Inside ITV’s bid for addressable TV ad budgets
ITV is going all in on addressable advertising with a plan to let advertisers use ad tech to buy its VOD content before the end of the year. Investing in addressable advertising is crucial to sustaining ad revenues — Sky’s AdSmart, for example, has brought a long list of new advertisers into TV, and the future of media trading is in addressable and self-serve platforms.
The broadcaster is working with partners to develop the offer after a deal with ad tech firm Sorensen Media failed to materialize in 2018. Discussions are ongoing, said ITV’s CEO, Carolyn McCall, on the company’s earnings call today (Feb. 27), as the broadcaster looks to build a programmatic team capable of managing the yields from auctions. Managing those deals makes more commercial sense to McCall despite the hefty £40 million ($53 million) outlay if it means not having to sell addressable ads through Sky’s own Adsmart and subsequently give away too much commission.
“We’ve had numerous conversations with Adsmart, but there’s something quite weird about paying so much money not just for tech costs but also for advertising,” said McCall. “We’re a market leader with around 50 percent of the linear market.”
That’s too much money to give away to frenemy like Sky when there’s so much upside around its VOD business ITV Hub, which has 28 million registered users. At the end of 2017, only 10 percent of the VOD inventory was addressable, whereas now it’s 75 percent. More inventory meant ITV earned 36 percent more money from VOD ads in 2018 than it did the previous year, according to the company’s latest earnings. While ITV doesn’t know for sure how much money its rivals make from VOD, the broadcaster estimated its share of the market is similar to its share of linear, which is around 50 percent.
“We have to prioritize VOD over linear for programmatic,” said McCall. “We’re ambivalent about all the VOD inventory in the U.K. because some of it is extremely low quality and it’s not something we would compete with. From a pricing point of view, we wouldn’t want to go anywhere near it. For us, we have a different definition of what VOD is for ITV.”
VOD is pricey but safe and high-quality. And while supply can be tight, ITV plans to change that through the growth of impressions around its VOD player. A large part of those impressions will come from smart TVs and connected TVs, where ITV’s average monthly active users grew 64 percent in 2018.
“Linear viewing is moving to an on-demand world and broadcasters like ITV are starting to build larger propositions around VOD,” said Simon Bevan, chief investment officer at Havas Media Group. “In the early days of VOD, a lot of the audience was online and mobile devices, whereas now more of that viewing is happening on connected TVs. That’s where the explosion in viewing is headed.”
It leaves the broadcaster better placed to chase those advertisers moving more money into addressable TV, particularly when its share of younger VOD viewers is rising. Eight in 10 people (80 percent) aged between 16 and 34 years old in the U.K. are registered on the ITV Hub, for example.
“The key thing for big brand advertisers is they are starting to question the brand-safety issues around YouTube and Facebook,” said Kelly Williams, managing director for commercial at ITV. “From the conversations we’re having, it feels like there’s a slight tipping point coming because Facebook’s brand is becoming relatively toxic. This is certainly true for the big brand advertisers that have invested so much in the equity of their brands and are now nervous about using social media.”
The urgency behind ITV’s addressable business is reflective of its attempt to pivot its ad business around total viewing and away from linear. Total viewing, which covers offline and online, was up 3 percent for the broadcaster in 2018, per its latest results. Interestingly, ITV’s share of viewing 16-to 34-year-olds grew by 2 percent over the same period. ITV 2 is the biggest audience for that demographic in the U.K., said McCall, who claimed it had beaten Channel 4 ‘hands down.” It shows how ITV is growing the total number of minutes viewed and subsequently offsetting the overall linear TV viewing declines.
“As long as we’re still getting viewers into our universe, then that’s good,” said McCall. “ We’re focused on total viewing, but we’re mindful of the advertising money that’s tied up in linear and VOD. We’ll manage that carefully.”
ITV isn’t planning to use its ad tech as a way to circumvent agencies and go directly to advertisers as some observers had previously anticipated. In fact, the broadcaster said the offer is being built primarily with agencies in mind. As McCall explained: “What we’re doing with the tech we’re developing is enabling advertisers, particularly the big group agencies to be able to buy ads on ITV Hub in a very targeted way. That will make it very effective and very cost efficient. It’s a big step for us and a big step for them.”
ITV also has eyes on subscriptions. The broadcaster, alongside BBC, will debut the subscription service Britbox in the U.K. before the end of the year after launching it in the U.S. last March. Most of the content will consist of archive shows from both broadcasters alongside new shows especially commissioned for the service.
It remains to be seen, however, whether that content strategy will be enough to convince people to fork out for another subscription service even if evidence suggests the future of TV is à la carte. Four million households in the U.K. are likely to subscribe to a VOD service over the next three months, according to research commissioned by ITV. Two in 3 of those households already pay for another VOD service.
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