Intro: The Rise of Targeted Advertising

The advertising ecosystem has changed dramatically over the past years, as the arrival of the internet has provided advertisers with the ability to target potential customers based on their behaviors, characteristics and individual preferences.

This type of advertising has since empowered increasingly effective campaigns, making Targeted Advertising (also called ‘Addressable Advertising’) extremely attractive to advertisers - and the corner stone of modern advertising.

Yet, up until recently, its use has been confined mainly to digital platforms, and considered difficult to implement in the television space.

With current growth at 40% per year and an estimated market total of €11.4bn by 2024[1], addressable TV advertising carries great potential for increasing your service revenues – while simultaneously boosting subscriber engagement.

By simplifying the adoption and management of technologies, new solutions such as VO’s Targeted TV Advertising now allow broadcasters and operators to implement advanced advertising easily, and to provide advertisers with a combination of television’s reach - and the effectiveness of data-driven audience segmentation they have long been practicing online.

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First Things First:
What is Targeted Advertising?

Targeted Advertising (TA) is an umbrella term for a suite of technologies that allow advertisers to present consumers with ads based on their personal interests and specific characteristics.
These can include demographic and geographic data, family composition, viewing preferences, behavioral patterns, & much more.

The technology is used to identify, segment, and then present each of these segments with customized - and therefore highly effective – advertisements.

The outcome is that two viewers can watch an identical program at the same time, and be served with completely different – and customized - advertisements, allowing operators to increase their inventory and offer more ad slots.

In addition, ad slots value is boosted, as viewers’ tendency to respond more favorably to advertising aligning with their interests renders these ads highly effective, and qualifies for premium advertising rates.

target

Targeted Advertising Delivery Methods - AVOD & FAST

AVOD-left

AVOD (Advertising Video on Demand) and FAST (Free Ad Supported Television) are two of the biggest growth areas in streaming video nowadays.

AVOD revenues are expected to reach $66 billion across 138 countries by 2026[2], an increase of 144% over the figure from 2020. Meanwhile, channels operating on the FAST model, such as Pluto, are rapidly expanding on an international basis and, in Pluto’s case, are now a $1bn a year business[3].

The two types of services are very similar. AVOD is essentially a streaming service, which is either wholly or partly funded by advertising rather than subscription. It provides operators with the ability to offer an extremely attractive tiered service, with ad loads decreasing in proportion to the value of a monthly subscription. A free service can be entirely supported by advertising, a premium one be dependent on subs and feature no ads at all, with several levels possible in-between. This is already proving popular in several mature markets, including high profile services such as HBO Max and Discovery+ in the US.

FAST meanwhile is the linear version of a streaming service and is provided to the viewer on a fixed schedule; effectively making it a traditional linear TV channel only delivered via OTT.

Targeted advertising is ideally suited to both AVOD and FAST deployments and results in a CPM (cost per mille - i.e. revenue per 1000 impressions) of around $15, comparable with prime-time broadcast cable[4].

It is also not restricted to simply pre- and mid-roll adverts. Using the right Targeted TV Advertising solution expands the inventory to include banners, event driven overlays, second screen activation, and more.

The setup costs of establishing an OTT service can be high, especially in the initial period, but the ability to offer AVOD and FAST services driven by TA provides immediate income to operators while also providing them the flexibility to decrease ad loads and earn subscription revenue with tiered services.

Targeted Advertising

Targeted Advertising Delivery Methods - Live & TSTV

Despite the rapid growth of streaming options, live TV, the traditional linear TV services provided by free-to-air and Pay-TV broadcasters, is still a significant factor in the broadcast ecology.

In recent years, the growth of PVRs and cloud PVRs has also seen a boom in time-shifted viewing (TSTV), with viewing habits first established in the era of the VCR becoming one-click operations and augmented by features such as the ability to live pause viewing.

Targeted advertising is a particularly powerful proposition for live linear TV. Globally, the average viewer watches just under two hours of linear TV every day[5]. If only 25% of the advertising served to them during this time was replaced by targeted advertising, with a CPM (cost per mille - revenue per 1000 impressions) of $15 as opposed to only $7.50[6] for traditional advertising, you have a directly proportional link to a 25% increase in revenues.

The more ads are replaced, the greater the increase in revenue. A 50% replacement yields a 50% increase in revenue, and so on.

Targeted Advertising-TSTV

The ecosystem for ad replacement in live TV is developing rapidly, with many broadcasters and technology companies realizing that scale is one of the keys to success. As a result, we are seeing broadcasters and operators collaborate on the technology in multiple markets.

For example, rival broadcasters Virgin Media and Channel 4 in the UK both use a third competitor, Sky, and its AdSmart service. Indeed, when using a technology-agnostic solution like VO’s Targeted TV Advertising solution, companies can leverage all the opportunities presented by rapid progress in the field, whichever technology they are based upon.

