This is Part 10 of our continuing series on the most interesting digital advances and emerging companies. Prior reports focused on Criteo and the retargeting business; the Cloud; Google Glasses; Crowd-funding; Social Gifting, Airtime (Facebook video chat); credit card linked offers (Linkable Networks); trending social companies Wendr, ShopSocially, and Karma. To read the full series, visit http://www.jackmyers.com/media-business-report
TV ad buyers and sellers have faced two giant challenges over the last decade with limited success in overcoming them. The increasing fragmentation of TV audiences is a huge concern. And TV companies haven't been adept at providing their clients with an online approach to advertising, with solutions like interactivity and the kind of granular data routinely supplied by Web-based companies as a means of proving the true value of their offerings.
Three recent failures speak to the latter issue: Canoe Ventures, which was backed by some of the most powerful cable companies in the U.S., scuttled its mission to create unified standards for interactive advertising. Google TV and Microsoft's Admira (Navic) television advertising ventures were also disbanded.
As for the first issue: "Audiences are fragmenting very fast across channels and dayparts. The net effect is that the per-campaign reach is collapsing, and [agencies and advertisers] are seeing an over-concentration of a small group – the very heavy TV viewer," says Dave Morgan, CEO of Simulmedia.
His company has developed a business model that seeks to solve the two conundrums in new ways. "A lot of people thought that the only way TV advertising could be made better would be to make it addressable like online. Our view was that first you need to build the kind of data backend for TV that's like online – which will let you start to better deliver, package, measure, optimize and report on campaigns," Morgan says.
Simulmedia has amassed info from 16 million set-top-boxes, and according to the company, that gives it access to the second-by-second viewing habits of 30 million viewers. It's done so by striking deals with cable, telco and satellite companies, along with TiVo. The data is married with stats from other sources like Nielsen, Kantar Media, MRI and the U.S. Census.
That approach gives it insight into the viewing interests, spending habits and demos of people who not only watch mainstream programs, but those that watch TV in dayparts that advertisers generally consider less attractive. And it also identifies the niche shows targeted viewers like to watch. By blending those insights together, it's able to discover "under-appreciated" spot availabilities that can extend a campaign's reach beyond the heavy viewers.
Simulmedia takes a classic arbitrage approach, of buying something at discounted rates and then selling it for much more. It purchases lower demand inventory on multichannel systems and networks. It pays the systems more than they usually get for the under-appreciated inventory, but which Simulmedia's data shows are actually of greater value to its clients. Then Simulmedia delivers packages that reach targeted audiences that are often under-delivered by traditional campaigns and at more cost-efficient rates.
"We sell translucent packages, only on an audience basis. We don't sell any networks or programs by name. We don't sell any operator footprints by name. We don't sell specific dayparts. We sell audiences – so young women who have a high propensity to buy health and beauty soaps," Morgan explains. While the specific placements are unknown by the buyer at the time of purchase – and while they don't have the option of demanding placement on specific networks – they have the ability to say what networks or operators they do not want their ads to run on. Then after the campaign runs, Simulmedia makes available data on specific placements.
The company has attracted supporters at some agencies, but it has received some pushback from others. It has made the most headway with TV network tune-in promotional campaigns, working with both broadcast and cable networks. CBS was an early adopter of the Simulmedia offering. However, Simulmedia does have its agency supporters, among them Greg Kahn, EVP and development director at Optimedia. "Collecting big data is something agencies are doing, but we often rely on partners to help us out where we don't have the wherewithal to collect data in aggregate, and Simulmedia is one of those preferred partners," Kahn says.
He adds that agency mindsets are still somewhat "stagnant" when looking at new ways to buy TV. "Simulmedia's challenge is in convincing a broad constituency base that you need to get more targeted with television advertising, that it needs to get more of the measurability of other platforms," Kahn explains.
Today, Morgan's pitch to clients is to give Simulmedia 15% of a campaign's budget, and the company will reduce waste and add incremental value that exceeds that slice of the pie. But eventually, he's after much more.
He believes that in the next five years, 20-25% of the national TV ad spend in the U.S. will be data denominated. That proportion could amount to about $10-15 billion according to Jack Myers Media Business Report forecasts. That's what Simulmedia is focusing on, but ultimately the company plans to extend beyond national TV.
"One of the most significant things we're going to see is a really strong data-driven integration and linkage between TV advertising and online advertising. Probably, though, what many don't expect is that TV will not be the tail to the dog of the big online companies. I think that's probably the story of Google TV Ads and Microsoft not working," says Morgan.
He believes the business model can extend into radio, "because it also has the capacity to be measured in a digital way," says Morgan. Although he adds that radio is not something Simulmedia is exploring.
"Data denomination of media tied to core client objectives on a cross-platform, cross-media basis is going to happen. But the thing that's going to really flip it into something big is when it happens in TV," he says.
He expects Simulmedia will be testing Web and Web-video offerings in the next six to nine months. "I think that will be a critical part of the business," he says.
Disclosure: Jack Myers is a Simulmedia advisory board member. Janet Stilson researched and independently wrote this report.
Janet Stilson is the writer of magazine articles, books and several film scripts. A principal of Heritage Masterpiece, a service that focuses on biographies and company histories.
Writer in residence at three international artist retreats. Former vice president on the New York Women in Film & Television board of directors. Scripts have been optioned and short listed for major international awards.
Penned articles for many fine publications over the years about topics that range from the delights of walking through Spanish Harlem to business models for advanced forms of media. Worked as an editor at several publications, and traveled extensively on assignment.
Editor roles have included the creation of a startup as well as liaising with a large corp of freelancers -- orchestrating and editing their contributions. Also written research reports about the media industry both as a freelancer as well as on staff at a consultancy. She can be reached at email@example.com.