Our takeaways from Future TV Advertising Forum 2015, Part 1

Future TV Advertising Forum brought together large parts of the television advertising ecosystem last week, with delegates from all over Western Europe and parts of the U.S. and Canada. Based on the public conference sessions and non-attributable background conversations, this is what we learned. We will be publishing more ‘take-aways’ next week.

1. Addressable TV advertising on broadcast infrastructure is set for take-off in Europe

Household-level addressable TV advertising is coming to Europe – in a big way. Sky UK has pioneered the concept on this side of the Atlantic; at Future TV Advertising Forum, Liberty Global revealed its ambitions for a pan-European roll-out of addressable advertising and data service capabilities over the next few years. 

It has been proven that this concept improves advertising efficiency on both VOD and linear set-top box inventory. With Europe’s two largest Pay TV groups fully committed to it, advertisers can look forward to the kind of scale currently seen in the U.S., where 40% of homes are enabled for addressable advertising today.

2. Major terrestrial broadcast groups are ‘buying in’ to the concept of STB-based addressable advertising

Apart from the roll-out of household-level addressable TV advertising across Europe (and there now seems an inevitability that other Pay TV operators will have to follow), the next big breakthrough will be large traditional commercial broadcasters – rather than only pay channels and operator-owned channels – introducing addressable advertising on their broadcast inventory. 

Channel 5 in the UK will be among the first. The broadcaster – one of the terrestrial and free-to-air ‘majors’ in the UK – is owned by Viacom International Media Networks and its ad sales are now represented by Sky Media. Advertisers will be able to buy targeted Channel 5 spots, using Sky AdSmart, next year.

Even the biggest European broadcasters are open to the idea of addressable TV advertising on their broadcast linear channels – what have always been, and remain, their crown jewels. How they enable this, and the partners they work with, remains to be seen. One major European broadcaster told us that they will work with Pay TV operators in their market while simultaneously pursuing free-to-air market solutions.

3. The free-to-air market is looking for its own solutions for ad-tech and data-tech

The most important new development at Future TV Advertising Forum 2015 was the growing interest among free-to-air platform operators and their free-to-air broadcast partners in household-level addressable TV advertising. At least two meaningful initiatives are under way (in separate European markets) to create the technology and business ecosystem needed to support free-to-air addressable.

One of these is platform-led. The operator in question is hoping that other platform operators in Europe will work together to develop the ad-tech and data-tech needed for household-level addressable TV. One of the challenges will be to create standardised STB reporting and ad insertion capabilities across horizontal, retail STB marketplaces.

The other initiative is broadcast-group led. The plan is to use the HbbTV standard as the basis for STB reporting and the insertion of IP advertising into broadcast streams. HbbTV 1.0 will enable IP ads to ‘overlay’ a broadcast stream. The linear TV channel picture (from the broadcast signal) might be reduced to three-quarters of the screen, with the IP-delivered graphical advertising displayed around the edges. It is expected that later, with HbbTV 2.0, it will be possible to insert 30 second spots in real-time (with frame accuracy) into broadcast signals.

One senior agency executive we spoke to recently thinks the most realistic approach to addressable for free-to-air broadcasters is to work with the Pay TV operators who already have, or are developing, the technology. Just over 60% of adults in the UK receive Pay TV (2014 figures), mostly from Sky and Virgin Media (Liberty Global). That may (or may not) be enough market coverage for advertisers looking for some STB targeting. 

Other European markets have lower Pay TV penetration and the need for a free-to-air solution will be greater if advertisers want scale. In any case, can the free-to-air platforms afford to be marginalized as advanced advertising capabilities come along? 

One of the fears driving the interest in free-to-air (FTA) STB addressable advertising is that if FTA platforms cannot match Pay TV ad-tech, smaller ad-funded channels (those getting zero audience ratings from the measurement panels, who can prove they have audiences using STB reporting) will migrate to Pay TV platforms, ultimately undermining the whole free-to-air business model and ecosystem.

4. Addressable advertising via STBs could become the premium end of the ‘digital stack’

It is beginning to look as if household-level addressable TV advertising (served from set-top boxes, for on-demand and linear inventory) could end up being viewed as part of ‘digital’ advertising rather than television. 