Time-shifted viewing (TSTV) comprises a steadily growing proportion of the total viewing time in many countries, with consumers happy to use cloud PVR services rather than record locally on dedicated hardware.

Broadcasters and advertisers can effectively treat the inventory in these catch-up services as live, targeting both pre-and mid-roll slots as they would any other broadcast, extending campaigns into near-live and box-set viewing windows, and further extending their monetization opportunities.

Targeted Advertising Delivery Methods - Live & TSTV

Despite the rapid growth of streaming options, live TV, the traditional linear TV services provided by free-to-air and Pay-TV broadcasters, is still a significant factor in the broadcast ecology.

In recent years, the growth of PVRs and cloud PVRs has also seen a boom in time-shifted viewing (TSTV), with viewing habits first established in the era of the VCR becoming one-click operations and augmented by features such as the ability to live pause viewing.

Targeted advertising is a particularly powerful proposition for live linear TV and associated time-shifted viewing (TSTV). Even in the age of streaming, the average TV viewer in the developed economies watches 3 to 4 hours of live linear television every day . If only 10% of the advertising served to them during this time was replaced by targeted advertising, given a CPM (cost per mille - revenue per 1000 impressions) of $15 as opposed to $4 for traditional advertising, that will lead to a +25% increase in revenue assuming a typical ad load of 12 minutes per hour.

The more is replaced, the greater the increase in revenue. A 20% replacement yields a 55% increase in revenue, and so on.

Targeted Advertising-TSTV

The ecosystem for ad replacement in live TV is developing rapidly, with many operators and technology companies realizing that scale is one of the keys to success. As a result, we are seeing former rivals cooperate to build out the technology in several markets.

For example, rival broadcasters Virgin Media and Channel 4 in the UK both use a third competitor, Sky, and its AdSmart service. Our solution is wholly agnostic to these developments and can enable operators to leverage the opportunities that rapid progress in the field is presenting.

It also unlocks the potential to offer banner advertising and overlays as part of the UI. These can provide valuable additional revenue streams in any streaming services, as research shows that viewers can spend up to 20% of their screen time within a service browsing for content to watch.

Finally, operators can also unlock the targeted advertising monetization of time-shifted viewing (TSTV). This is comprising a steadily growing proportion of the total viewing time in many countries, with consumers happy to use cloud PVR services rather than record locally on dedicated hardware.

Broadcasters and advertisers can effectively treat the inventory in these catch-up services as live, targeting both pre-and mid-roll slots as they would any other broadcast, and extending campaigns into near-live and box-set viewing windows.

Targeted Advertising Delivery Methods - In App Displays

Targeted TV Advertising is not solely confined to pre- and mid-roll ad inventory. It can also be deployed by operators to serve banner ads and pop-ups in the User Interface of any app-delivered services they run, such as those offered by the VO Secure Video Player.

These can provide additional revenue streams in any streaming services, including SVOD and AVOD, as research shows that viewers can spend up to 20% of their screen time within a service browsing for content to watch.

In-App advertising has distinct advantages for the operator

Revenue

All inventory is owned by the operator. There is no requirement to split revenue with content providers etc. All revenue earned from it stays in-house

Promote

Banner ads can also be used to promote new services, content etc.
And these can, of course, be targeted at a user’s individual profile

Web

In app advertising can also contain direct, clickable links to other web pages

Furthermore, the effectiveness of In App advertising has been shown to be even greater than for standard targeted advertising, resulting in a CPM of $80; approximately 5x targeted advertising alone (and 20x traditional linear advertising) making it an incredibly powerful tool for any operator.

Targeted Advertising Delivery Methods - TV 2 Digital

TV 2 Digital is the framework that serves to couple TV together with online advertising for holistic campaigns across both platforms. By providing advertisers with TV ad viewing data, it effectively enables the online retargeting of customers who had previously engaged with specific ads on TV. It does this by using both second screen activation and by sequencing campaigns to target customers gradually; first on TV, and then online (with the same / a follow-up ad). It can also include device-oriented targeting to sequence different screens at each phase. (PC, tablet, smartphone).

VO Targeted TV Advertising enables broadcasters and operators to extend campaigns outside of their own television ecosystem and into the digital arena. Effectively they become second party data suppliers to advertisers, opening up a new revenue stream and offering a far more impactful service than can be achieved even with Targeted TV Advertising alone.

This is an exciting new field for digital advertising that is still being developed, but has already seen successful campaigns run by forward-thinking industry giants such as AT&T.

Targeted Advertising Delivery Methods - TV 2 Digital

Leveraging the Power of Your First Party Data

Advertising segments are a group of users with specific shared characteristics, such as age, gender, geo-location, education,
or even unique viewing patterns and preferences. Segments are created from the analysis of data, which can come from several sources. If you are operating a TV service then basically all the information you have about your customers and how they use your services is defined as first party data. As first party data does not have to be shared with any external organization, including advertisers, its use meets the obligations of privacy legislation such as the GDPR in the EU, making it by far and away the most valuable dataset for broadcasters and advertisers.

