The advertising industry has had more than its share of digital disruption in the past 20 years. The newspaper industry was hit first and hardest with Google taking over the classified advertising business. This has sounded the death knell for a large proportion of regional newspapers and is increasingly threatening the viability of some national press.

Facebook has recently made huge inroads into the print display advertising market as brands identify Facebook’s ability as a “Discovery” platform. However, while online advertising revenues have soared vs. most traditional forms of advertising, TV revenues have stayed largely unscathed and have sat looking pretty for some time.

According to Statisca the United Kingdom ranks fourth among the world’s largest advertising markets, and first among markets in Europe – worth £21 billion pounds. The market is also growing with more spend predicted in 2017 than 2016.

UK digital advertising overtook television advertising in 2010 and now receives nearly 47% of all UK advertising spending. However, in the face of the digital advertising onslaught TV advertising revenue in the UK has grown year on year every year since 2005 and has now reached £4.14 billion pounds.

However, a tsunami of change is coming across the next year/two years which will disrupt the TV industry comprehensively and open a world of new opportunities for businesses.

The time is now

Despite TV advertising revenue growing, some broadcasters have started to notice profits slipping. ITV advertising revenue is reported to be down in 2017 between 4% and 7%. There are three main reasons why this might be happening.

Firstly, budget cuts from fast-moving consumer goods (FMCG) and retail advertisers. Secondly, changes are being driven by consumers who want personalised and relevant approaches from organisations and brands (i.e. not broadcast TV). Finally, the rise of online video and addressable TV.

So what is addressable TV and why will it dominate? Addressable TV is the ability to show different ads to different households while they are watching the same programme.

With the help of addressable advertising, advertisers can move beyond broadcast traditional TV ad buys, to focus on relevance and impact, and thereby efficiently and effectively deliver microtargeted advertising.

For instance; if you two people were asked if they’d expect to see the same advertising as the other on a website, they’d say no. Everyone is consuming different advertising across the web, even if they’re also consuming the same content.

However, if two people watching Saturday night ITV then they would absolutely expect to see the same advertising. Although this is inefficient as no two people are going to have the same interests and shopping habits.

An ad break targeted for a particular viewer is going to be completely irrelevant and uninteresting for another. With addressable TV that will all change. In five years, both viewers will see bespoke advertising that is relevant and engaging.

Fresh for disruption

With the rate of disruption seen in other forms of advertising its hard to believe broadcast TV advertising hasn’t been more significantly disrupted in the 62 years since the first advert went out in 1955 (Gibbs toothpaste).

However, the technology which facilitates addressable TV is in its relative infancy and add to that data limitations (addressable TV is heavily data driven) then it’s clear why the TV ad industry has remained more-or-less consistent since the 1950s.

Addressable TV will open the flood gates for businesses of all sizes to directly advertise to target consumers in specific areas across the UK. It will make television advertising far more accessible, bringing the barrier for entry down far lower than it is right now, with far less wastage in television advertising campaigns.

The large retailers and corporates who have dominated TV advertising will be challenged by a mass of niche and regional advertisers chasing micro-audiences. In a few years if a viewer is looking at a red dress on a retailer website they will see ads for the red dress and the retailer when they turn on their TV.

Business impact and industry preparation

The relevance and microtargeting of addressable TV is attractive to advertisers and media buyers. The benefit of this relevance will be two-fold for businesses. Firstly, the advent of addressable TV will mean it’s likely everyone will see ads that are far more relevant, so they may start to pay attention and it will stay tuned. Secondly, businesses will no longer need to pay for an audience they’re not interested in reaching.

This more relevant approach to TV advertising will also likely be welcomed by those  concerned by the rise of adblocking software if it’s implemented effectively.

Although most businesses are currently ill prepared for the advent of addressable TV arguably pre- preparation could pay off dividends. Those businesses who prepare for these changes and start to put a strategy in place for how they are going to maximise addressable TV could steal a march on competitors.

Primarily, they should be thinking about video asset creation which can be both expensive & timer consuming - will businesses simply regurgitate their current tv advertising? Will they get more granular with the content they present? Will they use the video assets they use online instead?

It is an exciting time for businesses that might have once felt TV advertising was a pipe dream or inaccessible. However, its possibly slightly unnerving time for the advertising and TV industries with many companies still thinking through how to make it work for them before they offer it.

It should be noted that the digital big hitters such as Netflix, Amazon and Google are heavily investing in addressable TV and are likely to dominate the industry in the next five years. They (especially Amazon with their retail offering) have the data as well as the medium that advertisers need.

Undoubtedly in five years’ time the industry will be transformed. The unstoppable pace of technological innovation will have ended the era of broadcast TV in favour of addressable TV.

Dan Fallon, Managing Director of SearchStar.