The Death of TV Advertising and Other Ideas, Part 1

Sep 23, 2003

By Al McClain

In a presentation at the GMA Merchandising, Sales and Marketing Conference, Peter Sealey, PhD, predicted the imminent death of TV ads as we know them today.

Doctor Sealey is Adjunct Professor of Marketing at the Haas School of Business at Cal-Berkley, Co-Director of the Center for Marketing and Technology, and spent the bulk of his
career as a senior exec at The Coca-Cola Company. He argues that while ECR and global synchronization have greatly reduced waste in promotions, new product intros, and supply
chain management, there is one key area of business remaining to be restructured: advertising. He sees this changing because: media is becoming digital, which enables tracking;
the new AdID standard (which identifies individual ads much like UPC codes identify products) provides the means to do this; and PVR’s (personal video recorders) will force a
new business model for ad-supported TV.

According to the professor, there are three distinct ages of TV Advertising: 1. 1947-1979 – no remote = family watching = no channel surfing. In this era, advertisers used the
strategy of “interrupt and irritate” effectively. 2. 1980-2003 – remote control = channel surfing, which led to “entice and entertain” ad strategy, i.e. Bud Light Super Bowl commercials.
3. Soon, we’ll embark on the PVR-TiVo era, which will allow consumers to “skip and omit”, leading advertisers to “embed and hide” messages within programs.

These predictions have support from large TV advertisers, such as Coca-Cola, whose COO, Steven Heyer said in February, “We are going…away from broadcast TV as the anchor
medium.” (Madison and Vine Conference) They are also bolstered by a comment from Michael Powell, chairman of the FCC, who said in January, “TiVo is God’s Machine”. (AP –

Advertisers are apparently moving away from traditional ads. Budweiser has created a short film/ad called “The Best Man” which takes their often humorous TV commercials to a
new high or low, depending on your viewpoint. (While clearly targeted at “20-somethings”, excerpts of this mini-movie had a GMA audience of middle-aged execs howling!) “The Best
Man” is available for download at McDonald’s, Ford, Pepsi, and Home Depot are among other marketers
involved with branded entertainment.

Driving the “death” of commercial TV is the personal video recorder — TiVo is the most well known brand — by enabling consumers to eliminate commercials, automatically record
programs, and watch virtually whatever they want, whenever they want. So, the argument goes, who is going to watch commercials if they don’t have to? Unless, perhaps, the commercials
are entertaining enough in their own right — although how will one know, since they’ve been deleted by TiVo? Further, with newfound ability to reach consumers based on demographics,
marketers will forego mass advertising reaching everyone watching a particular show. As PVR’s drop in price, consumers get used to them, and they start coming as standard pieces
of equipment with TV’s; broadcast advertising will become accountable, just like the Internet. Then, with the adoption of AdID as the standard, advertisers will be able to measure
results of their advertising, and presumably in the future, send messages out to viewers based on individual preferences through a digital signal. Exactly who owns and maintains
this viewer database of preferences, and delivers “smart advertising” is unclear, although Sealey believes it may be the cable companies, giving them enormous leverage.

The bottom line, according to Sealy, is that traditional media moguls are in denial, and will lose much business in the end. Just as TV execs in 1980 failed to embrace the possibilities
of cable and the traditional music industry is still resisting MP3’s (to the point of suing 12 year olds), current TV powers are failing to get on board with PVR’s, and the need
for more relevant advertising. New business models such as Google and Yahoo! reflect new realities. Mass forms of advertising yield to forms that are measurable, relevant, and

Tomorrow: Part 2, Simplicity Marketing

Moderator’s Comment: What’s the future for a better model of advertising? Where should retailers and manufacturers spend their ad dollars?

The death of mass advertising has long been forecast, but hasn’t happened, yet. As cable and the Internet have grown stronger, TV networks, radio, and newspapers
have essentially held their own. While the networks and newspapers probably won’t go the way of the horse and buggy, their leaders had better get after the new realities of technology-enabled
personalization, if they want to avoid becoming the railroads of our generation.
McClain – Moderator

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