, tying different messages to different demographic or behavioral characteristics. The technology to do this already exists, and some advertisers are experimenting with it on a very small scale through a single DVR or VOD service provider. But, as Wang wonders, Can you do it on a scale that crosses all service providers?
Like many new media technologies, targeted advertising, with its multiple versions of each spot, eventually will lead to more demand for commercial work. But Kim stresses that the changes ahead are not just about technology or increased production. Rather, they will require advertisers, agencies and commercial production houses to develop new ways to create commercials that work in these new environments.
Need for New Metrics
For most of the emerging channels to be effective, advertisers and agencies need better means of measuring not only viewership, but consumer behavior. The measurement systems that exist today were based on the old style of interruptive advertising, Bacci Mirque points out.
Donahue adds that todays metrics are exposure-based reach times frequency equals gross ratings points which means, in essence, that they gauge consumers opportunity to see an ad. What happens between then and when you buy?, he asks. Theres a big gap between exposure and sale. How do you measure that? The 4As is working with other advertising associations, including the ARF and ANA, to create a measurement of what it calls consumer engagement in advertising. That knowledge would help advertisers understand their consumers, create effective messages and distribute them through appropriate channels. You could design an ad with the potential and likelihood of engaging the user, Donahue explains.
The new technologies themselves can help advertisers discover how consumers behave. Through a DVR service, for example, advertisers can measure the number of clicks and zooms, see how often content and ads are viewed, and collect other information. These types of tools are the missing link that will allow [advertisers] to determine whether their investment is providing a good return, says Wang. They tell the whole story about how effective their advertising is.
Im hoping the impact [of new metrics] will be that the standard of creative will need to be greater than it is at the moment to catch peoples attention, says Wright.
Yet numbers alone cant drive creative decisions. Research and focus groups have been a part of commercial production for a long time now, ATTIKs Morris points out. They can be used to enlighten, but shouldnt be used to direct the work.
Obviously its practically impossible to quantify the effectiveness of a commercial, through there are many that are paid very well to try and do exactly that, says Shaheen. We take more of an organic approach at Cuppa, working with clients to make sure that we are delivering the message effectively. After all, its not how many people saw the ad, its about how many connected to it.
Some people need hard numbers to justify a corporate strategy, but getting messages through to people isnt easily measurable in my opinion, agrees Waller, who adds, In the effort to track everything, you make it too complicated for people.
Current Production Trends
While the issues surrounding new technology and how it will affect commercial production are of critical importance for animation houses involved in this business, there are also creative trends that are of more immediate interest.
One is an increase in collaboration among commercial studios. When companies in the commercial and broadcast design arenas concept something that they cannot solely execute, they turn to the experts at Engine Room, says Dan Schmit, dp at the company, who believes this collaborative practice will become more widespread. Engine Room, a hybrid digital studio that offers specialty cinematography, a prelit greenscreen stage and integrated visual post facility, was specifically established to cater to other companies concepts, Schmit says. Two recent examples of its work include visual effects for a GMC spot for vfx company, Radium, and a series of animated logos for Lionsgate Films produced by Devastudios.
This is not outsourcing in the traditional sense, because the partnership is overt rather than hidden, and Engine Room is working with its clients to craft the overall concept rather than picking up random shots, explains Schmit. He notes that the company was set up for this kind of collaboration, rather than simply to handle overflow work. We believe that as the lines of production and post become blurred, more companies will come together to accomplish projects in this fashion.
There is also increased collaboration among departments or companies specializing in different styles of art, particularly 2D and 3D. Our most recent spots include heavy collaboration between our 2D and 3D departments, reports Anthony Tabton, director of Charlex Animation. Concepts are initially developed by the graphic designers and then carefully directed into the 3D realm to give the spots a fresh departure from the norm. This technique bridges the gap between 2D graphic designers and 3D artists, potentially creating something entirely unseen before. Gone are the days of flat, orthographic designs, and the equally over-produced whiz-bang of 3D.
Tabton points out that off-the-shelf software, enhanced by minimal proprietary tools, makes this possible, even under tight deadlines. It is not so much the limits of technology, but the limits of creativity, that challenges the commercial world today.
Another trend is the increased reliance on CG in general. I see animation being used more and more as an often more cost-effective alternative [to live shots], says Michael Wharton, CG supervisor at Pure, a New York-based creative design studio. Spots on the air these days feature full-up CG money shots, right in your face, giving complete flexibility to the creatives. The trend seems to be more doing it in post instead of fixing it in post.
Wharton cites a spot Pure recently completed for Oreos Cocostix. At the onset, the agencys art director and producer were gearing up for a motion-controlled table-top shot, and had the intention of using Pure simply for the cleanup and composite, because thats how food people work. We threw it out there with a quick test to say, heres what we can do for you completely in CG. They brought the test to Nabisco, and we got the greenlight.
Loni Peristere, creative director at Zoic, believes the success of films such as the Lord of the Rings trilogy and Chronicles of Narnia have given advertisers and agencies confidence in CG. The big change in commercials and animation is the no fear policy the agencies and directors are embracing, Peristere says. You no longer see animatronic characters in TV spots. And the characters you do see look far more real.
The improvements in technology, the acceptance of CG by clients and the increased experimentation with new media channels all have created opportunities, even for the smallest companies. The trend I find most interesting is the wave of small independent production companies not only starting in the field, but garnering large company attention and accounts and thereby stabilizing themselves for a long-term independent future, says Yvette Edery, director of ArtistrYE Productions, an independent producer of puppetry, animation and experimental media.
Edery reports that ArtisrYEs small in-house team has worked with six other companies on eight productions over the last six months, ranging from a podcast to a stop-motion mobile-phone series. With larger companies spending more money on acquisitions than in-house development, little animation collectives, puppetry production companies, and freelance artists are coming into an era where they can make it on their own, stay on their own, and deliver better product because of it.
Going forward, the multiplicity of potential distribution channels for commercials will have to be taken into account from the beginning. Product stories need to be created and tailored for each medium, says Richard Marlis, executive vp at ka-chew!. Companies like ours that have cross-platform capabilities are brought into projects early on to look at the 360-degree picture. Looking at that picture from the inception of creative will be the trend, and the largest growth area in commercial production.
Karen Raugust is a Minneapolis-based freelance business writer specializing in animation, publishing, licensing and art. She is the author of The Licensing Business Handbook (EPM Communications).