The lines between digital and TV are already blurred in terms of the consumer experience. You can watch online broadcaster catch-up TV on the big living room television and it feels a lot like television, but in terms of advertising it is digital. But there has always been a clear technical distinction: If the content is served OTT it is digital advertising, and if the content is served via the broadcast infrastructure it is television.

Yet with household-level addressable TV advertising, the objectives of marketers are closer to what they like to achieve in the digital space. They want targeting in order to reduce waste (beyond what they can achieve with standard TV) and they want cost-effective incremental reach. This is all about data-driven marketing, including harnessing the subscriber data that a Pay TV operator has and the attributes that can be assigned to each household, then matching these against the advertiser target profiles and segmenting audiences. 

This all sounds a lot like what digital buyers do when they seek out audiences who are watching premium online television, working through demand side platforms (DSPs) and supply side platforms (SSPs). No wonder that DISH Media Sales, which presented at the conference, has started to trade its STB-based addressable linear inventory programmatically, including with the use of auctions (in the form of real-time bidding). 

DISH Media Sales has made it clear that a key ambition is to reach a new market that is familiar with, and focused on, digital ad buying. A spokesperson told us: “Brands get the upfront, full-screen experience unique to linear TV but are able to purchase ad inventory through an efficient, automated online marketplace.”

As we reported recently, Sky Media has acknowledged that auctions could be considered as a way to trade Sky AdSmart inventory at some point, although today it is impractical due to compliance challenges.

Jamie West, Deputy MD at Sky Media, said: “We are thinking about real-time auctions and we are thinking about how agencies want to integrate with Sky as a platform, but programmatic cannot be supported today. It might come; it will probably come, but only for a small segment of inventory. It will not become a universal way for trading inventory.”

Programmatic trading of STB broadcast infrastructure inventory may not become universal, but it looks like it will happen. DISH Media Sales is already testing its programmatic addressable linear STB solution. It plans to introduce the technology to the digital industry (note the emphasis on ‘digital’) once these tests are completed successfully.

One leading agency executive is already predicting that TV will become the premium end of the digital stack.

5. Leading broadcasters are already enjoying the fruits of advanced data and advertising strategies

Broadcasters know that the mass of their eyeballs are still on linear television and television sets, despite the important growth of on-demand and multiscreen. That is why STB, broadcast infrastructure-based addressable advertising matters to them. But their main focus, when it comes to advanced data and advertising strategies, is still online. This is a world where they can ‘own the customer’, gather their own data (without waiting for any new ecosystems to form) and personalize television today. 

At Future TV Advertising Forum last week we saw what two of the pioneers in broadcaster data-tech and ad-tech have achieved. As you can read elsewhere, Channel 4 introduced programmatic trading for on-demand content earlier this year and has now gone live with dynamically inserted online linear ads (also available to buy programmatically). Jonathan Lewis, Head of Partnership & Digital Innovation at the broadcaster, said Channel 4 is now moving into a “100% addressable world” when it comes to its online inventory.

The ability to target ads and trade programmatically has been built upon a long-standing data strategy. Channel 4 now has a database of 13 million registered users for its All 4 online service (which covers catch-up, archive, linear and short-form), giving access to age, gender, location and email address.

Modern Times Group is also using programmatic trading for its advertiser-funded VOD online, like catch-up TV. As you can read in a separate report, Alexander Bastin, Head of Digital Trading with MTGx (the digital innovation group within MTG) told the conference that the broadcaster has established a more direct line into digital advertising buyers as a result of its programmatic technology. 

Buyers are pleased to have top class premium inventory made available to them in this way, he said. “It is all brand-safe and it all plays quickly [ad loading times] and there are no issues with ad-fraud. The feedback we get is that these benefits are still hard to find in other programmatic systems.”

6. We are entering the premium programmatic era

Three years ago it looked as if programmatic technology might be applied to the television world, at least online. At Future TV Advertising Forum 2013 we witnessed long debates about where this technology could be used – and if it had any role for premium online video. The idea that we would trade set-top box inventory programmatically was largely dismissed – there were a few people who thought it would happen but this was a distinctly minority view.

