2016 Canadian Direct Response Forecast: A Turning Point for Digital & TV Media

TORONTO, ON--(Marketwired - January 21, 2016) - Pippa Nutt, Senior Vice President, Digital & Canadian Media of leading brand direct response (DR) agency, Northern Lights Direct weighs in on some of 2016's biggest direct response marketing trends affecting marketers and advertisers in the Canadian marketplace.

The Tides Have Shifted -- Digital Reigns
Digital continues to disrupt all traditional modes of advertising, in particular the aging television landscape: Netflix, cord-cutting, bit torrents, Roku, YouTube, Vine, Twitch (if you want to watch 15-year-olds playing video games) -- you name it. Canadians are finding more and more ways of getting the content they want, when they want it-live sports and all-and that is bad news for the traditional broadcast model that has struggled to evolve in the last decade. With people spending more time than ever online, and less time tuning into first-run programming, traditional broadcasters are struggling with the very real reality of becoming irrelevant in the not-too-distant future. Marketing budgets are reflecting the same trends, with more and more ad dollars shifting to digital.

In Canada, 2015 was the first year that internet ad spending finally surpassed broadcast TV, and unsurprisingly, digital will remain the only major growth driver in terms of marketing spend in 2016.

So where are all the digital dollars going?
According to eMarketer, search still dominates the digital ad market in Canada (the ROI is hard to beat), accounting for more than 50% of digital ad spend, followed by display. Within digital, video is the fastest-growing category and also the one that seems to have the most "maturing" to do. While the jury is still out on ROI efficiency (in a DR context, at least), this is a tactic worth keeping a close eye on and allocating some test budget to in 2016.

Does this mean traditional DRTV is dead in Canada? Far from it, as it's still an important part of the advertising mix, but if you live and die by sales, it's time to embrace digital as the future of direct response marketing. Click here to read the full report. 

Pick and Pay
Adding insult to injury, the CRTC-mandated "Pick and Pay" is another major hurdle impacting the Canadian broadcast industry in the coming year. Below is a brief snapshot of the key phases rolling out in 2016:

Skinny Basic
In March of 2016, every TV provider will be forced to offer a small "skinny" basic TV package capped at $25 per month. It must include all local and regional stations, public interest channels such as the Aboriginal Peoples Television Network (APTN), education and community channels, plus provincial legislature networks. Some distributors may also add certain national over-the-air stations like CTV, City and Global, or U.S. networks ABC, CBS, NBC, FOX and PBS as part of that package.

Pick-and-Pay Rollout
Starting in March, 2016, every channel outside the "skinny" basic service must be available either a-la-carte-with a fee for each network-or in small, "reasonably priced" packages. Those can either be build-your-own packages, or pre-assembled groups of five to ten channels. By December of 2016, every channel must be available individually, and as part of a small-sized bundle. Theme packs (comedy, sports, etc.), will also still be available from most providers.

It will take some time to see and feel the impact of pick and pay on Canadian television advertising, but the timing couldn't be worse in the face of an already struggling industry. It is naturally expected that the smaller, low-reach stations will be the first to go the way of the dinosaur, followed by the likely inevitable consolidation of the Canadian broadcast landscape, and the tightening of inventory that will eventually result. Presumably, rates will increase with less inventory, but time will tell what the demand situation looks like in 2016/2017 as advertisers also continue to shift more dollars to digital. Additionally, networks will have to work even harder to meet reach agreements, which means bonus availability will likely be impacted for DR advertisers.

2015 Programmatic = Epic Confusion
Programmatic was by far the most over-used, over-hyped and cringe-worthy digital term in 2015. Marketers and business owners of all sizes scrambled to get a piece of the elusive pie. They didn't quite understand it, but they had to be doing it.

