Second-Screen Advertising : A Tale of Two Assumptions

Fresh off completing a second screen ad study on a notable TV show .. (you know, the kind where you go in with a ‘lets-confirm-or-deny-what-we-think-we-know’ and come out with some of .. ‘hmm-now-we-know-what-we-didn’t-know-we-didn’t-know’). Wanted to use this moment to reflect on a topic of much procrastination — the emerging economics of Second Screen Ads. So here goes — with the caveat and adapted Yogi-ism – 90% of all prognostication is 50% mental.

As with any emerging market, Second Screen Ad prognostications are heavily dependent on your assumptions, which might include:

  • Pace of growth of TV Apps Ecosystem in both volume and ‘share of TV eyeballs’
  • Emergence of new Ad Units. Surely there’s more to second screen ads than banners & videos. Something that matches the increasing computing power of tablets, and the increasing short spans of focus on any single screen at a time. But what this is is anyone’s guess – and until then, there’s banners and click-thrus.
  • The relative valuation of new Ad Units to the incumbent ones. What should the base case of the Ad Unit revenue breadown projection? Banner Ad or more? CPM,CPA,CPC,CP(TBD?)?
  • The Trajectory of ‘input costs’ – What assumptions should be made about the costs of creating large varieties of ad units for the same campaign.
  • Analytics & Reporting. How about the potential ‘apples and oranges’ issues of adding up the engagement across devices, exposures and interaction styles into something simple and tractable.

Given a position on the above, we have sunny side uppers, the whoops, is that a Chasm I see? crowd (harkening back to the Gorilla Game), and the umbrella-carrying sun worshippers.

  • Sunny Side Uppers The assumptions made by sunny side uppers such as this, focus on the *potential* total addressable market. If you take the best case – a) 80% of all (4 billion!?) TV watchers have TV Apps running on their tablets while they watch TV, b) their TV App dwell time is a significant fraction of the program length, and c) their dwell time is handsomely rewarded by some unspecified but superior-to-banner ad style, with a lucrative ‘action-per-thousand-eyeballs’ metric.
  •  Whoops, is that a Chasm I see?  This school of thought is that a large pivot needs to happen in the second screen space before early adoption turns into revenue. Some studies point out that actual second screen use is close to 10% than 80%. This is in line with VC Fred Wilson’s 30/10/10 rule of thumb for any App (TV or non-TV). If you go with Fred’s rule, less than 10% of your app downloaders are active users, and about 1% of your downloaders might be on concurrently (for Social TV or Social Ads). Combine this with my earlier blog (pie chart included below for convenience) showing that most apps have 100K downloads or less – and you have an ad targeting over 10K users and social experiences across 1K users. Not that 10K is a small number, but nowhere near enough for banner style ad economics to add up to more than a month’s rent on a studio apartment.

TV App Graphs

  • Umbrella-carrying Sun Worshippers There is a ‘third way’ – one that acknowledges but triages the best of both the above. It acknowledges the ‘chasm’ view that getting the cross product of app eyeballs and dwell time in the millions isn’t exactly around the corner. However, the sunny side school does have a point that new ad categories may change the economics away from the obsession around eyeball counts in the millions and trying to conjure up large $ numbers from minuscule web by CPM’s. A number of companies are working in this space without yet showing their hand, and a maybe plus a perhaps don’t add up to two is’es. However, between YuMe’s award winning multi-screen ad units, and Adobe’s multi-screen ad inventory management, there are in-market examples of tangible current products trying to create a superior ad experience, nuanced analytics .. and therefore a more viable economic base.

And in the process of building a viable economic edifice for multi-screen TV, second screen ads could blur the lines between ads and content, click thru’s and audience participation- and in an oh-by-the-way manner, commoditize user panels. After all – why ask a user what they would do, when you can know what they do..do.

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