Global spend on TV advertising is forecast to rise from 173 billion US dollars in 2018 to 192 billion US dollars in 2022, according to Statistica. Global spend on TV advertising continues to rise. Using the latest dynamic targeted advertising solutions, channel providers can win a bigger share of advertising budgets. Advertising becomes part of the personalized experience, for greater customer engagement and loyalty.
This Decision Guide gives a quick and easy overview of the latest revenue-driving opportunities and developments in advanced targeted advertising, including Dynamic Ad Insertion (DAI). Find out how they can help you grow profits for your business model. This Decision Guide sets out clearly the key essentials of advanced targeted advertising.
Dynamic and targeted advertising insertion represents the greatest new revenue opportunities for TV providers. Global spend on TV advertising is expected to rise from 173 billion US dollars in 2018 to 192 billion US dollars in 2022, according to Statistica.
By adopting dynamic targeted advertising solutions, TV providers have the tools they need to compete for a larger share of advertising budgets and improve viewer engagement.
The personalization trend is driving average user revenues
With thousands of TV channels for viewers to choose from, in addition to other online media such as gaming and social video networks, broadcasters and pay-TV providers face increasing competition for audiences and revenues. Many providers are following the lead of OTT players towards more personalized content, in order to drive up average revenues per user (ARPU). This overreaching trend towards greater personalization includes more interaction, along with targeted content and advertising based on criteria including location, demographics, viewing preferences and purchasing history.
Targeted ads mean more relevance for customers and higher ROI for the advertisers.
Smarter advertising means higher revenues
To reduce viewer opt-out during programming, half of all mid-roll ad breaks in premium video now contain less than five ads (according to FreeWheel’s Video Marketing Report, Q4 2018). The revenues from this reduced number of ad spots need to be optimized.
The latest advances in cloud-based video processing, big data, and behavioral analytics are enabling TV providers to offer advertisers more targeted audience segments.
For advertisers, this smarter, personalized advertising increases the likelihood of customer engagement and conversion to actual sales. It also prevents wasting advertising spend on those who are unlikely to be interested in a particular product or service.
For TV providers, smarter advertising means they can charge higher cost per mille (CPM) rates – the measurement used in TV advertising, where the advertiser pays an agreed rate per every 1,000 views of a TV ad.
Advanced advertising business model for broadcasters
Advertising already represents a major portion of broadcasters’ revenues, as their larger audiences make them more attractive for mass-market advertising of high volume goods and services. Nevertheless, advanced targeted advertising still brings broadcasters the opportunity to augment advertising earnings, by giving advertisers the possibility to target geo-localized audiences. These localized ads give broadcasters the possibility to earn as much as ten times more than the usual CPM rates.
Scalable ad insertion solutions, capable of serving numerous niche audiences simultaneously, as well as large peak time audiences viewing live events, are crucial to the success of the broadcaster advertising business model.
Advanced advertising business model for pay-TV providers
Revenues for pay-TV providers are traditionally based on user subscription fees – but these fees are being subjected to increasing price pressure. Advertising, therefore, represents a relatively untapped opportunity for driving ancillary revenues, eventually giving them the possibility to reduce subscription rates and increase their competitiveness. This type of business model is used in the DirecTV NOW OTT service.
Targeted, rather than “one size fits all”, advertising is better suited to their paying customers, as it is perceived as less disruptive. It also opens up TV advertising possibilities to smaller advertisers.
Advertising that strengthens customer engagement
To retain customer loyalty and reduce churn, TV providers need to continually innovate in new ways to engage with them.
With targeted advertisements that are more relevant to viewer preferences, their perception of ‘ad disruption’ as part of the overall viewing experience is improved.
The smooth viewing experience also means that ads should be of a viewing quality consistent with the video content being watched. Solutions that can process, package and deliver advertising and video content together, into the same video stream, help to keep quality consistent. This assurance of quality helps to further drive up CPM rates for ad slots.
Link advertising with themed channels
With cloud-based playout and media processing solutions, content owners can leverage the value of their catalogs of content by creating thematic TV channels. Advertising that links into the theme of the channel being viewed is perceived as less disruptive, giving the possibility to insert extra ads slots per hour and eventually gain higher CPM rates.
Dynamic ad insertion
Advertising messages have more impact when they are relevant to the content being viewed right at that moment.
To swap advertising in a video stream instantly, the media platform needs to customize the playlist (known as manifest manipulation) in real-time.
Dynamic advertising insertion means that ads planned for a specific time slot can be switched instantly, for greater relevance. This increases the likelihood of customer engagement with the ad and their subsequent transition to buying.
Types of profiling and localized ads
Advertising can be targeted on many levels: from geolocalization, to deeper targeting based on socio-demographics and behavioral profiles.
At its simplest level, targeted advertising uses data (such as zip codes and IP addresses) to create groups of viewers based on their geographic location. A similar process is used to manage blackout – for content and advertising not to be shown in certain regions or countries.
Deeper targeting and purchase behavior prediction
More granular targeting can be achieved by leveraging big data analytics which uses information from a variety of sources (such as browsing and purchasing history), in order to classify consumers into socio-demographic groups.
A further layer, based on behavioral variables, can be added, by collating groups of viewers into broad personality groups and their respective triggers for purchasing. Advertising communications can be fine-tuned to communicate with – and appeal to – these specific personality traits.
Selecting ads for insertion
Each time an advertising slot is due, the media processing platform sends out an ad request, to an advertising decision server company (such as Freewheel). This ad calls contains data such as where the user is located, what is being watched and the viewing device being used.
The advertising decision platform then selects from a range of ads that fit with the TV provider’s guidelines. These guidelines ensure that ads used are in line with the channel’s brand image, particularly in the case of premium broadcasters.
Triggers for buying include the content that is being watched, recent buying activity and personality profiles.
Beat the ad-blockers
Ad-blocking software, traditionally located on viewing devices, has a negative impact on ad views and revenue models. The latest technological advances enable advertising and video content to be stitched together and processed into the same video stream. The result is that advertisements and content look the same to ad-blocking software, making it much more difficult to detect and block ads. This solution also guarantees a smooth transition and the same viewing quality for contents and ads.
Track ad viewing
Ad tracking systems are necessary to monitor how many times an ad is seen, which groups of users view the ad and what percentage of the ad is watched.
This information can be used to calculate CPM rates – and to analyze the efficiency of campaigns in real-time. The next advertising break can thus be adapted and changed immediately, as required. All ad tracking information can be fed back into the database for future analytics, to further improve the effectiveness of targeted advertising.
Open up to the new world of advertising opportunities
Digital video ads served by Freewheel saw ad views ramp-up between Q2 2017 and Q2 2018 – by 35% in the US and by 31% in Europe. The DAI market is expected to continue this upward trend. Cloud-based media processing solutions can leverage these market opportunities in one end-to-end seamless architecture, making deployments headache-free.
Harmonic’s fully-scalable advanced targeted advertising solutions are based on its VOS®360 cloud-native media processing platform. Features include creation of ad slots, ad ingest, ad stitching, playout, encoding, blackout management, transcoding, ad impression reporting and a new manifest manipulator component to enable the delivery of custom ads to each viewer. The solution has been designed to scale up when the platform has to deal with hundreds of thousand simultaneous ad insertions.