TV operators already hold exclusive access to a great deal of first party data, including their customers’ names, addresses, email

addresses, and so on. As a result, most broadcasters and operators already have access to enough first party data to start their own targeted advertising services right now.

Some broadcasters have expanded the scope of their registration info to include additional, optional data on household composition etc. as part of the sign-up process.

This has helped extend the amount of data available to them while following one of the key objectives of setting up any TA offering; respecting the viewers’ privacy at all stages of the process.

With the right solution, first party usage data can befurther augmented in several ways:

Intelligent-Analysis

Intelligent analysis of viewing patterns, driven by the customer’s content consumption preferences. This enables both more granular segmentation as there is additional data to work with and helps to keep the segmentation current and updated.

Second-Party-Data

Use of second party data. When an external partner organization such as a brand or a store provides information regarding its clients, this data can be used to further refine the targeting of a campaign.

AI analysis

AI analysis of data sets to provide additional segmentation by extrapolation.

Charts

This last option is particularly powerful and uses the pattern recognition capabilities of artificial intelligence to process large amounts of data and detect significant life events.

As a simple illustration, a sudden shift in an individual household’s demand for programming during the daytime can indicate several change of life events, from the birth of a new baby to retirement.

Corroboration with the type of programming being watched (which is, of course, first party data) can automatically ascertain which event has taken place and allow for the creation of segmentation as a result.

Managing Third-Party Data

When customers’ information, collected by a certain organization is then shared with other organizations for commercial purposes, it is then considered as third party usage data.

While its use is not explicitly prohibited by the GDPR and other legislation, its effectiveness has become increasingly limited as it has to meet with strong legislative safeguards. In practice, this has led to a decline in its usage, as there are problems in verifying compliance all the way through the chain.

It is also both expensive to acquire and often comes with question marks over its reliability. As a result, 78% of European marketers and 76% of US companies expect third party usage to decline further[8].

Luckily, as a TV operator or broadcaster, you do not need to use third party data as you already have access to plentiful, valuable first party data of your own to allow for effective monetization of your TV business, without having to rely on third party data provided to you by others. Advanced TV advertising solutions, such as VO’s Targeted TV Advertising, will allow you to understand, assess – and make the most of the data you already have in your possession.

Most broadcasters and operators already have access to enough first party data to start their own targeted advertising services right now.

By choosing the right TA solution, first party data can be further augmented in several powerful ways:

Intelligent-Analysis

By choosing the right TA solution, first party data can be further augmented in several powerful ways:

Second-Party-Data

Use of second party data. This is essentially first party data provided by a partner organization such as a brand regarding their own users and customer base. For instance, a local car dealership can provide you with first party data regarding its clients to help further refine the targeting of a campaign.

AI analysis

AI analysis of data sets to provide additional segmentation by extrapolation.

Data-Analysis

This last option is particularly powerful and uses the pattern recognition capabilities of artificial intelligence to process large amounts of data and detect significant life events.

As a simple illustration, a sudden shift in an individual household’s demand for programming during the daytime can indicate several change of life events, from a new birth to retirement. Corroboration with the type of programming being watched (which is, of course, first party data) can automatically ascertain which event has taken place and create segmentation as a result.

Providing AVOD Control for Broadcasters

Control

VO Targeted TV Advertising fully supports the IAB’s Video Multiple Ad Playlist (VMAP) specification. This removes any potential downstream issues once a library has been repurposed for AVOD purposes, and allows content owners to maintain greater control over their inventory and thus maximum flexibility over their pricing.

Video-Player

VMAP is an XML template that content owners can use to describe the structure for ad inventory insertion in circumstances where they do not necessarily control the video player or the content distribution outlet, such as in aggregated services. Effectively it enables them to associate the rights for both content and advertising together, giving them exact control over ad inventory structure via a single platform, no matter what the eventual destination.

add-new

By using VMAP, VO Targeted TV Advertising not only assures content owners that they retain control of their inventory in an AVOD setting, but also that they can continue to slot in and add new advertising as new campaigns are actioned. This ensures that their AVOD offerings are as up to date and current as the rest of their output and can also be included in overall inventory for cross-service campaigns.

Providing AVOD Control for Broadcasters

Linear ad insertion standards

In a linear broadcast ecosystem, the ad server needs to know where to insert the ads within the broadcast programs. This is done by placing markers at appropriate points within the signal. There are currently three main technologies used to accomplish this: SCTE 35, HbbTV-TA, and DVB-TA.

