Who Drives Ad Innovation In The UK?

By Nigel Walley – @nwalleySept 2011 - New NW BW Head & Shoulders (thumbnail)

We are in an interesting period with television and video advertising innovation in the UK. There is a lot of it about, but not always in the right places and it is not being delivered with enough consistency for us to claim that we are an advanced ad market. As part of our FutureMedia analysis, we have been picking TV advertising apart to assess the state of innovation.

From a tech point of view, broadcast TV has traditionally been a ‘low innovation’ zone. Apart from a brief flirtation with red button interactivity in the last decade, there has been little broadcast ad innovation to talk of, and platform based VOD has yet to materialise properly.  Most innovation around video formats has come therefore from the web elements of the industry.

From this perspective, the UK’s advertising R&D landscape for TV looks healthy. On top of the new formats and functionality offered by YouTube and the other international ‘video majors’, the big commercial broadcasters – ITV, Channel4 etc – are all experimenting with new interactive and addressable formats for video on demand on their web players. There are also various initiatives experimenting with inserting addressable advertising into streamed IP versions of linear channels.

The problem is that the web players are still a tiny fraction of any broadcasters’ total TV distribution – typically 1-2% of total consumption. This means that the total volume of inventory around which to innovate is relatively small.  The data that they have to play with is ‘partial’ to say the least, compared to the amount of household and viewer data available to a platform operator.  So broadcaster web advertising is a great innovation story with limited impact. The difficulty for the broadcasters is that they don’t have the ability to innovate around ads in their key distribution mechanism – broadcast – because they are not in control of the means of display, the set-top box or smart TV screen. You need control of the set top box to do anything clever with broadcast advertising.

So broadcast channels are reliant on the innovation programmes within the major TV platform operators who run the boxes, to deliver a new wave of addressable, interactive advertising on mainstream TV. This is where the UK starts to look problematic.

A much talked about objective in future TV advertising is to be able to build a campaign narrative with a consumer. This utopian outcome would allow an advertiser to target different types of households with different ad campaigns, based on a detailed data understanding of the household profile, cutting across general channel audience profiles. Once a household has seen one ad a couple of times, the advertiser should be able to deliver a follow-on ad, or allow the viewer to interact with more detailed content on second screen devices. In this world, broadcast use could be correlated to VOD use, and shared family TV viewing balanced with individual video viewing. It is a utopian view that allows agencies to mix ‘pre-planned’ media with dynamic, real-time* activity and to mix ‘audience’ and ‘user’ targeting.

All of this would need the broadcaster and platform to work hand in hand to create these new advertising opportunities. However, of the four major pay TV platforms distributing in the UK, only BSkyB have a live ‘ad innovation’ programme – AdSmart. Virgin have, until recently been working on targeted VOD but have recently broken up their team and the market is now waiting for news of how it is to be replaced with the new relationships they have in place. BT and TalkTalk have no advertising or innovative data programme in place at all, hampered by the separation between their customer data groups and the software development that takes place within the very separate Youview organisation.

Then there are the free-to-air boxes. Even though they have added internet connectivity to their boxes, the free-to-air platforms, Freeview, Freesat etc by definition don’t capture the kind of subscriber data needed to deliver innovative new ad formats and functionality. Nor do they have the ability to deliver ad-insertion into linear or any other STB based innovation. While there is advertising being delivered into the broadcaster VOD players on these platforms, it is being sold as part of the general VOD ad sales by the online teams. For the most part there is no reference to, or reporting of the fact that it is being viewed on a main TV, within an audience not a user context. It doesn’t really exist as a separate TV based format.

The vibrancy of the free-to-air market has always been seen as a great strengths of the UK television market. However, in terms of ad innovation it is becoming a problem, particularly when coupled with the inability of three of the four pay TV platforms to implement a future advertising strategy. If major broadcasters are to get involved in innovation, around linear in particular, they need to be able to offer campaigns that work on as many boxes as possible, with as much consistency of targeting and evaluation data as possible.

The concern about the free-to-air boxes is that their lack of innovation will make them vulnerable to the predation of the ‘programmatic’ ad organisations. The addition of a broadband connection in most Freeview/Freesat STBs and Smart Screens has allowed both on-demand and linear streamed IP channels to be delivered alongside the free-to-air channels, which is great. However, the question of what else travels up the pipe into the STB along-side the content is getting interesting. It is highly likely that the first dynamically inserted, addressable advert served into a linear channel on a Freeview box will be on an IP-based channel and will be served by an agency group not a channel.

But this will deliver innovation outside the control of the TV industry, rather than being delivered by the TV industry. We need the whole TV industry to move towards innovation in a co-ordinated manner to fend off the unwanted attention of the predatory tech groups. By doing this, and co-ordinating to create scale, the TV industry can control its own destiny.   We can’t rely on the broadcaster web sites to drive innovation and we can’t rely on Sky to be the only innovator around STBs. AdSmart, on its own, does not a market make!

* No – we don’t know what ‘real-time’ means either.

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