In my last blog I had talked about the opportunity for revenue growth for non TV devices that are retransmitting linear feeds in the local ad insertion space. A number of people asked what are Local ads versus National ads.This blog dives into local and national ads on linear tv in the US.
When you are watching linear TV ( basically the TV you see when you flip channels...that is live TV) there are different ads that you see between the premium content ( the serial you are watching or the news or the sports broadcast). The industry has divided up who has the right to put an advertisement in each time slot. This broadly breaks up into two categories:
Local Ads
These advertisements are inserted based on the region or zone that the viewer lives in. Thus you will see an advertisement for your local car dealer or local discount store. At same time another viewer that is watching the same channel with the same content distributor but living in a different zone or region will see a completely different advertisement.
For example if I am watching TV at 7:00 PM in the eastern US in New Haven and am watching Channel 37 from ZDVE broadcaster and have Cablevision as the provider and another viewer is also watching Channel 37 ZDVE in Hartford at the same time on Cablevision, when we hit a local break I could be seeing a different advertisement or commercial than the person in Hartford. This is a local ad as shown in the diagram above
Note as mentioned in my last blog this is only 2 minutes in the entire hour but in this two minutes in every zone a different video advertisement could be displayed and sold!
National Ads
National ads on the other hand are sold directly by the broadcasters typically. In these advertisment slots the content distributor such as the cable operator or telco does not have the right to insert new advertisements Instead the broadcaster has retained the right to this time slot for the advertisement and has sold it through their own sales channels to the advertisers.
Thus in the example above with a viewer in Hartford and a viewer in New Haven on CableVision, they will both see the SAME advertisement.( its the Gilette ad in the figure that is seen in both Hartford and New Haven)
National ads occupy around 15 minutes of the entire hour on every channel. Typical program content is around 43 minutes in the hour.
Value/Cost
National ads by there very nature(they go to all regions and zones) have greater reach or exposure ( basically more people see them). So naturally they are more expensive than local ads. In overall industry numbers the total amount of money that is made by video advertising on TV is around $60 Billion dollars, May 2011 TV ad spend forecast from IAB. Local ads is estimated to make up $15 billion of that number.
National ads range in cost based on the premimum event. For example during the SuperBowl national ads this year were at an all time high of $3.5 Million dollars for a 30 second advertisement! The price for a national ad at a non peak time( say 2:00 AM ) with non peak content is considerably lower.
Local ads are estimated to be about $15 Billion. The cost of each ad is based on a number of factors:
1. the time slot ( peak time between 6 and 9 pm or between newscasts is more expensive)
2. The number of zones or regions that the advertisement will air in.
Interesting side note. Local ads to National ads in time 2 minutes :15 minutes ( or a ration of 1:7.5). Revenue ratio on the other hand is 15 billion :45 billion or 1:3. This means that per unit time the local ads overall generate more revenue than the national ads. Though 2 minutes an hour looks to be a very small amount of time and the actual commercial spot is lower in cost per zone as compared to the national ads, as there are many more ad slots to sell the net resultant is that its a very significant amount of the revenue in the TV advertising industry.
When you are watching linear TV ( basically the TV you see when you flip channels...that is live TV) there are different ads that you see between the premium content ( the serial you are watching or the news or the sports broadcast). The industry has divided up who has the right to put an advertisement in each time slot. This broadly breaks up into two categories:
Local Ads
These advertisements are inserted based on the region or zone that the viewer lives in. Thus you will see an advertisement for your local car dealer or local discount store. At same time another viewer that is watching the same channel with the same content distributor but living in a different zone or region will see a completely different advertisement.
For example if I am watching TV at 7:00 PM in the eastern US in New Haven and am watching Channel 37 from ZDVE broadcaster and have Cablevision as the provider and another viewer is also watching Channel 37 ZDVE in Hartford at the same time on Cablevision, when we hit a local break I could be seeing a different advertisement or commercial than the person in Hartford. This is a local ad as shown in the diagram above
Note as mentioned in my last blog this is only 2 minutes in the entire hour but in this two minutes in every zone a different video advertisement could be displayed and sold!
National Ads
National ads on the other hand are sold directly by the broadcasters typically. In these advertisment slots the content distributor such as the cable operator or telco does not have the right to insert new advertisements Instead the broadcaster has retained the right to this time slot for the advertisement and has sold it through their own sales channels to the advertisers.
Thus in the example above with a viewer in Hartford and a viewer in New Haven on CableVision, they will both see the SAME advertisement.( its the Gilette ad in the figure that is seen in both Hartford and New Haven)
National ads occupy around 15 minutes of the entire hour on every channel. Typical program content is around 43 minutes in the hour.
Value/Cost
National ads by there very nature(they go to all regions and zones) have greater reach or exposure ( basically more people see them). So naturally they are more expensive than local ads. In overall industry numbers the total amount of money that is made by video advertising on TV is around $60 Billion dollars, May 2011 TV ad spend forecast from IAB. Local ads is estimated to make up $15 billion of that number.
National ads range in cost based on the premimum event. For example during the SuperBowl national ads this year were at an all time high of $3.5 Million dollars for a 30 second advertisement! The price for a national ad at a non peak time( say 2:00 AM ) with non peak content is considerably lower.
Local ads are estimated to be about $15 Billion. The cost of each ad is based on a number of factors:
1. the time slot ( peak time between 6 and 9 pm or between newscasts is more expensive)
2. The number of zones or regions that the advertisement will air in.
Interesting side note. Local ads to National ads in time 2 minutes :15 minutes ( or a ration of 1:7.5). Revenue ratio on the other hand is 15 billion :45 billion or 1:3. This means that per unit time the local ads overall generate more revenue than the national ads. Though 2 minutes an hour looks to be a very small amount of time and the actual commercial spot is lower in cost per zone as compared to the national ads, as there are many more ad slots to sell the net resultant is that its a very significant amount of the revenue in the TV advertising industry.
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