If the pay TV model is dying, somebody forgot to tell Sky. Looking at the most recent financial results, for the nine months up to 31 March 2015, the group saw a revenue rise by 5 percent increase to almost £8.5 billion. Ad revenue was up 6 percent (and 22 percent in Germany) and operating profit rose by 20 percent, amounting to £1.025 billion. One of the key players in driving up Sky’s ad revenue is Jamie West, Deputy Managing Director for Sky Media. West has headed up Sky’s AdSmart products and here he discusses the recent advertising deal with Viacom, his take on the rise of programmatic video, the progress of Sky AdSmart’s progress, and the secret to a successful sell-side data strategy.
VF: Sky recently signed a deal with Viacom to take recently signed a deal to take over Channel Five’s £250m sales operation. Could you provide some background on the deal?
JW: The relationship is already a long-standing one and we have been working with them for six or so years. We’ve always maintained a good, strong dialogue and relationship with them and we’re delighted to say that we’ve extended that partnership to cover both an extension for the next five years until 2020 on the Viacom channel but also adding to that all of the Channel Five channels and inventory. So the main channel, Channel Five, Five USA plus all of their in-demand and digital assets, so great news for Sky in that we’ve got longevity and a really strong commercial partnership with Viacom. It also means we’re able to extend our innovation and technology and data propositions to include Viacom channels. As part of that deal we anticipate that by the end of 2016, both Viacom digital channels and Channel Five will be AdSmart-enabled in due course.
VF: Do you think data-driven advertising will one day be used by broadcasters and operators for primetime inventory or will it always be a way to extract more value for lower tiers?
JW: I think the interesting thing is that whenever you talk on platforms or stages at events, the talk is all about programmatic. The thing that mildly amuses me about that whole topic is that the people that are starting that conversation are generally in the technology business, the ad serving companies or indeed the trading desks because it’s in their benefit. When you take a look from the other end of the spectrum and think about things from the perspective of the advertiser, I think it’s more helpful to think what’s going to deliver effective advertising campaigns. So in my mind, we need to think about what the role of TV is. For some advertisers it’s about being in that big, brand-building environment. Programmatic isn’t necessarily going to service that world.
So my view is that we’ll have a mixed economy, we’ll have people who use TV much as they do today, you have people that will want to have data-enhanced ad serving and that might be to complement their existing schedule or media strategies, and then there will be another group of individuals that will only want to target specific segments of audiences and they may trade programmatically.
For me, we’ll have a cross section of types of trading. There’ll be programmatic direct, and then there’ll be private market places. TThen there’ll be different types of inventory. Such as day time and through the the night time.But those big peak spots, for example on ITV, you would buy X Factor, because it is a big impactful programme watched by millions. An advertiser will most likely want to buy the whole spot to achive brand fame not just a segment.
Two key points I would highlight is that only one advertiser in the last year has particularly challenged Sky to start trading programmatically and that’s out of the hundreds that we deal with. And number two, the phrase I would use is to urge caution. Buying lots of impressions or, in TV language, lots of impacts, does not mean that your campaign will have impact. Advertisers, media owners and media agencies need to take that into account when you talk about media effectiveness.
VF: When you talk about impressions at scale not having impact, what specifically are you talking about?
JW: If you buy a spot in Britain’s Got Talent and it reaches 8 million individuals, that will be an impactful moment where everyone will see the same message at the same time, in the right environment. Buying 6 million impressions programmatically will not have that same talked-about moment. Achieving standout in this really challenging environment where there are many devices and many routes to view content, it’s becoming more and more cluttered, and having those standout moments in a campaign are even more important. That’s why TV will continue to remain the number one brand builder.
VF: What in your opinion is the secret to an effective data strategy?
JW: From a Sky perspective, we are concentrating on building consistent data propositions. At the moment, the challenge in the market is that there are many different data sources, many different ways of trading that data, whether it be via a DSP or an agency trading desk that wants to arbitrage versus universally available data to third party data. The challenge for the industry is to have a consistent data standard, transparent trading currencies and the Holy Grail from the Sky perspective is to be able to seamlessly join up all of the platforms that we operate on. So for the first time bring TV viewing data at scale and enable that to offer multi-platform sequential targeting.
VF: And how do you bridge that gap from the shared linear experience right down to the individual devices?
