By Fred Dawson, Editor, ScreenPlays Magazine
From a traditional broadcast TV perspective, the advertising trend may be less than stellar, but from the larger perspective of how ad spend follows audiences, there’s a big opportunity awaiting broadcasters in DVB markets who choose to capitalize on advertisers’ surging commitments to streamed over-the-top (OTT) video.
As market developments fragment broadcasters’ traditional viewing audiences, they are fragmenting the legacy TV advertising market as well. The impact this is having on broadcast TV revenues in DVB markets was distorted by the coronavirus pandemic in 2020, which threatened to continue well into 2021. Goldman Sachs predicted the European broadcast TV advertising total would drop 18% in 2020 and grow by just 6% in 2021, adding up to a significant fall off from 2019, when revenues topped $38 billion.
But Covid aside, the state of affairs in European broadcasting is tracking with the global trend in legacy TV advertising, which ad agency Zenith projected would show close to zero growth through 2022 in a report issued just before the pandemic hit. That report predicted growth for TV advertising in Europe through the forecast period would top out at 2.8% in 2022.
Ever more of those legacy TV advertising dollars are flowing into the OTT streaming domain as ad-supported services, labeled AVOD even though they include a sizable quotient of live linear content, gain momentum. In a 2018 survey of more than 200 advertisers and agencies worldwide, FreeWheel found that 52% of agencies would be buying from OTT streaming as well as traditional TV inventory in 2019 and 91% planned to do so by 2021. As noted in FreeWheel’s 2019 Q1 Video Market Report, the commitment to online advertising with TV programming is driven in part by a surge in the amount of inventory on live OTT streaming programming, much of it tied to sports, which resulted in a 100% increase in live ad views between Q1 2018 and Q1 2019.
The expanding role of addressability in OTT advertising
OTT streaming is an important realm of opportunity for broadcasters, augmented by the fact that hybrid broadcast-OTT streaming operators expand their ability to leverage advertisers’ growing reliance on dynamic ad placements in unicast OTT streams to deliver targeted messages based on viewers’ interests, demographic profiles, and locations. Addressable advertising in the OTT streaming domain is a fast-growing subset of the TV advertising market’s surging shift to addressability, as reflected in a recent Rethink Research report calculating the global addressable ad spend reached $15.6 billion in 2019.
So far, this spending has been focused on dynamic ad insertion (DAI) with legacy VOD and linear TV delivered through set-tops equipped to store multiple ad options. But the much larger role to be played by addressability in OTT streaming services delivered to smart TVs and other CTVs is reflected in the researchers’ projection that the addressable outlays will jump to over $85.5 billion by 2025, which doesn’t count sums paid for targeted ad insertions in TV programming consumed on mobile devices or PCs. Some sense of the size of the CTV advertising market, which encompasses TVs connected to the internet via external devices as well as smart TVs, can be gleaned from a SpotX study that includes all types of linear and addressable advertising placements within and external to video programming, as shown in the table.
As for the addressable component, the move to addressability online is outpacing the growth rate in conventional TV advertising by large margins, according to FreeWheel’s Q1 2019 report. In Europe addressable ad buying accounted for 25% of OTT streaming ad campaigns that quarter, marking a 56% year-to-year increase in targeted campaigns.
The upsides with addressability aren’t solely dependent on targeting based on personal profiles, which must be done in conformance with stringent privacy regulations. Localized advertising, enabling small businesses to participate in TV messaging, is an especially low-hanging fruit where no privacy issues are at stake, as has been amply demonstrated by the DVB satellite broadcasting giant Sky, now a unit of Comcast.
Since 2014, Sky’s U.K. division has relied on STB-based ad storage and insertions with its legacy satellite service to mount the largest addressable advertising operation in Europe. In an assessment of its AdSmart addressability platform’s performance over the first five years, Comcast reported Sky’s support for highly localized advertising had attracted a thousand businesses which had never used TV before.
As for the benefits of targeting based on demographics, the company said that, with advertising targeted to broadly drawn household profiles, channel switching on the satellite service was reduced by 48% when addressable ads were in the first three positions of a break, compared to standard linear advertising. And it found that combining addressable ads with traditional linear ads in ad breaks raised ad awareness among viewers by 22% on average, and that when the frequency of addressable ads was equal to or higher than linear exposure, ad recall was boosted by 49%.
DVB standard for targeted advertising: DVB-TA
Another development facilitating broadcasters’ reliance on CTVs as the linchpins to new service strategies is the DVB Project’s development of DVB-TA specifications, which have been approved for standardization by ETSI. The specifications adopt the SCTE 104 and 35 signaling mechanisms for triggering DAI and indicating the start and end boundaries of placement opportunities for targeted ads. And they set parameters for delivering targeted ads either via server-side streaming mechanisms or downloads to prescribed storage and placement components in smart TVs and other devices that would allow client-side DAI with no interference from ad blockers.
While, as mentioned earlier, addressable advertising is moving into the mainstream, this is a trend dependent on continuing progress toward consensus on metrics, definitions of target profiles, valuation, and other factors. DVB-TA ensures broadcasters will have a uniform approach to executing addressability with consistent quality of performance as the other pieces come together.
Much work remains to be done to put DVB-TA in play. Because the standard’s client-side approach to ad placement on smart TVs depends on support from OEMs with production of future models, a server-side approach may be more readily at hand. But that will require infrastructure support from operators of public CDNs and broadband access networks unless broadcasters choose to mount their own CDNs, as many have begun to do using software platforms that can be instantiated in public and private cloud facilities.
About Fred Dawson
Fred Dawson is founder and CEO of Broadband Information Resources, Inc., which through its publication ScreenPlays has been a leading provider of editorial coverage and market support services for the broadband services industry since 2005. Prior to ScreenPlays Dawson provided guidance to industry decision makers through consulting services and executive newsletters, including the Cable-Telco Report, the DBS Report and Broadband Commerce & Technology. He also has held executive positions with industry publishers, serving at different points in his career as vice president of editorial at Virgo Publishing, editorial director for industry publications at Cahners and editor-in-chief at Cablevision Magazine.