With advertising revenues under pressure, TV channels see targeted advertising as an exciting new opportunity. According to eMarketer, by 2019, personalized advertising spending will grow to 4 percent of total ad spend and $3.04 billion. Despite being somewhat of a new concept, targeted advertising has already shown solid growth in the North American and UK markets.
Benefits of Targeted TV
The biggest benefit of targeted advertising is its potential to unlock monetization. TV advertising expenditures worldwide are expected to grow substantially from 2010 to 2020, and targeted advertising has emerged as an area of acceleration. (See Figure 1.)
Figure 1. Global advertising spending in billions of U.S. dollars. (Source: Statista)
Targeted advertising has evolved in recent years, thanks to increased video consumption on connected devices and a shift toward OTT viewing, which simplify data collection, aggregation, and intelligence.
Targeted advertising is a win-win situation for content creators and television viewers. Viewers only see ads that are relevant to them, and ad buyers only pay for measurable and targeted impressions. The entire value chain is automated, creating more value for media companies, more efficiency for advertisers, and more satisfaction for viewers (i.e., less ads, more relevance). What’s unique about targeted advertising is that it brings together TV operators and advertisers that are interested in reaching a specific demographic of people as opposed to trying to reach as many people as possible, as is the case with traditional advertising methods.
TV operators that own their content inventory can support targeted advertising to a more extensive degree, collecting data from subscribers across all channels. Beyond just selling the inventory, operators can approach advertisers with tangible information (i.e., data) about potential market segments that can be targeted.
Figure 2: Traditional vs. Programmatic vs. Addressable TV
Challenges and Best Practices for Targeted Advertising
In Europe, GDPR came into force in May 2018, creating a specific framework to deal with targeted advertising. GDPR makes it more expensive to obtain opted-in third-party datasets and puts legal constraints on the collection of users’ consent. By complying with GDPR, TV operators agree that they will obtain permission from viewers to use their data. It also gives viewers the power to access, delete and stop sharing data.
Giving viewers more control over their data can actually benefit TV operators. It establishes trust between viewers and the TV operator. Additionally, it makes viewers more apt to watch ads. When someone watches an ad that they know is based on a respectful use of their data, their acceptance level of the ad increases.
Beyond regulatory challenges, there are business and technical challenges involved with collecting and analyzing television viewer data. TV operators have to make sure the targeted ad is relevant. This can be achieved by accurately collecting, analyzing, and match profiling viewer data.
Operators can either collect viewer data themselves or from third parties. When collecting data internally, operators need to make sure the data collected is very high quality and accurate. Operators can gain better insights by using artificial intelligence and machine learning technologies. If third-party data is collected, there’s no way to guarantee how accurate it is. The quality of the data is based on how it’s collected. When collecting data from a set-top box, operators need to know: Where is the STB located? What is the composition of the household? Who is watching the television content and targeted ads? Information about households is needed at an individual level or it becomes far less relevant.
Another challenge with targeted advertising is that there are hundreds of companies involved in the ecosystem. Establishing a value chain is not easy. TV operators need to connect with trusted and relevant technology partners in order to effectively appoint inventory, analyze data, and make decisions about which ads should be matched with specific profiles in real time.
Whenever there is a new technology, especially one linked to revenue, it’s easy to get excited. Yet, TV operators need to think about the benefits beyond monetization. Are they providing a valuable service to consumers? The content has to be meaningful to raise the acceptance level. The more relevant data collected, the more appropriate the ad will be for the audience. It’s a circular process: relevant data means relevant ads, creating upsell and monetization.
In today’s GDPR era, complying with privacy regulations is a must. When choosing a targeted advertising solution, TV operators should look for one that has been created based on privacy by design. Deploying a comprehensive, best-of-breed, pre-integrated solution that puts viewers’ data privacy and security at the center, while ensuring proper operator control and TV channel inventory monetization, will ensure success in the targeted advertising environment.