It is incredible what has happened in the two years since. The evolution of programmatic went something like this: Digital tech companies told the television industry why they needed programmatic; the TV industry rejected it primarily because the online programmatic models failed to protect their data or their business and sales models; the digital tech firms came up with better solutions that worked for publishers with high-value scarce inventory; Leading broadcasters started to use the new capabilities; now Pay TV platforms are outlining a role for programmatic on set-top box broadcast inventory. 

It all happened in around 24 months! If ever there was an example of convergence, there it is. Indeed, most of the revolutionary disruption, challenges and new business opportunities that have featured at Future TV Advertising Forum over the last four years have digital/TV convergence at their heart.

At this event, Lewis at Channel 4 said there needs to be a ‘mind-shift’ about the role of programmatic buying for premium video, with an acknowledgement that this trading process, when applied correctly, can be used in parallel to direct sales to give buyers access to the best online television inventory. 

“We are delivering multiple ads into breaks in a programmatic way and this is not about passing unwanted impressions back into the market. We are now entering into the premium programmatic world where the game is changed,” he declared.

Bastin noted that MTG still uses direct sales but now treats programmatic sales as an equivalent. “We do not see much difference between them,” he confirmed. He added that existing clients are moving to programmatic buying. “This validates the fact that money in the market is converting to programmatic sales.”

7. There is an opportunity to exploit data-tech beyond advertising, with wider data analytics businesses

Advertising is increasingly data-driven, including in the television market. Early-mover broadcasters are creating viewer profiles. Pay TV operators are blessed with reliable subscriber data that can be adorned with lifestyle and demographic attributes taken from third-party data providers and married (in a privacy-compliant way) with advertiser data about their target audiences. Once you add the set-top box reporting you have the basis for addressable TV.

Pay TV platforms can add great value to the advertising market even without addressable advertising. Ben Tatta, President of Cablevision Media Sales, showed the London conference how. His company, helped by census-level data from 7 million Cablevision set-top boxes in three million New York area homes, (including second-by-second channel tuning data) enables ‘long-tail’ channels (below the top 40 networks) to prove they have audiences even when they show up as zero ratings on audience panels. 

He explained: “When we first started, we realized there is a ton of viewing and impressions that are not measured. The measurement of the top 40 networks is relatively accurate using the Nielsen panel but anything below that is under-measured or not measured at all, with ‘zero sell’. So there are a lot of impressions that have not been monetized because they have not been measured.

“For advertisers there are a lot of audiences they have not been reaching, since typically they are focused on the top 20-30 networks. Porsche, a client we did a lot of data work for, found that the majority of the audience they were trying to reach could only be found in those networks outside the top 40 and we could get CPMs on inventory that we could never have achieved in the past.”

So before you even start talking about addressable advertising, there is a more fundamental service Pay TV operators can offer: the ability to monetize standard linear inventory that is otherwise worthless.

Tatta highlighted the wider opportunity for platform operators with rich data and the ability to analyse it. His company is helping programmers to better understand viewing behaviour, including ‘source and destination’ for programmes, or what they call ‘path analysis’ on the web. Where are the audiences before they arrive at a show, and where do they go afterwards?

If a network loses audiences after a season premiere, Tatta and his team can find out where they went. Maybe there is a new show in the same time-block that they are watching instead. “We can see the attributes of the audience that is moving away and whether that is the target audience for the network or not. Based on that, they can move time slots or run ‘tune-in spots’ [promotions for your show] on other networks where the [original] audiences have moved in order to get them back.”  

Tatta made it clear that if you invest in set-top box data and data analytics, there are business opportunities that are not directly related to advertising. There was plenty of comment at this conference about the integrity of the data that Pay TV operators (and indeed broadcasters) possess – and a noticeable sentiment that advertisers worried about digital fraud and viewability issues are looking upon ‘traditional’ media companies as a safe haven. We will take a look at some of those discussions, and much more, next week when we conclude our FTVA 15 analysis.