Google has made a deeper push into TV ad tech with the launch of ‘Dynamic Ad Insertion in DoubleClick’ and ‘smarter ad breaks’ which are designed to give broadcasters and distributors more control over what appears in a given ad pod. While neither product is ground-breaking, it does suggest that Google’s DoubleClick for Publishers (DFP) is going to start competing more heavily with the ad tech products that work with the TV industry, such as FreeWheel (owned by Comcast), Ooyala (owned by Telstra) and Adobe Primetime.
Dynamic ad insertion will enable broadcasters to deliver ads across both online screens and set-top box video on demand. So broadcasters create individual streams using server-side ad insertion, which will make TV advertising more addressable. Google have been experimenting with dynamic ad insertion into live linear TV through the Google Fiber set-top-box, which the company announced at last year’s NAB Show.
Thus far Google say they have been partnering with companies like AMC Networks in the US and Globo in South America. Yesterday the company announced three new partners: MCN, Roku and Cablevision, who will use DFP to serve ads and monetise both cross-screen TV and video content.
While Google has had spectacular success with getting online publishers to sign up to DFP, it looks like its going to be far harder for them to link arms with the TV industry when it comes to ad tech. Here are some of the reasons why:
1. The TV Industry Hates YouTube, and YouTube Hates TV
There’s a historical distrust of Google in the TV industry because of their association with YouTube, which was touted for many years as a ‘TV-killer’. While YouTube isn’t regarded as the only online threat to TV these days, that’s only because the video platform now shares the ‘TV-killer’ moniker with companies like Netflix, Facebook, SnapChat and Amazon.
Tensions between YouTube and the TV industry exist in pretty much every market, but they have been particularly pronounced in the UK. Google infuriated broadcasters by claiming in October last year that advertisers should spend 24 per cent of their TV ad budget to reach 16 to 24 year-olds in the UK. The UK TV industry’s marketing body research Thinkbox hit back with research saying that YouTube accounts for only 10.3 per cent of time spent by 16 to 24-year-olds consuming video (see chart below), and to just 4.4. percent for all individuals.
The spat erupted again at Advertising Week Europe earlier this week, when Google said that research drawn from 56 sources showed that YouTube drives higher ROI than TV at current spend levels.
So in one room Google is saying they want to help the TV industry with their advertising, while in another they’re telling the market that TV advertising doesn’t work as well as YouTube. As these PR and research moves are highly calculated, it seems that Google views YouTube advertising as being the ultimate prize, and one with more revenue potential than TV ad tech.
2. YouTube Red Will Move YouTube into the Living Room
Over the years YouTube have made a few bungled attempts at producing original content. Each time these projects failed, it seemed like YouTube might just accept that it is destined to be a platform for other content creators.
But the opportunity is just too big for a company like Google to miss, which is why they launched YouTube Red. And at this point it looks like YouTube Red is only going to exacerbate competitive tensions with the TV industry. Just yesterday Google CEO Sundar Pichai on a quarterly earnings call that YouTube is to invests a lot more heavily in producing original series, which will in all likelihood make YouTube more of an OTT challenger in the living room than it has been up until now.
3. Pay TV Operators and Broadcasters are Strategy-Savvy
In most markets, Pay TV is heavily consolidated and so operators understand the importance of ecosystem control better than most. For years, many if not most of them have been offering the ‘quadruple play’, where alongside TV they also offer broadband, mobile and landline services. Bundling integrated services not only makes your own operations more efficient, but also helps to deter challengers offering single point solutions.
However, the world is changing, and Google has outflanked the TV industry on a number of key strategic fronts, most notably via search (which it announced this week will also be used for TV show discovery), its Android mobile operating system, Android TV and ChromeCast and Google Fiber, the company’s broadband service in the US.
Then of course there’s ad tech, which includes DoubleClick for Advertisers (including DBM, Google’s DSP), DoubleClick for Publishers, and the DoubleClick Ad Exchange. These products enable Google to give preference and divert spend to its own products. So, for example, you can only now buy YouTube inventory programmatically by using Google’s own DSP, which struck a blow against rival DSPs. Similarly, until just last week, Google used its DFP product to give preferable treatment to its own ad exchange with dynamic allocation.
The large broadcasters and operators are all too aware of these strategic risks, which is why we have seen companies like RTL Group, Sky, Comcast, Dish and Telstra all make significant ad tech investments. These moves are partly to retain control over ad delivery, partly to exploit the revenue opportunities, and partly to avoid spending money with companies like Google who compete with them in other areas.
It’s going to be fascinating to see how programmatic TV pans out and if Google can win back the TV industry’s trust – especially when it comes to smaller broadcasters who are a bit less likely to view Google as a direct competitor – or if the ecosystem-wide integration of its various products will simply give it so much power in the market that broadcasters will have little choice.