Article originally published by Trender Research for OTT Executive Magazine, 2019.
Connected TV (CTV) and more broadly Over-The-Top (OTT) streams are the natural evolution of linear TV. Consumers wanted control over the content, and now they have more control than they could ever dream of: watch any show, on any device, at any time… for free.
Of course, Subscription Video-On-Demand (SVOD) consumption is massive because of services like Netflix. However, the rise of Advertising Video-On-Demand (AVOD) services like Xumo, Pluto TV and hybrid models like Hulu or Youtube TV prove that AVOD is not going anywhere. In the US, 200M users stream content over-the-top while 300M viewers still stick to cable TV, with OTT usage projected to overtake traditional linear TV in the next few years. So one could expect the same trend to take place in the advertising budgets, with OTT spend passing Linear TV budgets, right? Wrong! As OTT consumption increases, Linear TV advertising budgets are slow to follow the watchers. Even for online advertisers, including OTT in the marketing mix still isn’t common practice.
So why is the ad industry so slow to take over the OTT/CTV market? The answer comes from a combination of factors:
– Publisher, platform and app fragmentation makes it hard for the small and medium publisher to find advertisers
– Proper measurement and transparency is only starting, with some players such as Integral Ad Science leading the way
– Lack of standardization in terms of technical solution and audience segmentation
These problems are not new; the industry started addressing them on desktop over 10 years ago and on mobile within the past decade. The answer was programmatic advertising. Today, 80% of digital video ad investments have already moved from direct sales to programmatic sales. Programmatic brings transaction, delivery and measurement standardization to the ecosystem. User data is now formatted and easily tracked, allowing for modern addressable advertising.
What does Programmatic mean?
Programmatic has been used left and right in the digital advertising space, sometimes without much programming involved at all, so I thought I would take a few lines to describe what I mean by programmatic.
Programmatic Advertising means that advertising inventory is transacted in real-time in an auction-based system in which the highest bidder gets an opportunity to deliver an ad to a specific user. Each ad is then individually tracked in order to provide performance feedback to the buyer: was this ad viewed? was the user in the expected audience segment? etc…
The advantages of Real-Time Bidding (RTB) are quite obvious for publishers and advertisers alike:
– Optimization of ad dollars to reach the right user, in the right context for brands
– Increased competition leading to improved rates for Publishers
However, programmatic has not reached the OTT space yet, despite massive investments in the programmatic TV space over the past year. Video Demand Side Platforms (DSPs) now provide dedicated bidding channels for OTT while Supply Side Platforms (SSPs) are doing everything they can to onboard the largest publishers on the market. Yet almost all of the available OTT inventory is still monetized through direct sales. The most advanced publishers are starting to set up programmatic deals within private marketplaces (PMPs) but 1) their usage remains limited, and 2) this is really another way of transacting directly with buyers.
What’s preventing TV from going programmatic today?
As of today, publishers and advertisers list 3 reasons why CTV/OTT inventory is not yet being sold programmatically at scale
1. Technical Limitations
2. Data and Measurement
3. Simple integrations
Technology also exists to solve duplicate creative issues (ad repetition), or to prevent competitive ads from running back-to-back. Creative hashing allows us to keep individual fingerprints for each video media file and to apply real-time intelligence to reject unwanted creatives in specific ad slots.
Data and Measurement
Despite being arguably the sexiest advertising format on the market, no advertiser will blindly pour its ad-dollars into OTT. They want proof that their campaign has been delivered to the right screen and to the right user. As a result, CTV ads are being packaged with delivery measurement and verification. Companies like Integral Ad Science are pioneering in the OTT space with the first-of-its-kind Ad Verification standards. Other Data providers like LiveRamp now offer OTT-specific segmentation using third party data to know if the user watching a basketball game on Hulu is in the process of buying a car or if the subscriber has started but not completed the HBO subscription process.
Solutions are already being implemented to solve for the technical and measurement challenges, but complexity remains the largest problem. Ad Tech providers often need their software to be integrated directly within the app itself in order to run any type of decisioning process. These integrations are slow, error-prone, and Publishers cannot integrate an infinite number of SDKs in the world within their apps. Server-side integrations are the way to go. Solutions which provide an all-in-one integration solution connecting publisher’s OTT apps to all of the world’s programmatic platforms can dramatically reduce the complexity. With this approach, a single server-side HTTP endpoint is all that a publisher needs to call in order to run an auction between 10 buyers, match users with each of them, get the highest bids, and filter out poor quality creatives or duplicate ads. At Publica, we recognized the value of this solution, and are committed to it, because we believe that solving the complexity challenge is the key to fixing the entire programmatic value chain.
Over the next 6-12 months, all of the largest OTT app providers will have adopted their own version of programmatic monetization. Whether it is through a single platform like Publica, or partnering with many different providers, the value-creation is too large to miss. The real question is: what will happen once publishers have the ability to monetize their inventory programmatically?
Advertisers will dip their toes in the Programmatic pool, before diving in.
It will take time for advertisers to change their buying habits. The TV industry has been around for decades and although measurement is extremely limited, experience allows marketers to measure quite precisely the ROI of their TV campaigns. So OTT will (and has already started to) capture small percentages of TV budgets. As the quality of measurement and targeting improves, advertisers will quickly realize that the ROI of OTT campaigns is far greater. Once advertisers enter the ball game, I expect their media agencies to start designing OTT-specific campaign plans. A Superbowl advertiser in 5 years will deliver not one but 1,000 ads depending on who’s watching and in what context. You would want to know if your ad is being shown at a watch party in front of a hundred people or in a living room of a retired couple, wouldn’t you?
And that’s when things will get really exciting. Once the buy-side and the sell-side converge to design OTT-specific experience, we will start to realize the full potential of connecting the king of screens to the internet.