Digital Ad. Maximizing TV Stations' Revenues. The Digital Opportunity. A Special Report from Media Group Online, Inc.

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Logan Pitts
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Maximizing TV Stations' Digital Ad The Digital Opportunity TV is an enviable position compared to almost all other traditional media in the digital age: an increasing number of TV households, a 96.

1 Maximizing TV Stations' Digital Ad The Digital Opportunity TV is an enviable position compared to almost all other traditional media in the digital age: an increasing number of TV households, a 96.5% penetration rate and the highest penetration rate of all devices in the home. Despite the explosion of ad revenue in the digital medium, TV remains competitive, although total digital ad revenues have or are about to exceed TV s share. Of course, as Media Group Online states often in our content for you, TV and digital are the most complementary media mix for advertisers. The time has come, however, for TV, and local TV stations, specifically, to take advantage of the digital opportunity that too many stations are overlooking. Stations must achieve more of a balance between generating ad revenues from its traditional on-air content, which remains 95% of the total, and from their owned-and-operated Web assets, mobile apps and social media platforms (Facebook in particular), which represent just 5% of all current ad revenues. BIA/Kelsey has estimated that local stations could double digital ad revenues. The good news is that this is achievable by monetizing the audiences that stations have already attracted to Facebook. Local advertisers would love to have access to these audiences and pay for the privilege because TV stations premium video content is exactly what social media audiences are seeking. This month s Special Report from Media Group Online explores this opportunity and the data to support it.

pg. 2 Local TV Revenue Forecast According to BIA/Kelsey estimates, advertisers will spend $147.9 billion in local media during 2017, with local TV s share 14.6%, or $21.6 billion.

5% All other $23.0 B 15.6% BIA/Kelsey, July 2017 By 2021, local ad spending will total $174 billion, or a Compound Annual Growth Rate (CAGR) of 3.

2 pg. 2 Local TV Revenue Forecast According to BIA/Kelsey estimates, advertisers will spend $147.9 billion in local media during 2017, with local TV s share 14.6%, or $21.6 billion. Top-6 Local Media Ad Spending, 2017 Medium Amount Share Direct mail $37.1 B 25.1% TV $21.6 B 14.6% Online/Interactive $18.6 B 12.6% Newspapers $16.0 B 10.8% Mobile $16.0 B 10.8% Radio $15.6 B 10.5% All other $23.0 B 15.6% BIA/Kelsey, July 2017 By 2021, local ad spending will total $174 billion, or a Compound Annual Growth Rate (CAGR) of 3.8%, with mobile, social, local online and mobile video predicted to increase by a minimum of 17%. Pertinent to this Special Report, however, is that digital s share of total revenues will only increase from 4.6% to 6.4%. Of course, 2018 will experience an increase because of mid-term US Congressional elections, and 2020 because of the next US Presidential election. Local TV Over-the-Air and Digital Ad, Year Overthe-Air Overthe Air Share Digital Digital Share Total 2016 $20.6 B 95.4% $1.0 B 4.6% $21.6 B 2017 $19.8 B 94.7% $1.1 B 5.3% $20.9 B 2018 $21.1 B 94.6% $1.2 B 5.4% $22.3 B 2019 $20.8 B 94.1% $1.3 B 5.9% $22.1 B 2020 $22.8 B 94.2% $1.4 B 5.8% $24.2 B 2021 $22.1 B 93.6% $1.5 B 6.4% $23.6 B BIA/Kelsey, July 2017 Clearly, relying almost entirely on over-the-air ad revenues is not an advantageous strategy for local TV stations. Yes, over-the-air will generate enormous shares during this period, but digital will generate a much larger CAGR. The over-the-air and digital ad revenue numbers for local TV stations during the period indicate a 7.3% increase in over-the-air and a 50% increase in digital. A closer look reveals, however, that over-the-air revenues will peak at $22.8 billion for 2020, and then decline to $22.1 billion for 2021.

