Targeted Ads Are Coming To TV, And The Kings Of Cable Are Gearing Up For Long-Term Gains

Credit Suisse analyst Omar Sheikh’s recent meetings with companies in the television advertising space — Simulmedia, Clypd and Matter More Media — reinforced his long-term thesis for the industry: “[P]otentially game-changing” developments in linear TV advertising are in the works.

The thesis is focused on the industry’s development through the next 10+ years, but suggests that domestic ad revenues could faster than what the Street expects, between 12 and 48 percent of current top lines (see Sheikh's track record).

In the near-term though, investors should recognize the growth of digital advertising platforms — such as Facebook Inc FB and Alphabet Inc GOOG GOOGL — which continue to cut deeply into U.S. TV advertising.

4 Takeaways

Following the meetings, Sheikh came away with four key ideas concerning the future of TV advertising.

First, advertiser concern over digital ads is at a tipping point. Many companies are wary of fraud, transparency and brand safety issues.

The TV industry hopes to capitalize on this concern by targeting its advertising products.

Second, several platforms including Simulmedia and Clypd are working to overcome concerns regarding advertiser anonymity. Comcast Corporation CMCSA’s Blockchain Insights Platform has the potential to lead this effort after launching in 2018.

Third, vertically integrated platforms are especially well-positioned to grow in the future through targeted advertisements, much like the digital platforms.

If the AT&T Inc. T–Time Warner Inc TWX merger goes through, its combination of consumer data gathering and ad delivering capabilities would provide strong long-term value.

Last, traditional ad agencies and Nielsen N.V. Ordinary Shares NLSN will see their role diminishing as networks and newer third parties build a new TV advertising system.

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