While they are all detailed below, it is important to note that VO’s advertising solutions support all three technologies. It is important that broadcasters or operators use a standard, but not which one. For example, France and Belgium implement SCTE 35 successfully in different specs. As long as broadcasters are consistent in the ad replacement signaling, then frame-accurate replacement is possible.

SCTE 35

SCTE 35

Defines the in-stream signaling of ad breaks or other related events such as the start of a program, regional blackouts and so on in a frame-accurate manner. This is typically used in conjunction with SCTE 30, which defines a digital program insertion splicing API between a real-time splicer and an ad server. This SCTE35/30 ecosystem has been adapted to support targeted advertising.

HbbTV-TA

HbbTV-TA

While the base HbbTV 1.5 specification supported targeted advertising, it was not considered comprehensive enough to sustain growth. Developed alongside the DVB, Hbb-TA is complementary to DVB-TA (see below) and was the first open specification released aimed at supporting targeted advertising for live broadcast TV. It aims to bring an end to fragmentation in the market, which has been a particular problem in the European market and a significant brake on growth.

DVB-TA

DVB-TA

Created by the DVB Project, DVB-TA (the TA standards for Targeted Advertising) defines a technical framework able to offer dynamic ad substitution on broadcast networks. It builds on the VAST (Video Ad Serving Template) developed by the IAB which uses a XML schema to transfer important metadata about an ad from the ad server to a video player. It is split into two parts. Part 1 covers ad server integration and what occurs when an ad trigger is received; part 2 governs how the triggers are conveyed to TV sets to perform the ad replacement.

Conclusion: The Future of TV Advertising

As the declining use of third party cookies blunts the effectiveness of digital advertising recently, advertisers are turning their gaze to television to provide them with continued access to the targeting capabilities and profile-level segmentation they have become used to practising online.

This is happening both at scale and at a local level, as big brands look to engage with international audiences, and local businesses seek to take advantage of new cost models that lower barriers to entry.

And while technological developments in the video industry as a whole are accelerating, the ad tech stack is perhaps evolving even faster.

That’s why you need a comprehensive advertising solution that will allow you to meet with the increasingly compexed demands of advertisers in the simplest and safest way possible.

VO’s Targeted TV Advertising solution enables you to hook quickly & easily into the workflows in the ad tech ecosystem at the relevant points, without forcing you to upskill, incur substantial expense, or manage complex integrations - all of which would be required if you opted to engage directly with the rapidly evolving system of ad tech.

Supporting all technologies and formats, VO’s solution uses AI analysis of usage flows and consumption patterns, as well as a pioneered dynamic segmentation model based on AI and ML to continually optimize performance and ensure highly effective advertising, empowering you to deliver superior user experiences, while maximizing your service monetization, and boosting your ROI.

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Appendix:
A brief introduction to ad-tech

Advertising technology, or ad-tech as it is universally known, has evolved rapidly over recent years to create an interconnected ecosystem where real-time trades are possible. At its simplest, it creates a direct line between advertisers and publishers (who, in this case, are broadcasters and operators) and has introduced new technologies, measurement capabilities, and performance optimization into traditional advertising. This has taken the form of demand-side platforms, ad exchanges, ad networks, supply-side platforms, and ad servers.

Broadcasters and operators can now enter into the market without having to be involved with the overall operation of the ecosystem. Nor do they require detailed knowledge of its operation.

Our advanced TV advertising solutions provide seamless integration into the ecosystem, enabling the free flow of information and data without the TV operators / broadcasters having to engage with the entire system.

Ad-Server
Demand-Side-Platform

Demand-Side Platform

A Demand-Side Platform (DSP) is used by advertisers to buy ad impressions automatically. It allows them to bid on inventory of publishing opportunities from a range of different media owners at the same time, removing the need for conducting multiple negotiations with each publisher and thus increasing efficiency and decreasing costs.

Ad Exchange

Ad Exchange

An ad exchange is essentially a digital marketplace where advertisers and media owners buy and sell impressions. This can take place via real-time auctions where media owners offer publishing space inventory and advertisers look for impressions that match their campaign objectives. DSPs or similar tech can be used on ad exchanges to optimize advertisers’ purchases. Ad networks perform the same task but offer value add services by aggregating impressions from more media owners, then taking their cut for supplying the service.

Supply-Side-Platform

Supply-Side Platform

A Supply-Side Platform (SSP) is the functional opposite of the DSP and is used by media owners to manage their ad inventory and sell impressions programmatically. They enable media owners to connect their inventory to multiple ad exchanges, DSPs, and exchanges at the same time, maximizing the number of potential buyers and boosting competition, with a consequent potential increase in revenue.

Ad Server

Ad Server

Finally, once an ad impression has been sold to a media owner, the ad server ensures the right ad is played for the right target consumer. This has to function reliably across platforms and provide a high level of transparency to ensure all involved parties have the knowledge to make future decisions.