The promise of targeted advertising has been held up as a way to safeguard the future of free TV – and deliver added value for pay TV – for a long time now. In Europe, the UK has been the pioneer, with Sky and Channel 4 taking the lead in investing in and advocating the benefits of targeting.
Sky has had the advantage of being both a pay TV platform provider with a direct subscriber relationship with viewers and a content provider with advertising inventory in its own right. The company developed its AdSmart platform as a client-side way of delivering targeting, initially for its own channels. AdSmart had run over 4,000 campaigns by February this year, just over two years after it launched, according to figures provided by media agency Group M.
About 2% of potential inventory was taken up by AdSmart campaigns across about 70 channels, which is expected to rise to about 100 by the end of this year. Sky is likely to roll the platform out in Germany in the next two years or so, while Sky Italia is expected to launch targeted advertising a bit sooner, possibly next year or in 2017.
For broadcasters, however, targeting of linear TV ads remains challenging for a number of reasons including the ability to deliver campaigns over multiple distribution platforms to achieve sufficient scale to make the campaign worthwhile.
In the US, the practice of TV networks giving cable distribution platforms the right to sell a limited number of minutes per hour of advertising inventory by ad replacement has created a significant business that can serve as the basis for delivering more sophisticated forms of targeted advertising. Commercial arrangements between platform operators and broadcasters are already in place.
In Europe, it has proved somewhat more challenging to get operator-based targeting off the ground because broadcasters, who hold the rights to all their own advertising inventory, have to see an advantage in coming to terms with platform operators for it to work.
For Tim Sewell, CEO of advertising replacement specialist Yospace, the launch of targeting by broadcasters is basically dependent on different elements coming together such as the ability of broadcasters to provide a digital footprint that justifies the investment and media agencies taking an active interest.
Yospace has worked closely with Channel 4 and Scottish broadcaster STV in delivering a platform that enables them to offer targeted advertising. Sewell says that the experience of the Channel 4 in bringing targeted advertising to its digital video-on-demand platform has enabled it to “push targeting to live” as well.
“The key thing about the ability to improve targeting to the end user is that it unlocks inventory that previously couldn’t be monetised,” says Sewell.
Targeting has often been seen as all about enabling broadcasters to offer advertisers the ability to reach desired socio-demographic groups, and ultimately to deliver truly personalised advertising based on individual tastes and preferences. But more prosaically, it can also enable them to target new advertisers that previously would not have considered TV as a suitable medium such as local businesses with a limited geographical market. The ability to offer highly specific postcode-based advertising enables them also to resell the same inventory to multiple advertisers.
[icitspot id=”625092″ template=”box-story”]While video-on-demand has been a testing ground for ad replacement, the ability to seamlessly stitch ads into linear streams is potentially far more lucrative. “The view-through rates on linear streams are substantially higher than on VOD,” says Sewell, citing a view-through rate – essentially a measure of post-impression response to ads seen – of 97-98% in the case of linear replacement ads against 75-85% for mid-roll VOD ads.
“There are more and more broadcasters doing targeting across linear TV. The technology has matured and it is a viable thing to invest in. It is potentially a differentiator between one broadcaster and another. While advertisers don’t necessarily care about how an audience is being reached, they care about how they can segment their audience,” says Sewell, who adds that broadcasters are using the technology both to sell unused inventory and by charging more to reach desired demographic groups.
The key to unlocking the true potential of targeted advertising, however, is data. “Broadcasters with data available can increase the value of their inventory and target more efficiently to make the best use of that inventory. Their audience goes further. Targeting strengthens the argument for increased CPMs [cost per thousand impressions] and it also extends the number of campaigns broadcasters can deliver to a fixed number of viewers, as opposed to delivering a million eyeballs for one campaign,” says Sewell.
Scottish commercial broadcaster STV has been at the forefront of adopting the technology. Rémi Brunier, product owner for STV Player for both linear and VOD at the broadcaster, says that STV now has about two million registered users, out of a total population in its footprint of five million people. As with Channel 4, it has obliged people to register in order to see premium and on-demand content they would not otherwise have access to. Mandatory fields included name, date of birth and first line of address, with a few more fields added to enable more granular targeting.
STV introduced live ad targeting on STV Player after introducing the technology for its VOD streams. The technology is available on iOS and Android devices and the web. The broadcaster offers targeting based on micro-regions, enabling it to offer advertising to local businesses, and can also segment the audience on the basis of age group and gender. Brunier says that 80% of inventory is “targetable”, although the proportion that is actually ‘targeted’ in practice is considerably less.