Big-Three Social Media Platforms, 2016 Platform % of All Americans % of Online Adults Facebook 68% 79% Twitter 21% 24% Instagram 28% 32% BIA/Kelsey (Pew Research Center), April 2017 The demographic

3 Editorial credit: / Shutterstock.com pg. 3 Digital Audience and Ad Growth According to the latest Pew Research Center data (2016), Facebook, Twitter and Instagram are the Big Three social media platforms. Big-Three Social Media Platforms, 2016 Platform % of All Americans % of Online Adults Facebook 68% 79% Twitter 21% 24% Instagram 28% 32% BIA/Kelsey (Pew Research Center), April 2017 The demographic details reveal more compelling comparisons. Big-Three Social Media Platforms, by Gender, Age and Geography, 2016 Metric Facebook Twitter Instagram Men 75% 24% 26% Women 83% 25% 38% % 36% 59% % 23% 33% % 21% 18% % 10% 8% Urban 81% 26% 39% Suburban 77% 24% 28% Rural 81% 24% 31% BIA/Kelsey (Pew Research Center), April 2017 The final comparison table is income and education. Big-Three Social Media Platforms, by Income and Education, 2016 Metric Facebook Twitter Instagram Less than $30,000 84% 23% 38% $30,000 $49,999 80% 18% 32% $50,000 $74,999 75% 28% 31% More than $75,000 High school degree or less 77% 30% 32% 77% 20% 27% Some college 82% 25% 37% College+ 79% 29% 33% BIA/Kelsey (Pew Research Center), April 2017 Not only does Facebook have the largest shares in all these demographic categories, but also it is dominating social media advertising during 2017, and is forecast to continue to do so during Social Media Advertising Share, by Company, 2017 and 2021 Company Facebook 81.8% 80.2% Twitter 10.7% 10.2% LinkedIn 2.8% 2.9% Other 4.6% 6.7% BIA/Kelsey, July 2017 Of course, it s common knowledge that Facebook s shares in all these metrics overwhelms Twitter, Instagram and all other social media platforms. The significance of the 88% share for adults and 84% for adults will be evident on page 4 of this Special Report.

pg. 4 Accessing News on Social Media Quite likely, the biggest reason local TV stations should implement a strategy to maximize their digital ad revenues and on Facebook, specifically is the

4 pg. 4 Accessing News on Social Media Quite likely, the biggest reason local TV stations should implement a strategy to maximize their digital ad revenues and on Facebook, specifically is the increasing number of Americans who use social media for some or all of their news access. According to August 2017 data from Pew Research Center, 67% of Americans obtained news from social media, with 20% saying often, 27% sometimes and 20% hardly ever. Although the largest group is still adults 18 49, at 78%, for the first time a majority (55%) of adults 50+ were accessing social media for news. Since Pew s 2016 study, the percentage of non-caucasian Americans increased more than Caucasian Americans, from 64% to 74% and from 62% to 64%, respectively. Plus, the percentage of Americans with some college or less increased (from 60% to 69%) while those with college+ decreased (from 68% to 63%). Of 9 social media sites Pew measured, Facebook was the primary news source for most US adults who used social media, and at more than twice #2 YouTube. Top Social Media Sites for News Access, August 2017 Social Media Site Use Site Access News #1: Facebook 66% 45% #2: YouTube 58% 18% #3: Twitter 15% 11% #4: Instagram 26% 7% #5: Snapchat 18% 5% #6: LinkedIn 21% 5% #7: Reddit 6% 4% #8: WhatsApp 11% 2% #9: Tumblr 4% 1% #6: LinkedIn 21% 5% #7: Reddit 6% 4% #8: WhatsApp 11% 2% #9: Tumblr 4% 1% Pew Research Center, September 2017 As is well understood, the other critical element is the number of younger adults who use TV as their primary news source has been declining. Clearly, a TV station with a greater and more active presence on Facebook can capture and offer this audience to advertisers.

pg. 5 Social Media and Broadcasters and SMBs It isn t just the vast number of people who obtain their news from Facebook that require local TV stations to maximize their presence there.

