The growth of addressable TV advertising in the US has been driven largely by telcos like Comcast, AT&T and Verizon, who have developed addressable solutions which run via their set-top boxes (STBs). Initially the inventory available via STBs has been limited, but Comcast’s purchase of NBCUniversal and AT&T’s recent Time Warner merger has opened up new pools of addressable inventory.
With US operators having largely overcome the initial challenges of scaling which still hold back addressable solutions in other markets, VAN spoke to Thomas Bremond, general manager of Comcast’s video ad tech business FreeWheel, about why the US is scaling so much more quickly.
Addressable TV advertising is still only a small fraction of total ad spend in the US, but is growing rapidly. Advertisers are on track to spend $3 billion annually on addressable ads by 2019, growing from 0.6 percent of total ad spend in 2015 to four percent next year.
Operators in the US are the most advanced globally in their ability to deliver addressable ads on linear TV according to Bremond. In the US, operators have developed household addressable capabilities on linear so that they control delivery infrastructure, enabling two types of execution: full and split avails. Full avails allow advertisers to send different messages to every household within the footprint, while split avails enable advertisers to serve ads only to specific households which meet their targeting criteria.
These capabilities have scaled to roughly 50 million households in the US via set top boxes from Comcast, AT&T and other distributors. Comparing this to the European market, Bremond said it will take time for advanced TV to reach similar wide-scale adoption in Europe, as there are a number of different obstacles which have slowed down the scaling of addressable TV advertising solutions here.
“The first fundamental difference between Europe and the US is the fact that the European TV market is fragmented. There is a variety of video consumption habits, local legislation, and technical set-up,” said Bremond. “It is not like the digital market, where you have standards (such as the IAB) and everything is far more harmonised.”
“The second main difference is that a variety of players own the distribution network in Europe. For these stakeholders (Pay TV broadcasters, for example), it will be both a business model challenge and technical challenge,” he said.
Despite these challenges, Bremond is confident that addressable TV advertising in Europe will scale up in the same way it’s done in the US. “We have already seen great headway in the United Kingdom and Belgium, and other countries are likely to follow suit,” he said. Indeed Sky, the driver of addressable TV advertising adoption in the UK via its AdSmart product, has been helping spread addressable capabilities across Europe, having enabled AdSmart in Italy two years ago, and with plans for a rollout in Germany soon.
As Sky’s director of digital and AdSmart Graeme Hutcheson told VAN, Sky is aware of the challenges described by Bremond, and is overcoming them by remaining flexible with how the technology is used in different territories.
The Next Hurdles for Addressable
While addressable TV advertising capabilities in the US continue to scale, the next challenge to achieve further penetration will be enabling programmers to run addressable TV ads on linear.
“Following on from the precedent that has been set on set-top box video on-demand (STB VOD), with operators’ data enabling programmers, work is currently underway to facilitate household addressable for programmers, said Bremond. “However, in achieving this, the challenge is getting it to scale – as success relies on the right operator infrastructure and bandwidth capacity.”
Convincing broadcasters to sign up to the operators’ addressable solutions could also slow progress on this front, a challenge which European markets are also facing. In the UK for example, the likes of ITV instead are choosing to develop their own addressable solution, rather than signing up to existing solutions like AdSmart.
Alongside this, Bremond picked out three other key challenges which he said must be overcome to establish addressable TV advertising firmly in the mainstream.
Firstly, he believes addressable TV inventory must be pooled with other premium inventory on digital and STB VOD channels on one unified platform, where it can be sold, delivered, optimised and reported against a single campaign. Without this, premium video inventory will remain too fragmented to draw significant spend away from long-tail or user generated video.
Such a platform might sound simple, but creating it will be “incredibly complex” according to Bremond. “It means bringing together the best of linear (such as reach and simplicity) with the best of digital (including data, targeting, and measurement) against a backdrop of different technology stacks, workflows, measurement capabilities, and resource skill sets.”
The second challenge in Bremond’s view is proving return-on-investment (ROI) of addressable TV ad campaigns. “Premium video has historically been seen as ideal for top-of-funnel brand marketing, but gets less credit than it should for driving mid and lower funnel metrics (for example, consideration, intent, and sales metrics),” he said. “It’s much easier for bottom-of funnel tactics, such as search, to link back to sales results and take the credit.”
He believes the addressable TV advertising has the opportunity to change this preconception among marketers, and that it will be crucial for broadcasters to do so in order to draw spend away from competing media channels and intro addressable TV advertising.
The final key challenge is solving for measurement, making it easier for buyers and sellers to transact across premium video channels. “It’s a problem that hasn’t yet been solved – different platforms (for instance, linear TV, over-the-top (OTT) services, desktop, and mobile) all support different measurement capabilities, which makes it harder to transact,” he said.