The race for TV and video advertising budgets is fierce. With new players constantly emerging, new strategies are needed to ensure broadcasters stay in the lead. Before we dive into the matter of comprehensive addressable TV strategies, it is important to touch on some background issues. TV advertising makes up a large portion of total ad spend in Europe — with $28.7 billion in TV advertising spend in Western Europe. Despite this fact, the TV advertising business is no longer the exclusive playing field of TV broadcasting groups. Global digital giants and local players are competing to get their own share of big screen advertising budgets in living rooms throughout Europe.
This creates fierce competition for the multi-billion Euro TV advertising business that was previously dominated by big broadcasting groups. Despite the rise in competition, broadcasters are still in a leading position and remain the driving force shaping the future of TV advertising.
Competition for TV budgets is coming from different angles — and different players
There are three main areas in which new and existing players are refocusing their efforts to provide TV-like offerings — many of which have already become part of the regular mix seen in successful big screen advertising strategies. The combination of scalable reach, data-based targeting opportunities, and digital delivery of big screen video ads are key success factors. In addition to this, social media apps like TikTok, Facebook and Instagram aim to take part in TV advertising budgets with TV-like offerings for the small screen and younger target audiences.
Hardware manufacturers such as Samsung, LG, and Roku are heavily investing in free ad-supported streaming TV (FAST) offerings, which they embed into their user interfaces and thus integrate seamlessly into the TV browsing experience. This method allows them to overcome the boundaries between traditional TV viewing and online video streaming.
Most services are focusing on the aggregation of content, but some are beginning to invest in exclusive content as a way to create unique selling propositions. In addition, automatic content recognition (ACR) technologies embedded on the platforms allow the aggregation of data points, which form the basis for exclusive targeting products within these services.
Some manufacturers use white-label offerings of existing globally active video content aggregators such as Pluto TV and RLAXX.tv that offer their content independently and compose bouquets of local and global video streaming content. FAST services offer newly created linear video channels independent of platform and distribution. These services are available on most devices but are mainly consumed on smart TVs. The growth in this segment can be attributed to FAST’s ability to achieve decent traffic volumes and create an attractive environment for advertisers.
Established VOD services are following suit with ad-supported offerings (i.e., AVOD). In the past, most leading global SVOD services focused mainly on subscription-based business models, but have begun to extend their offerings to include ad-supported services. Recent announcements from Netflix, Disney and Amazon are prime examples of a shift towards ad-supported on-demand streaming services.
Although we are seeing this shift, we should acknowledge YouTube, as it has always focused on advertising-funded content distribution. Additionally, all platforms will continue to attract TV budgets by adding exclusive content rights such as live coverage of major events.
There are also several streaming services focused on one genre of content, which they mostly produce or licence for this specific purpose. These services also fall under the FAST or AVOD labels and are primarily available to viewers free of charge. Music streaming services like Vevo, Xite.tv, and Qwest.tv are available on most major mobile and TV devices but continuously face the challenge of generating relevant traffic volumes. This challenge results in services like these partnering with streaming content aggregators.
For broadcasters, full addressability is key
Many European broadcasters have defined “addressability” as one of their top strategic priorities. Transforming the traditional TV advertising business model towards addressability – with its granular targeting capabilities – is a critical factor for a sustainable long-term product and commercial strategy.
There are numerous methods broadcasters are using to achieve the goal of shaping the future of the TV advertising industry. We have seen broadcasters attempt to optimise targeting methods across different devices and audiences by developing products that enable the unique collection of TV viewing data. Another way that has become very popular in recent years is the growth of external initiatives such as mergers, acquisitions, and strategic alliances between broadcasters, media sales houses, and adtech companies. It is through these methods that broadcasters hope to accumulate a large share of TV advertising budgets.
Three core areas of addressability
There are three main areas of what we call “addressability” in the European TV advertising landscape.
- Addressability in broadcast TV via HbbTV
Most relevant for linear TV is addressability within the broadcast TV stream via HbbTV and the emerging HbbTV-TA standard. For most major broadcasters, traditional television still holds the largest share of consumption and thus the largest share of advertising revenue. Therefore, broadcasters are heavily investing in solutions that take advantage of the massive reach traditional TV provides.
In Europe, one of the key drivers is the HbbTV standard. This allows for the combination of traditional TV distribution (e.g. cable, satellite, terrestrial) and insertion of digital ads into the broadcast stream. In markets like Germany, Spain and Italy, insertions of display ads have been the key driver behind the success of Addressable TV advertising. As HbbTV has traditionally been somewhat limited in the quest to substitute the ad break, the development from HbbTV to the new HbbTV-TA standard is a groundbreaking advancement. HbbTV-TA now creates the basis for frame-accurate substitution of ads within the ad break in combination with granular device-specific targeting.
[The HbbTV-TA specification was introduced by HbbTV.org in 2020 and includes specific capabilities that allow advanced targeting advertising (TA). The major benefit for broadcasters, platforms, and operators lies in the opportunity to create a seamless substitution of video ads within a traditional TV ad break. smartclip has already successfully introduced the substitution of the ad break based on HbbTV-TA in Germany. More details on HbbTV-TA at hbbtv.org]
- Addressability in broadcast TV via managed platforms
Another form of addressability within the broadcast TV stream is through collaborations with managed platforms. Broadcast distribution in markets like France, Benelux and Nordic countries is mainly executed through proprietary ecosystems of telcos and operators. Another example is the addressable TV solution enabled via the Sky AdSmart platform in the UK. Broadcasters are closely collaborating with telcos and operators to enable addressable TV solutions. In markets like France and Belgium these collaborations have already led to successful ATV advertising propositions.
- Addressability in linear live stream and BVOD
Given that the big screen remains the preferred viewing method of video content consumption, the final area of addressability is linear live streaming and BVOD. It is no secret that the demand and usage for content consumption on digital platforms is constantly increasing. As consumer habits continuously change, broadcasters are responding by expanding their services on digital platforms. Services may be offered on all digital devices, but the big screen remains king. This is illustrated by a large share of viewers using BVOD and linear TV streaming apps via smart TVs.
These owned digital offerings put broadcasters in a unique position to combine their linear programme with on-demand functionalities and exclusive access to locally produced content. Advertising within these offerings can be delivered via pre-rolls, mid-rolls, or by substituting ad breaks in linear streams through Server-Side Ad Substitution (SSAS) technologies.
As the TV and digital advertising industry react to the momentous news regarding digital SVOD players moving towards advertising-funded business models, we need to keep in mind who the true advertising powerhouses have been and still are. European TV broadcasters generate billions of euros and remain the clear leaders in advertising revenues — providing the perfect position to drive a shift in TV ad budgets towards digital.
Achieving addressability on all distribution platforms is not an easy task, but broadcasters have already proven that their advancements and investments in addressable TV products are paying off. Our sister company and tech partner, smartclip, is already providing major broadcasters like Atresmedia and RTL Germany with comprehensive addressable TV products throughout all their distribution platforms. smartclip’s recent acquisition of Realytics adds the power of TV data analytics and TV data attribution to the product mix.
In the shadow of the public focus on the advancements of Netflix, Disney, and other streaming services towards ad-funded “TV-like” offerings, European broadcasters have already done their homework and secured a head-start in the race for big screen advertising budgets.