Will HbbTV be Google’s Beachhead into TV Advertising?

When the HbbTV (Hybrid Broadcast Broadband TV) association announced a slate of seven new members back in October, one name stood out – Google. Whilst Google already has a presence in the living room via Chromecast, YouTube and it’s Google Ad Manager ad serving platform (formerly known as DFP), it’s no secret that the company has larger ambitions to develop its presence in the ad tech market. Just a couple of weeks ago the company announced a landmark deal confirming that the company is to partner with Disney on their advertising operations globally.

However, Google does require content to be IP-delivered in order to scale, and HbbTV – which can flip between traditional broadcast and IP-delivered content in the same stream – might (in theory at least) enable Google to ramp up its TV business more quickly. Shorty after it signed up to the HbbTV association, Google sent Jean Semere, head of video solutions, EMEA, to speak at the HbbTV Symposium in Germany last month. Vincent Grivet, chairman of the HbbTV Association, said Semere made it clear that Google are excited about the HbbTV opportunity.

“It’s no surprise that the topic of his presentation was addressable TV advertising, and leveraging HbbTV technology to achieve addressable TV advertising,” said Grivet. “So I think Google is making no secret that their number one motivation to be involved in HbbTV is primarily addressable advertising.”

Justin Gupta, head of broadcast & entertainment, strategic partnerships, UK & Ireland at Google, said the company sees a lot of potential in the tech. “We see an opportunity with HbbTV to bring addressable advertising to free-to-air platforms, and this is beneficial for the whole industry. We want to make sure it’s done right, in a way that everyone can benefit from the technology.”

And Google sees an opportunity for its ad serving business too. “When broadcasters are ready to do addressable TV, we will have the capability within our systems to support it as well. The industry is looking for better approaches in this area, and it fits in with our product strategy to enable cross-screen advertising on all surfaces,” said Gupta.

However, Sebastian Busse, director of addressable TV international at SpotX (owned by RTL Group and a rival to Google in this market), said that some broadcasters might have reservations about partnering with Google for HbbTV.

“Broadcasters and publishers know what has happened in the digital world. Google has taken control, it has taken their data and publishers lose control” said Busse.

But he believes that power still lies with broadcasters to choose their own fates, and those who are wary of Google can choose to build their own solutions instead, as indeed some are already doing. “Google joining the HbbTV ecosystem doesn’t mean they are part of the TV advertising ecosystem, because what you need in the end is inventory. For that, you need to partner with broadcasters, and broadcasters are very sensitive of Google,” said Busse. “That’s why they’re investing in their own tech stacks.”

Grivet also stressed that broadcasters would and should be the natural users and beneficiaries of HbbTV’s targeted advertising features. “HbbTV is a broadcaster-minded and broadcaster friendly technology, and broadcasters will have an open road to continue to develop and market their own targeted advertising proposals based on the HbbTV specification”.

And on balance Grivet and Busse say Google joining the association is a positive, as it signals changing perceptions around the standard. “Google at one point was saying that HbbTV was outdated, and it would never fly,” said Busse. “And now they’ve joined the association, so that’s a good thing, and it puts more focus on HbbTV as a technology too.”

Gupta meanwhile said that Google has never been dismissive of HbbTV and that it was just a question of timing. “At Google, we believe it is the right approach to join,” said Gupta. “There’s no doubt now that HbbTV is the de facto standard now that’s integrated into every new television across Europe.”

Progress on Addressable Advertising

And there are reasons to be confident about HbbTV’s future. The technology continues to achieve higher penetration, and moves closer to being able to deliver true spot-replacement in ad breaks (where ads within a live TV broadcast are replaced with a targeted ad for specific audiences). Work is ongoing to create a specification for addressable advertising using HbbTV, which would enable spot-replacement.

Addressable ad campaigns are already being run by some broadcasters, but mostly these are overlays which sit next to live content, rather than replacing spots during ad breaks. Grivet says that while these are good, they are not “the new frontier which everyone would like to reach”.

Some broadcasters have even begun trialling spot-replacement, as ProSieben’s Jens Mittnacht explained to VAN earlier this year. But Mediaset’s Angelo Pettazzi, who also chairs the HbbTV Marketing and Education Working Group, says these solutions tend not to be fluid and seamless, and that “the true industry ready solution is the one which is under development right now [the aforementioned work on a targeted advertising specification]”.

But Busse says that while we wait for spot-replacement addressable TV advertising to be fully functional, broadcasters should be working with HbbTV right away, to start learning what the market wants from addressable advertising.

“Broadcasters need to learn what targeting criteria buyers have, what you need to construct segments, what are valuable segments for advertisers, and you can do this things with the display-like formats that are already available,” said Busse. And he says there is already appetite from the buy-side for these formats, since they introduce digital advertising staples like frequency capping, regional targeting and audience buying into the TV world.

Further Challenges Ahead

But while good progress is being made on HbbTV’s advertising capabilities, there remain a number of significant challenges for the technology. Many of these challenges involve making sure that there are strong incentives for all the necessary players to keep pushing forward in developing HbbTV and its advertising capabilities.

Verance, a tech company which has created a watermark that’s been folded into the HbbTV specification, says that TV set makers will likely need to be compensated for the work that will be required on their part to make spot-replacement advertising possible.

“I think there is a broad acceptance that because this is going to require additional technology and testing and investment on the part of device manufacturers,” said Verance CTO Joe Winograd. “And [targeted advertising capabilities] won’t necessarily be a value-add in the consumer’s eyes, it won’t sell more TV sets, so there should be some other way of compensating device manufacturers for their investment.”

This is complicated by increased pressure on TV manufacturers’ profit margins. Winograd cited IHS Markit research presented at the HbbTV symposium that as China is able to produce more parts of TV sets itself, Chinese manufacturers are lowering their prices.

“That’s changing the market, and changing the investment theses of television manufactures in terms of how they choose what features are in TV sets, which operating systems they’re running, and who’s able to monetise different aspects of the viewing experience,” said Winograd.

Some broadcasters also remain to be convinced that they should work with HbbTV. “Broadcasters always ask ‘do we get more money or less money?’” said Busse. “And when there is another technology involved, they tend to think there is less money because they need to give up a share of the income.”

But the more problematic players tend to be the operators, who often themselves prefer to develop their own addressable TV advertising offerings instead of signing up to HbbTV, since it gives them a way into the advertising business.

In markets where operators are particularly strong, many operators are resistant to HbbTV, and instead try to muscle their way into the ad market with their proprietary addressable solutions.

But this makes less sense in markets where there’s many competing TV operators, and no single one has significant enough scale. Vincent Grivet said that Sky’s AdSmart solution, for example, works because Sky claims it reaches an audience of up to 30 million (and had enough cash to fund the expensive development of the product). In France on the other hand where there are four strong IPTV operators, if each developed their own solutions it would become “a nightmare for advertisers” according to Grivet.

Getting all these players with often conflicting interests pulling in the same direction is of course tricky at times, but Grivet said he’s been impressed by how the level of engagement on all sides so far, and that they’ve recognised the importance of working together to develop solutions.

Winograd agreed – Verance is relatively new to the HbbTV space, but he said from what he’s seen he’s been “extremely impressed with the success that different regions have had with creating healthy ecosystems for bringing the technology to market”.

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