The success of Sky AdSmart in the UK and progress in North America masks serious challenges holding back addressable TV advertising in most other markets. This is a problem for broadcasters and pay TV operators because addressability offers at least some relief from declining market share and revenues for TV advertising as marketing budgets switch to online video and other digital formats. Sky AdSmart has already demonstrated that the ability to target households with ads selected on the basis of demography, socio-economic status, location and various known preferences including over video content, can increase effectiveness for the brand and revenues for the operator or broadcaster.
In its recent white paper, AdSmart: Five Years and Forward, Sky cites one benefit as being to lower the cost of entry by creating smaller subgroups within a given prime time audience, with £3,000 ($3,800) being the minimum price. This has so far attracted over 1,000 new enterprises to TV advertising which either could not or would not afford the price of a national spot ad shown to all viewers. Sky reports that 70% of AdSmart advertisers return, while channel switching is almost halved when addressable ads are shown in the first three positions of a break, with viewers 10% more likely to recall such an ad spontaneously than in the case of a standard linear TV spot.
A bigger clue to future success for advertisers and operators lies in the observation that linear and addressable TV ads work better in combination than either on their own. Ad awareness was increased by 22% and ad recall by 49% when shown in both linear and addressable formats.
Above all perhaps, the increased engagement and relevance translate to business results, with purchase intent increased by 7% overall, and up to 20% for advertisers new to TV which therefore benefit from exposure and credibility they lacked before.
Given such benefits, it is surprising that AdSmart faces relatively little competition as a pure addressable advertising platform, with AT&T’s advanced advertising business Xandr being one of the few. Xandr enables addressable advertising on AT&T’s own DTH service DirecTV, as well as Altice USA and Frontier, using ComScore to provide analytics and measurement.
Comcast has also been something of a pioneer and in June 2019 got together with fellow MSOs Charter and Cox to create and promote a unified technology stack for addressable advertising taking in content, delivery and audience measurement. In practice, Comcast – having acquired Sky – has acknowledged AdSmart as a defacto standard platform for addressable, bringing it into its NBCUniversal business, which generates $10.6 billion a year from TV and digital ad sales. This is about four times what Sky handles in the whole of Europe, including Germany and Italy where AdSmart is only just getting going.
Elsewhere, addressable TV advertising is being held back by lack of proven platforms, given that the likes of AdSmart are not yet being marketed more widely. Lack of ad inventory, that is the slots themselves, has also held back addressable in many other markets, while outmoded regulatory constraints have also imposed a barrier in some countries. The latter applies particularly to France, where service providers have not been allowed even to target ads by location or demographics of their viewers despite this having become routine practice in the digital world.
The addressable playing field is therefore anything but level at present, being staged for further rapid growth in the UK and US but with takeover postponed in some leading markets. Rethink TV, our research arm, is currently preparing a global forecast of addressable TV advertising that will identify where the growth will occur, analyze the issues and derive some specific forecasts of total ad share and revenues, broken down by geography. That Rethink TV report will also consider that addressable advertising will advance at a much faster rate over online services delivered via connected TV, putting the onus on broadcasters and operators to unify their OTT and linear services with joint ad targeting across both. For broadcasters, the latest terrestrial delivery technologies, that is HbbTV 2.0 in Europe, ATSC 3.0 in North America and ISDB-T Hybridcast for Japan and parts of Latin America, will enable addressable ad delivery.