For local businesses and niche brands, targeting on a geographical or demographic basis makes sense. For larger brands, says Brunier, it may make sense to run split campaigns, with creative specially commissioned to target specific segments of the audience with messaging to complement a broader national campaign.
Brunier says that STV is also trialling programmatic – or automated – selling of inventory alongside targeted advertising but that this is at an early stage. For broadcasters, the jury still appears to be out on programmatic – and there remains a question over whether direct sales deliver more value.
For STV, the main gaps in its targetable inventory currently are those on streams delivered to TV platforms including free-to-air platforms Freeview, Freesat and YouView. Brunier says that STV is advancing towards universal targeting. The company plans to test the technology on Freesat next month and plans to develop the service on YouView following its imminent transition from Flash to HTML5. “The TV is definitely of interest,” says Brunier. “It also offers a slightly different demographic [meaning] we can cover all bases.”
Yospace’s Sewell also says that his company is working with a number of player vendors to ensure that HTML5 implementations will support dynamic ad insertion, while MPEG DASH will support insertion later this year.
Alex Merwin, vice-president, global programmatic demand at advertising technology provider SpotX, meanwhile contends that requests for targeting – like demand for programmatic buying of spots – is coming from the demand side rather than the suppliers of advertising inventory.
“The challenge for sellers is that the control [of the inventory] they had helped them keep control of their rate-card, but they are now losing linear audience share to YouTube and Facebook. The trick for broadcasters is to maintain the rate-card and the value they bring to the content in terms of audience and the value of their programming,” he says. “There are now other content creators – MCNs and so on – that are starting to compete, along with SVOD providers and that is creating pressure.”
According to Merwin, while broadcasters have the high-quality content that advertisers want to associate their products with, they are “not coming to the table with a great targeting story to justify the rates they charge”.
He says that some broadcasters are now making some of their inventory available for programmatic buying via private exchanges. Buyers use their own data sets or buy in third-party data to enable them to target their ads. Large corporations have gathered huge amounts of data about consumers as part of their product development activity that they can now apply to advertising “that drives results at lower prices”, says Merwin.
While media owners are under pressure, delivery of meaningful targeting requires content to be delivered over addressable IP networks. In Europe, says Merwin, where large numbers of people still consume TV over free over-the-air broadcast networks that are not addressable, “TV is safe for now” from competition. Nevertheless, he says, even mainstream over-the-air TV will inevitably come under more pressure as younger audiences drift towards YouTube. In addition, the global nature of the internet and IP provides a global platform for advertisers that broadcast TV can’t match – so there is likely to be pressure in the longer term for TV to give up its legacy – scattered, localised – broadcast platforms and move everything to IP.
“In TV, every market does everything differently – there is no single protocol. Digital has a big advantage over TV because it is global. Whether in the future the market tries to create a global linear TV solution or put linear content onto the existing global platform is an open question, but I would bet on the latter,” he says.
Measuring the responsiveness of consumers to TV advertising is a key part of the value of targeting, but it is also challenging. TV, unlike the web, does not provide an instant feedback mechanism in the form of click-throughs.
For Kevin O’Reilly, chief technology officer of advertising data analysis specialist TVSquared, the TV business remains fragmented in terms of platforms and technology. “Putting together a measurement platform that looks like the web is very far away,” he says. “People don’t interact with the TV. They interact via tablets and smartphones.”
TVSquared provides a platform that is designed to help agencies and advertisers measure the responsiveness of TV ads by analysing data to assess the way consumers use second-screen devices to engage with brands.
While only a small amount of TV content is consumed via video-on-demand and live unicast streams, such streams are potentially valuable because it is possible to track who an advert was served to at what time. TVSquared attempts to take this further by figuring out whether consumers respond to such ads by interacting via second screen devices. When TV spots appear, it is possible to judge which of them are driving the best response rates.
Strength in reach
Not everyone believes that broadcast’s days are numbered unless they can deliver addressability across their inventory immediately.
Matthew Huntington, chief technology officer at UK free-to-view satellite platform Freesat, argues that TV has “seen the threat from the internet come and go” and contends that budgets that previously migrated to digital platforms are in many cases returning to TV.
“Watching TV is done in a different mental state than surfing the web. Part of the value is its ability to deliver a message when you are more open to brand messaging. There is not an imperative to improve what it does, although there is an argument that unless TV advertising is fully measured money will disappear,” says Huntington. “However, the problems with measurement on the web are far greater than for BARB in the UK, for example, and in some ways TV is a better position.”