For brand advertisers, the evolution of programmatic is revolutionary; for DR advertisers it's a lot more "been there, done that". For those agencies still in the Dark Ages used to standard IO buying, the process of buying digital impressions in an automated, auction-based environment was truly ground-breaking. The rest of us have been buying that way pretty much since the inception of Ad Words. Many DR advertisers have always taken advantage of programmatic buying as it was the only option to deliver the ROI they were looking for. We can't afford to pay for eyeballs that may or may not convert; we live and die by the ABC's of sales.

In simple terms, the true value of programmatic is the ability to scale efficiently, both from a workflow and performance perspective. If you have reached the point where you are tapping out on large networks, then it makes sense to expand your horizons in this respect as programmatic buying is crucial to achieving scale. But think wisely - the reach offered by the Google Display Network and Facebook in Canada, for example, is massive. If you are not hitting your target, it could be for many reasons other than simply due to reach. Perhaps your agency doesn't know what they are doing or they are outsourcing to someone else who doesn't understand the market.

Here's hoping that 2016 (and hopefully Google and some of the other large players) will bring some much needed clarity to this digital strategy.

All Eyes on "Viewability"
2015 was the year that "viewability" finally got added to the internet dictionary of all things awesome. The industry was pounded with study after study with scary stats like "56% of all served ad impressions are not seen." Oh the horror! Articles made bold claims that "metrics mean nothing if an ad isn't seen." I have to disagree on that front.

As a DR agency, "viewability" is somewhat of a red herring. Sure, I care about viewability from the standpoint of achieving campaign sales objectives-if no one sees my ad I'm likely not driving any clicks-but that is not what we are typically measured on and also not how we typically buy. To put it bluntly, if someone did not see an ad, I'm not paying for that impression anyway, so I'm not really that bothered by it. I care about clicks, how to qualify them as best as possible, and conversions. We're not in the business of just eyeballs; we have actual work to do.

I'm not saying the metric doesn't hold value; it definitely does, but not in isolation. Ensuring the other half of eyeballs "viewed" your ad is still pointless if they were untargeted, disinterested and didn't act on it.

Ad Blocking
Despite the IAB reporting that overall traffic in Canada has declined 30% in the past two years as a result of ad blocking, we haven't seen any major impact on client campaigns to date. With Apple's release of iOS 9 in 2015, we're keeping a close eye on this trend moving into the New Year.

If ad blocking picks up steam, it will inevitably reduce the inventory pool we are all fishing in. Some research has also predicted that it will be more challenging to reach the male 18-34 audience who tend to block ads more frequently-but there's always Twitch! Similar to the argument around viewability, the good news is that advertisers don't pay for blocked ads, so it all depends on what you're measuring and what your objectives are.

If anything, ad blocking will kill the growth of those irritating, bandwidth-hogging ad formats like pop-ups and expandables which consumers have always found irritating, yet brands naively thought were a better way to get in your face-even if you didn't want them there in the first place. As a DR agency though, it doesn't really affect us. The outcome of ad blocking will inevitably mean smarter, more hyper-targeted campaigns that provide a better consumer experience overall, and realistically, that's not a bad thing.

Summary

2016 will be a pivotal year for digital and direct response. We are finally at that turning point and the focus this past year on regulation and measurement are a big part of that evolution. It's time that advertisers shake things up and recognize the growth for what it is-changing human behavior. You can't fight it, so you might as well embrace it. It's feast or famine!

Read our 2016 U.S. DR Forecast here: U.S. DRTV Media Marketplace 2016: A Look Ahead

About Northern Lights Direct:

Northern Lights Direct provides brand-based direct response television (DRTV) and digital advertising services for corporate and nonprofit organizations in the U.S. and Canada. With offices in Chicago and Toronto, Northern Lights Direct is the only independent DR agency that seamlessly helps clients advertise in the American and Canadian markets and is fully turnkey, providing direct response (DR) campaign strategy, media, search, analytics, creative and production services. The Art & Science of the Sell. For more information, please visit: www.northernlightsdirect.com

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