Digital TV must overcome its contradictions if it wants to attract more ad dollars

Digital TV is becoming ever more popular among consumers, yet it lags behind in advertisers’ plans. Yet as the siloes between digital and TV break down, it is an area brands should find worth exploring.

smart tv connected tvIf you talk to a young person about linear TV, they may snigger at the idea of checking listings in a print newspaper, writing out a schedule or remembering to tune in at exactly the right time. They might think it baffling that revellers used to get home from the pub and ‘see what’s on’.

These are the same youngsters who post on social media about spending half an hour finding something to watch on Netflix and then ignoring the show to stare at their phones. Don’t worry, this isn’t going to be a wistful article about the value of serendipity, but it is about contradictions; namely those in over-the-top (OTT) and video-on-demand (VoD) advertising.

Ad growth lags user growth

OTT services (which viewers access over the internet, sometimes via their TV sets) have seen rapid growth.

It’s almost a year since Ofcom revealed there were more UK subscriptions to Netflix, Amazon and Now TV than to ‘traditional’ pay TV services such as Sky, and that pay TV revenues were in decline for the first time. In 2018, the Video Advertising Bureau said 71% of internet users in the US use an OTT service at least once a month.

There’s obviously still some inertia, though, from advertisers. In an oft-quoted Magna Global stat (which I regrettably couldn’t find a source for), OTT apparently accounts for 29% of TV viewing but only 3% of TV ad budgets.

Netflix isn’t ad supported, so that partly explains this disparity, but it’s still a striking stat. Other estimates have OTT ad spend in the US at roughly 4% of linear TV ad spend. The Winterberry Group predicts that growth in US OTT ad spend will drop from 42.2% in 2018 to 20% in 2019.

What’s the reason for this inertia, given OTT seems to be maturing?

Measurement is one difficulty often cited, with no consistent set of metrics across OTT services (which play across a range of devices that can’t all be cookied), contrasting with linear TV and its well-established Nielsen ratings. That’s a puzzling one though: isn’t digital meant to bring with it accurate targeting and tracking?

Recent developments in the market certainly seem to be all about targeting in OTT, as a counterpoint to the sheer scale of linear TV. Adobe now allows customers using its Audience Manager and Advertising Cloud products to target first-party audience segments on Roku, the OTT platform.

Channel 4 is also set to allow advertisers to do the same on its All4 VoD platform.

And Amazon is pitching its data and OTT video inventory (chiefly across Fire TV), with Business Insider revealing a pitch deck that references a beta ad programme called ‘ad-attributed search’ that measures if an ad results in more searches on the Amazon website.

Soon enough, the silos of digital and TV that exist among clients and agencies will break down, and hopefully the so-called golden age of TV will also see a golden age of advertising, both creative and relevant.

Is this a tantalising glimpse of OTT platforms soon offering the best of all worlds?

I can certainly admit to binge-watching The Shield on All4 recently and getting a little curious about just why I was being shown ads for over-the-counter Viagra and robotic lawnmowers.

The familiar feeling of being personally targeted on a computer may well become much more common on your TV set, though it’s worth adding that however much OTT trumpets its ability to deliver one-to-one advertising, internet TV is still TV, and therefore most often a one-to-household device.

Sick of the same ads?

Frequency caps seem to be another contentious issue in OTT which, as a consumer not an ad man, I find fairly surprising. Though I’m sure there’s research out there on this subject, frequency capping seems to me to be less sagacious now than in previous decades.

Speaking from personal experience again (always dangerous, I know), I have been shown a particular Strongbow ad hundreds of times when bingeing on All4 (The Shield, worth another mention) and it has become a bit of an in-joke between me and my wife.

We’ve got an advertising form of Stockholm syndrome; we enjoy the ad more with every view and drink cider with every meal (I’m half serious). In a world of ever more adverts and ever quicker product turnover, I see frequency as effective, if expensive.

Pricing is another issue in OTT. Frequency caps are said to be one of the reasons that lots of OTT inventory is unsold, but it has presumably also got something to do with price, with OTT being fairly punchy (to prevent broadcasters’ linear TV advertisers decamping to digital).

Though there are lots of issues that seem to make OTT advertising complex (this is digital advertising, after all), the power of advertising on the TV set in the heart of the home should surely be all that advertisers require to be convinced. This is the only advertising, in my opinion, that people will willingly engage with.

With OTT exploding, both advertising and branded content are worth exploring now, before the stakes get even higher.

Tellingly, YouTube sees the writing on the wall. Digiday reported in March that the company has made TV a central part of its ad pitch – telling advertisers that people spend more than 200 million hours watching YouTube on TV sets, and also separating out TV inventory.

Soon enough, the silos of digital and TV that exist among clients and in agencies will break down, and hopefully the so-called golden age of TV will also see a golden age of advertising, both creative and relevant.