Wall St Speaks Out on Ad Share Shift, 4K Readiness, and Social Effectiveness

Janney/MediaEntertainment: Wible's Weekly - Ad Share Shift, 4K Readiness, and Social Effectiveness

Ad Shifts – DWA's Awesomeness TV is producing two series for a cruise brand (RCL), which has decided to move spending from TV to online video. This is interesting on two fronts. First, this feeds into the concerns that TV ad spend will move to online video. However, we note that this is just one data point, is a very small sample, and RCL was under-invested in digital based on its TV to online ad spend ratio. Second, the move shows how YouTube networks/publishers can use native advertising to improve monetization as these revenues are not split with GOOG.

Streaming 4K Readiness – AKAM said 11% of the world is ready to deliver ultra HD stream, based on its assessment of internet data speeds across the globe. About 17% of the US is ready for the sustained data 10 Mbps to 20 Mbps generally required for 4K/Ultra HD streams, which ranks the US at 13^th vs. the leader South Korea at 60%. We note that the requirements suggest consumers would burn through a massive 4.4-8.8 GB/Hr of streaming that will quickly eat into UBB caps. Separately, US consumers are buying even larger TVs that will see more of a benefit from Ultra HD. Average TV pricing is down 9%-11% in the last 2 years, and average 50-inch pricing is down ~12%, according to NPD. Larger screens now account for over 50% of all TV sales.

Social Effectiveness – Marketers are increasingly focused on the effectiveness of their content on social media networks, according to a study by Ipsos OTX and ANA. The top 3 metrics for marketers are FB Likes (89%), Clickthroughs (87%), and TWTR retweets (81%), while less than one quarter of respondents link to "harder" metrics such as Sales (24%), ROI (23%), Cost per Conversation (18%), or Cost per Sale (5%). A separate study by Contently confirmed the focus on softer metrics, with 69% of respondents focusing on page views/visitors, 65% on social shares/likes, while only 42% measured conversions/sales and 7% did not measure anything. We believe social media advertising will flourish over time if marketers eventually embrace the hard metrics used to evaluate other media.

Display Pricing Dynamics – According to digital ad agency 360i, aggregate desktop display CPMs are increasing with the push toward more premium ad formats and the move to programmatic buying. More specifically, native ads, video, targeting, and the integration of premium inventory into programmatic platforms are driving the improvements. Improvements in viewability, measurement, and targeting should drive CPMs up in the future.

Tony Wible can be reached at twible@janney.com.

IMPORTANT DISCLOSURES
Research Analyst Certification
I, Tony Wible, the Primarily Responsible Analyst for this research report, hereby certify that all of the views expressed in this research report accurately reflect my personal views about any and all of thesubject securities or issuers. No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views I expressed in this research report.
Janney Montgomery Scott LLC ("Janney") Equity Research Disclosure Legend
Individual disclosures for the companies mentioned in this report can be obtained by accessing our Firm’s Disclosure Site.

Read all Tony's MediaBizBloggers commentaries at Wible's Weekly: Janney/MediaEntertainment.

Check us out on Facebook at MediaBizBloggers.com
Follow our Twitter updates @MediaBizBlogger

The opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaBizBloggers.com management or associated bloggers. MediaBizBloggers is an open thought leadership platform and readers may share their comments and opinions in response to all commentaries.