The rise of Targeted Advertising (TA) in 2023, with solutions like Sigma’s Targeted TV Advertising, offers a ray of hope amid the challenges faced by broadcasters and operators. While the industry witnessed record-high viewership during lockdowns, the revenue from advertising, a crucial part of the sector, took a hit.

Nevertheless, there’s a sense of optimism in the industry. TA solutions, which deliver ads tailored to consumers’ individual interests, even down to the household or individual level, are gaining mainstream acceptance. While TA’s share of the overall ad spending remains relatively small, its growth trajectory continues upward, despite the impact of the COVID-19 pandemic. Notably, eMarketer predicts that Connected TV (CTV) ad spending in the US will surge from $8.11 billion in the previous year to $18.29 billion by 2024.

2023 Vision — Targeted Ads come of age

While the United States is undeniably a significant hub for the growth of Targeted Advertising (TA), recent months have witnessed a surge in TA activity on a global scale, encompassing Europe, APAC, Latin America, and various other regions.

In the final months of 2023, Europe alone witnessed a flurry of developments: UK commercial broadcaster ITV unveiled its Planet V platform, FranceTV Publicité and Orange launched pioneering linear campaigns in France using TA, Molotov, a French OTT live and catch-up TV platform, introduced the new AVOD service Mango, and Movistar rolled out a TA service on channel #0 in Spain, with plans for expansion in 2021. Notably, similar initiatives were initiated by Mediaset in Italy, Proximus in Belgium, RTL in Germany, and a host of other projects globally.

Broadcasters across the world are either introducing standalone solutions or forging strategic alliances, such as the collaboration between rival Pay-TV companies Sky and Virgin in the UK. Simultaneously, ad tech companies are experiencing a comparable surge in activity. Samsung, for instance, made its Connected TV (CTV) inventory programmatically available through SpotX ahead of schedule in response to increased viewership during the Covid pandemic. LG, on the other hand, invested $80 million to acquire a controlling stake in TV ad data firm Alphonso, with the objective of establishing a first-screen, cross-device advertising platform complete with integrated analytics.

As previously mentioned, the interest in Ad-Supported Video on Demand (AVOD) has seen a substantial upswing as audiences seek fresh content without incurring premium costs. Projections from Digital TV Research indicate that the AVOD market is set to grow by 120% from 2019 to 2025, jumping from $24.3 billion to $53.5 billion, and contributing 32% of total OTT revenues.

With an ever-increasing number of viewers turning to Connected TVs (CTV), exceeding 50% in select countries, and a surging demand for AVOD-driven content, the structural dynamics of the broadcast industry are shifting towards streaming as the dominant mode of consumption. Consequently, advertisers are increasingly keen on replicating the successes they’ve achieved on digital platforms within the realm of television.

SpotX, a prominent player in the evolving ad tech industry, highlights in its Global Video Advertising Trends 2021 survey that ad spend is aligning with evolving consumer behavior, and it’s gravitating toward OTT and CTV at a pace faster than previously anticipated.

The challenge of complexity

The rich opportunity of Targeted Advertising
The rich opportunity of Targeted Advertising

One of the limitations that operators face when looking to enter the market, however, is complexity. A research study in 2019 discovered that marketers have an average of 28 different technologies in their ad tech stack, with 70% believing that number would grow over the following three years due to the complexity of the advertising ecosystem. It would be hard to argue they are wrong.

Even narrowing the discussion down to the television space, there are a large number of competing technologies, standards, and solutions that operators can choose from. In most territories, there isn’t a clear market leader and the choices become complex. 

An illustration of the difficulties here is offered by the efforts at industry standardization with at least one high profile project moving into a key phase. The DVB and HbbTV have been working together to build the forthcoming DVB-TA specification, and indeed we have been a part of these efforts at VO (you can see our recent presentation at the DVB Demos day in November last year here).

Currently, work on the DVB-TA specifications ecosystem continues within the DVB Project. This includes the implementation of SoME (Signalling on Media Essence), where audio and video watermarking are used to signal targeted advertising replacement opportunities present in supported legacy STBs via a broadband connection.

The operator opportunity in the ATV market

If that complexity can be addressed, and it can, targeted advertising provides multiple new revenue opportunities. The headline is of course the possibility of ad replacement in linear primetime, which allows operators to increase the number of ad slots without increasing ad load; charge premium rates for them; and decrease churn as viewers have been shown to respond more favorably to targeted ads. 

But there are other significant opportunities as well, especially when you consider that, with their first-party data, operators have everything they need to start making money now.

Additional opportunities include:

  • Leverage the UI – Operators can increase inventory still further by serving ads within the UI of their apps. This can be further explored when the user is actively interacting with the UI, such as when browsing content.
  • Catch-up content – As we wrote in Time is Money: the hidden revenue potential of time-shifted viewing, operators can use TA technology to serve ads attached to catch-up content. With more viewers watching more minutes of catch-u every year this is a powerful proposition
  • Self-promotion – With many companies in the OTT sector offering triple-play services and more, TA provides a valuable route to increasing the efficiency of their own promotions, both for additional services and for specific content
  • Freemium to premium- Operators can offer free (or almost free) content access, backing it up with significant ad revenues, to increase their market penetration and OTT migration, and create leads that will become premium customers in the future

It’s also worth pointing out that there are solutions on the market, such as ours, that do not require the latest equipment to be installed in viewer’s homes to make this happen. 50% or more of viewers worldwide are watching television on legacy devices that do not necessarily support OTT services, and this is an audience that needs to be reached for maximum benefit.

Targeted advertising works both with and without inventory. Operators with existing inventory can offer creative monetization options enabling them to optimize between their different monetization channels and on top of that use AI-based insights to increase the efficiency and scope of their segmentation. This boosts reach and revenues as a result. For operators without inventory, an off-the-shelf smart infrastructure enables them to connect with various TV channels and support multi-ad servers. This allows them to leverage their existing first-party usage data to offer attractive segmentation to advertisers, while also supporting and measuring ad-insertion.

And with Sigma SSAI, in particular, providing a rich opportunity for the launch of new services to capture audiences hungry for increasing amounts of content, it seems there is no better time to adopt a technology that satisfies both advertisers and audiences alike.