5 pg. 5 Social Media and Broadcasters and SMBs It isn t just the vast number of people who obtain their news from Facebook that require local TV stations to maximize their presence there. It is also Facebook s overwhelming strength in engagement and reach. BIA/Kelsey s research of top-ten, mid-sized and smallmarket DMAs during Q found that more than 90% of the engagement for broadcasters in all three market sizes came from Facebook. (Twitter had a higher voice share because broadcasters in larger market most often posted there.) Social Media s Audience, Voice and Engagement for Broadcasters, Q Tool Facebook Twitter Instagram Audience 65% 31% 4% Voice 28% 69% 3% Engagement 92% 4% 4% BIA/Kelsey (Share Rocket), April 2017 (Audience represents the total fans/followers and page likes. Voice represents the total posts across all platforms. Engagement represents the total number of actions (likes, comments, etc.) As has always been the case in advertising, the primary strategy is to follow the audience. For local TV stations, the audience is local SMBs and, of those who advertise on TV and cable, the largest percentages use Facebook news ads and video ads. Use of Social Media Advertising by SMBs Using TV/Cable, 2017 Social Media Percent #1: Facebook news ads 30.1% #2: Facebook video 27.3% #3: LinkedIn 26.9% #4: Blog 25.4% #5: Twitter 25.1% #6: YouTube 25.1% #7: Instagram 22.9% #8: Pinterest 20.6% #9: Native/Sponsored 19.6% #10: Promoted tweets 16.0% #11: Twitter video 8.8% #12: Snapchat 0.7% #13: Other social 0.1% BIA/Kelsey, April 2017 Local TV stations must also be aware of another trend: the forecasted increase in spending for local audience activation from 2016 to More local SMBs understand the value of targeting impressions with geotargeting techniques. Social Media Spending: National vs. Local Activation, Year National Local Social Total 2016 $11.8 B $3.1 B $14.9 B 2017 $14.3 B $4.6 B $18.9 B 2018 $16.5 B $6.5 B $23.0 B 2019 $18.5 B $8.2 B $26.6 B 2020 $19.6 B $9.4 B $29.0 B 2021 $20.7 B $10.8 B $31.5 B CAGR +11.9% +28.3% +16.2% BIA/Kelsey, April 2017

pg. 6 Examples of Monetizing Facebook Audiences As previously stated, a revenue-generating opportunity that too many local TV stations are overlooking is monetizing their current social media

6 pg. 6 Examples of Monetizing Facebook Audiences As previously stated, a revenue-generating opportunity that too many local TV stations are overlooking is monetizing their current social media audiences. Since Facebook is the largest source of their audience, BIA/Kelsey, in association with Share Rocket, a leading provider of social ratings currency data for local TV, has developed estimates of social audience impressions. Specifically, the two companies focused on Facebook Native Video and Facebook LIVE video and determined the value of reach, impressions, video views and engagement in three sample markets: Madison, WI; Kansas City, KS-MO; and Los Angeles, CA. TV Station Social Monetization Opportunity, July 2016, July 2017 Market Value Revenue Growth Potential Madison, WI $2.35 M +3.8% Kansas City, KS-MO $10.70 M +6.7% Los Angeles, CA $61.70 M +3.9% BIA/Kelsey (Share Rocket), August 2017 The table above shows that the Facebook video impressions of the local TV stations in each market could be monetized by millions of dollars. In Los Angeles, it s a rather significant $61.7 million. The local TV stations in each market have an opportunity to increase substantially their revenues relative to their over-the-air revenues. Monetization of Broadcast Audiences at Los Angeles TV Stations, 2016 TV Station Rating Points comscore HH Live AA* Minutes 2016 BIA/Kelsey Market Data $/Rating Point $/AA Minute KABC (ABC) 21,937 1,203,374,449 $283 M $12, $0.24 KCBS (CBS) 17, ,077,169 $224 M $212, $0.23 KCOP (MyNet) 4, ,748,234 $42 M $10, $0.19 KNBC (NBC) 14, ,294,900 $193 M $13, $0.24 KTLA (CW) 16, ,541,187 $120 M $7, $0.13 KTTV (Fox) 9, ,328,959 $220 M $23, $0.43 TOTAL 84,616 4,641,364,898 $1.082 B $12, $0.23 BIA/Kelsey, comscore, August 2017 * Adults 25 54, All Day, All Week

pg. 7 Monetization of Broadcast Audiences at Kansas City TV Stations, 2016 TV Station comscore HH Live Rating Points AA* Minutes 2016 BIA/Kelsey Market Data $/Rating Point $/AA Minute KCTV (CBS)

14 KSHB (NBC) 20,630 187,145,864 $24.0 M $1,163.34 $0.13 WDAF (Fox) 36,956 335,128,311 $37.3 M $1,009.30 $0.11 TOTAL 133,497 1,210,606,648 $150.1 M $1,124.37 $0.