Huntington believes that the real threat to free TV is not the web, but pay TV, which has put in place platforms that have the capability to deliver addressable advertising. He says that free TV broadcasters will need to deliver something similar or better, given their much greater dependency on advertising as their chief source of income.
None of this is to say that targeting is seen either as an absolute immediate imperative or as a panacea in the face of a perceived online onslaught on TV advertising budgets from the web. Many observers believe that the ability of TV to deliver a common brand message to a very large audience remains one of the medium’s strengths.
Thomas Bremond, commercial director, northern Europe, at advertising technology company FreeWheel, believes that reach remains a strong selling point for TV.
“Broadcasters have a pretty powerful message for advertisers in terms of offering reach,” he says.
Bremond believes that targeting will have an appeal for certain types of channels, such as smaller niche services whose audiences does not appear on BARB ratings or their equivalent and whose inventory is typically packaged up with that of other channels and possibly undervalued. However, the key remains measurability and data, as well as targeting in a way that advertisers can make sense of.
“Some operators want to offer more than 50 attributes. No one is going to target to that many because you run risk of targeting no one. It makes sense to focus on two or three – age gender, geo-location, kids, no kids, degree of affluence – those kind of things. You don’t want to get down to things that are too uncommon,” says Bremond. “TV is not direct response marketing. Advertisers are looking for brand affinity rather than specific product targeting.”
For Bremond, advertisers already have tried-and-trusted ways of measuring responsiveness of audiences to TV spots. The key to realising the value of targeting, however, is in using it to unlock hitherto untapped markets.
“People who have always advertised on TV will continue to do that. The interesting piece is identifying the brands that could go to other channels that are currently given away as part of the brand campaign because they are not measured by BARB. It could make sense for people who have never advertised on TV, as they now have impression-based advertising measurement and can target their audience a bit better,” he says.
Further down the line, says Bremond, broadcasters will see a lot of value in integrating linear and non-linear platforms to be able to offer integrated campaigns targeting consumers across multiple devices for both linear TV and VOD. FreeWheel is currently working on a platform that can deliver this, which Bremond says is being beta-tested with a number of broadcasters.
Adam Smith, futures director at WPP-owned global media agency Group M, also strongly believes that TV still provides a unique selling point, which online platforms simply can’t match. “What advertisers buy is reach,” he says, adding that recent predictions of TV’s imminet decline are misplaced. “TV isn’t in crisis because it has not lost much reach.”
While a significant number of younger people may not watch TV – or watch a lot less than previously – TV as a medium has lost “only about three points of reach”, according to Smith. TV, he says, is not in the same spiral of decline as newspapers.
Smith agrees that addressability can help TV by extending the market for TV advertising. Local ad replacement can open up the market to local restaurants and other businesses. He cites the statistic that 70% of Sky AsSmart users were new to TV advertising as of February this year – and adds that this represents a decline on the previous year’s figure of 80%, probably because earlier users were satisfied with the product and came back for more.
The overall numbers remain relatively small, however. Smith cites eMarketer research that shows worldwide addressable TV advertising totaling US$400 million (e350 million) in value in 2015, a figure he describes as “plausible”. The value of UK addressable TV advertising was estimated at US$50 million last year. Smith says that global addressable TV ads could be worth US$2 billion by the end of next year – still only 1% of total TV investment.
“Our first priority has to be to get TV and gaming content measured across various platforms,” says Smith. “These platforms are not substitutes for one another. Reach has a time dimension as well just being about the numbers. Marketing comes with time constraint attached. You need to achieve your reach within a given month, for example.”
Online video comes with other problems attached. While marketers often want to achieve an immediate response to a campaign, this can be difficult to achieve in a digital-only domain. In the absence of direct response to ads, advertisers need to be able to measure both reach and the frequency with which videos are consumed. Large amounts of online video are being consumed by a small proportion of the overall population, meaning that advertising around that could create a problem of ads being seen too frequently by a small number of people while others never see them at all.
Nevertheless, Smith concedes that TV will need to embrace targeting, because it remains quite likely that TV’s lost audiences at the younger end of the spectrum will remain lost as those people grow into adulthood.
“‘Addressable advertising will maximise TV’s reach in the fragmented future, because it replaces broad demographics with real individuals aggregated at scale,” he says.
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