JW: To date, TV viewing data has been driven as a currency by BARB and that will continue to be the currency for the foreseeable future. It has been hugely accurate and relevant and will continue to be. Sky is fortunate in that it has a viewing panel at scale so on a daily basis, 600,000 but we’re expanding that further so you can overlay Name and postcode combined with Linear TV viewing data then overlayed with, Device ID Login ID device behaviour, on-demand behaviour, as well as third party cookie pools. That, plugged into our SSP/DSP enables us to deliver very accurate cross-platform campaigns.
VF: Now that Sky has fully acquired Sky Deutschland and Sky Italia, will AdSmart be deployed in those markets?
JW: One of the goals for Sky and the Sky Group is to ensure that we have best-in-class technologies and propositions in all the areas and territories that we operate in. What that is meaning so far is that we’re sharing both technologies in terms of hardware, like set-top boxes etc., and we’re also learning in terms of ad technologies and ad propositions so we’re not in a position yet to make announcements of when specific products will be launched but absolutely it is our ambition to have something as powerful as AdSmart operating in all the territories that we operate in.
VF: Will AdSmart always be a Sky-only product or are there plans to white-label or license in other markets?
We’ve always said that we’re keen to have a consistent targeting capability out there in the market. We think it’s right and many media commentators have talked about the fact that you want to be able to target consistent attributes across as many platforms as possible. We’re open to conversations with other platforms, anyone that has a set-top box platform or some way of serving the ads for example IP devices . We’re happy to have the conversation but of course it’s subject to us agreeing commercial terms. We have had conversations with some of the existing PSBs in the UK and we’re open to talking. Of course, Cisco, our middleware partner is working with us to expand that technology globally.
VF: How long do you think it will be before all TV is IP-delivered and what do you think the impact on advertising will be?
This is very much my personal opinion and not a Sky corporate position. I think we will for a very long time have a mixed economy of TV delivery if you like, a mixed solution for TV. The UK in particular has variable broadband coverage and some of the viewing experiences like the Premier League or some of the high-end movies are very, very bandwidth heavy, so having millions of people watching Premier League on a Sunday is likely to challenge some of the networks. So I think we’ll have a mixed economy.
In Sky’s experience, as we make content available for people to watch on demand, they’re availing themselves at a massive rate. More than 20 million programmes are downloaded on a weekly basis from just our set-top box on the on demand service so I think it’s sometime yet. That feeling, that sense of collective viewing, that big viewing event is quite ingrained into the psyche of people in the UK. Equally I think there are a lot of our customers that like have content curated for them. They like to not have to make a decision and they want that big viewing event. They don’t want to have to choose what to watch, they want to have that channel brand that is renowned for having premium quality content.
VF: One of the hopes for Sky AdSmart was that it would grow the pie by bringing new advertising money on board. Has that been the case and how are the regional sales offices around the UK faring?
JW: That’s right, one of the main strategic goals of Sky AdSmart was to make TV more relevant to more brands. Previously TV had been thought of as being in the domain of big, broad brands. Sky AdSmart for us has been about enabling that diagloge with SMEs, whether they be local or indeed niche businesses in terms of their targeting. Since opening the market we’ve run advertiser campaigns to more than 450 different advertisers and 2,200-odd campaigns. Of those, 78 percent of the advertisers are new to TV or new to Sky, so commercially for Sky it’s great news because we’re growing our revenue. And of that 78 percent, about 22-23 percent are brand-new-to-TV advertisers. That’s categories from car dealerships – we’ve run more than 400 different car dealerships on the platform through ten different franchise owners.
We’ve also had taxi firms like Deans Taxis in Newcastle. From local charities right through to high end finance brands like Blackrock, it has been a real journey for us, and we’ve really had to evolve and adapt our language. We had to make the dialogue more readily accessible to local advertisers. We’ve now got a strategic partnership with Johnson Press, which continues to enable us to talk to more and more local businesses. We’ve built a strategic partnership with a car dealership marketing agency to give us that direct relationship with car dealers, and then we have a local sales effort in the southwest, the north east, in Manchester. We’ve got guys focusing on the Midlands and also in London and that is continuing to scale, so as soon as we start to feel we’re maximising the resource, we’re expanding that, and that will be a major area of expansion for us next year.