7 pg. 7 Monetization of Broadcast Audiences at Kansas City TV Stations, 2016 TV Station comscore HH Live Rating Points AA* Minutes 2016 BIA/Kelsey Market Data $/Rating Point $/AA Minute KCTV (CBS) 33, ,154,790 $36.2 M $1, $0.12 KCWE (CW) 8,246 74,732,952 $6.4 M $ $0.09 KSMO (MyNet) 3,163 28,638,565 $6.2 M $1, $0.22 KMBC (ABC) 30, ,806,166 $40.0 M $1, $0.14 KSHB (NBC) 20, ,145,864 $24.0 M $1, $0.13 WDAF (Fox) 36, ,128,311 $37.3 M $1, $0.11 TOTAL 133,497 1,210,606,648 $150.1 M $1, $0.12 BIA/Kelsey, comscore, August 2017 * Adults 25 54, All Day, All Week Monetization of Broadcast Audiences at Madison, WI TV Stations, 2016 TV Station comscore HH Live Rating Points AA* Minutes 2016 BIA/Kelsey Market Data $/Rating Point $/AA Minute TVW (MyNet) 2,297 8,645,735 Not available WBUW (CW ) 2,493 9,360,484 $1.525 M $ $0.16 WISC (CBS) 35, ,545,308 $16.4 M $ $0.12 WKOW (ABC) 25,390 95,929,419 $13.0 M $ $0.14 WMSN (Fox) 18,816 71,227,246 $10.95 M $ $0.15 WMTV (NBC) 36, ,790,211 $ M $ $0.13 TOTAL 120, ,507,403 $59.8M $ $0.13 BIA/Kelsey, comscore, August 2017 * Adults 25 54, All Day, All Week (1/1/16 9/1/16) What each of these tables reveals is not just the totals for each station and the market, but also the average amount each rating point and AA minute generated, with Los Angeles average AA minute at $0.23; Kansas City, $0.12; and Madison, $0.13. The critical calculation in each market is the effect of ratings estimates being off by just half a point. In Los Angeles, with each rating point worth $12.8 million, advertisers could improperly spend $6.4 million; in Kansas City, $560,000; and in Madison, $248,175.

8 pg. 8 Monetizing Strategies Facebook offers a number of specific revenue-generating opportunities for local TV stations as publishers. Instant Articles Facebook Audience Network (FAN): 70/30 revenue split Publisher/Facebook; Direct Sell: 100% to Publisher Sponsored Content/Branded Content: Direct Sell: 100% to Publisher Although some broadcast groups were able to generate revenues with Instant Articles during 2016, especially when selling directly, most broadcasters and publishers didn t find Instant Articles a valuable means to monetize their Facebook content. Sponsored Content, however, has proven to be a better opportunity for some forward-leaning broadcasters, although testing continues. Nevertheless, Sponsored Content could be your station s best strategy for monetizing its Facebook audience for these four reasons, as presented by BIA/Kelsey in its April 2017 report, Local TV Station Roadmap for Monetizing Social Media. 1. Cost of sales is low. Existing sales teams can add Sponsored Content to their offerings. Digital sales teams can sell a new platform. Television sales can offer a new (and typically younger and mostly mobile audience) as an audience extension to their television buy. 2. Content costs are low. A typical station is already creating an average of 1,500 engaging posts per month on Facebook. Weather, Sports and other sponsor-friendly content can now be published with a sponsored message attached. 3. New source of premium video inventory. Facebook Live and native video posts can now be monetized. 4. Scarcity provides upward pricing pressure. Unlike digital, where there are seemingly unlimited impressions available, Sponsored Content is a limited commodity. There are only so many posts or avails published each day. This is certainly an opportunity that your station should explore because digital will only continue to draw local audiences and ad revenues from traditional media, despite TV strong current and future position. Sources: Nielsen Website, 9/17; BIA/Kelsey Website, 9/17; Pew Research Center Journalism/Media Website, 9/17. Prepared: September Media Group Online, Inc. All rights reserved.

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