There are very few purists left in digital advertising. Over the last few years we’ve seen an orgy of identity switching, as agency groups run their own ad networks while ad networks and ad tech companies are behaving like agencies and occasionally publishers. Even brands are behaving differently, whether it’s through taking agency services in house, creating their own content, or by building fully-fledged media businesses.
As far as digital advertising goes, the TV industry has been relatively straight-laced. For the most part they have simply been the highly prized clients of the ad tech specialists. However, there are signs that the TV world is starting to wake up to the power of ad tech, whether it’s through acquiring companies, building their own tech, or by simply making use of the infrastructure available to build ad networks of their own. In Europe alone, over the last couple of years we’ve seen the following early moves:
– In 2012, BSkyB launched Adsmart, a TV targeting service which they also hope to offer to other broadcasters;
– Last year we also saw RTL Nederland acquire Videostrip, the leading premium video ad network in the Netherlands;
– Various broadcasters creating their own custom ad formats to differentiate their offering e.g. the custom formats built by ITV and Channel 4.
– Zodiak Media, a TV production company with 45 local brands in 17 countries and with annual revenues of around $800m, recently launched ‘Zodiak Advertising’, a premium publisher trading desk. Sources close to the company say the division has ambitious plans for future growth and is eyeing up possible acquisition targets.
While in the scheme of things this still represents more of a trickle than a stream, there are various reasons to believe that these moves may be part of a long-term trend of continued investment, which will be welcome news to the ad tech companies overlooked thus far by the likes of Google, Adobe and AOL. Here are a few of the market forces VAN believes are pushing the TV industry deeper into ad tech:
Ad Tech and Ad Networks Would Give TV a New Stake in an Increasingly Fragmented Market
The Internet fragments audiences and fuels consumer demand for à la carte services. This is already problematic for the TV industry, where the advertising proposition is primarily built around scale and reach, mainly across walled gardens where they rule they dominate. Having a role in ad tech or owning an ad network would allow them to also tap into the ever-growing budgets being spent by advertisers looking for incremental reach online.
The Online Video Competition Controls a Significant Chunk of the Ad Tech Industry
As we’ve seen with the programmatic revolution over the last few years, ad tech’s influence goes way beyond simply targeting and serving ads. It has disrupted multiple business models and has reshaped everything from agency business models to the way media is produced. If the TV industry continues to look in from the outside, they are – to at least some extent – subject to the influence of third party providers, many of whom are building media businesses aimed squarely at taking on the TV industry.
Ad Tech Relationships Are Useful for Content Owners
As Google and AOL will tell you, there’s a synergy between ad tech and content ownership (there’s a conflict too, of course, which is discussed below). For example, an ad network could double as a syndication network, and vice versa. This is what AOL Networks are doing today with video: hypothetically, you could have content syndicated to you from AOL and then monetise the content by serving ads through their Adtech ad server or via Adap.tv’s exchange. One publisher relationship for AOL, multiple selling opportunities.
Also, ad tech platforms are often where advertisers and publishers will encounter new services. For example, a publisher using Google’s DFP will find that the option to sell remnant inventory using the Doubleclick Ad Exchange is baked right into the UI, while other exchange options don’t feature. Similar biases can be included in buying tools, so hypothetically a broadcaster could have their own inventory feature more prominently if they owned a video DSP.
Another dimension is that owning an ad network or ad tech division would allow a broadcaster or operator to see what type of content is working online, and for who. This is important in a world where consumer behaviour is an ever-moving target for content producers, so being able to see what’s working for other publishers could inform a TV company’s production decisions. However, this sort of sneakiness would of course raise concerns about a conflict of interest, which brings us to our next point:
But who would work with a TV-backed ad tech provider?
A natural response to the idea of the TV industry moving into ad tech would be to question who would work with them on the sell-side. Could they actually compete with the more established tech companies? How many publishers would be willing to work with media competitors? Why would a publisher hand money, data and insights to a TV industry? And wouldn’t the owner of such technology always put their own media interests first?
There are no clear answers to any of these concerns. On the one hand, you could point to the successful ad tech businesses run by Google and AOL, who also have conflicting media interests. They must be doing something right. Or is that many of their publisher clients are simply resigned to the fact that online media industry is built upon a network of interwoven ‘frenemy’ relationships, so it’s simply a fact of online life that you need to work with competitors who have the scale and global infrastructure you need.
But because Google and AOL can get away with it, it doesn’t follow that a TV company could do the same. Google and AOL are known as web natives and – to varying degrees – tech companies, so ad tech is a more natural extension of their businesses. In the digital advertising industry, a TV-backed ad tech company could find itself perceived as the vicar at the disco. That might just be a risk they have to take, as looking the media industry’s current trajectory and the competitive landscape, can they really afford not to?