We’ve been hearing for a while now that Connected TV (CTV) is the next big thing, and that 2018 is the year it will hit the mainstream. Amidst all the excitement and anticipation however, it’s worth acknowledging that there remain several factors inhibiting its growth in the UK. There are actions we can take against each to achieve real progress towards the goal of widespread CTV penetration in 2018. We’re in a better position now than ever before.
Demand is Strong
If CTV hasn’t reached its potential in the UK, it isn’t because viewers don’t want it. The results of Telaria’s proprietary 2017 Global CTV study, ’TV in Transition’, showed us that UK viewers are redefining what it means to watch TV. More than 57% signified that streaming content via a connected TV should be defined as simply ’watching TV’. Millennials show a very strong affinity for subscription-based video on-demand (SVOD) with a staggering 89% saying they would miss tuning into Netflix if it was taken away tomorrow. From observing my own children’s viewing habits, I know this will apply even more to Generation Z and beyond. Other than the occasional treat of watching Match of Day with me on Saturday evening, my kids (aged 7–13), simply do not watch linear TV anymore. Essentially all their viewing is streamed via on-demand services.
The US Market Predicts UK Potential
Consumer demand alone is not the only reason for all the hype. Globally, the TV market has changed rapidly, particularly in APAC and North America. In the U.S., both SVOD and advertiser-supported video on-demand (AVOD) have seen big increases in users over the last 24 months, in part due to the volume of original content being created. In 2017, Netflix spent $6bn on original content and this is predicted to skyrocket to $13bn in 2018. There is a corresponding proliferation in AVOD services such as Pluto TV, Sling TV, and Crackle in the US. Such services screen their own original content and also license live sport, TV, and movies from cable providers. As viewership, content, and service options grow, the opportunity increases. It’s a virtuous cycle, and seeing how it’s played out in other markets gives us great insight into how we can fuel that same cycle here.
The global trends are clear, but it’s important to note that each market is unique and the UK certainly fits that label. As we move towards a future of connected television, the key areas where we must make progress here in the UK are the need for greater supply, more AVOD services and a reflection that programmatic capabilities and technology must keep up with the way consumers are increasingly watching television.
Boost UK CTV Supply
A key question in the UK is why supply has not grown alongside such strong demand. Part of the story may have to do with unique industry dynamics. While the US CTV/OTT market is a vast web of frenemies working across pipes with complex licensing deals, in the UK most cable providers and broadcasters do not allow other distributors to leverage their original content. For example, Channel 4 programmes are only available to watch on the broadcaster’s own catch-up service, thus content available to license is limited. What’s more, the content sold by broadcasters such as C4 and ITV is in high demand and usually sold out by in-house sales teams via legacy deals with specific advertisers and agencies. There is a massive opportunity for any industry player who figures out how to make more content available in inventive ways, perhaps through innovative licensing deals. What’s more, studios have clear motivation to make a serious investment in original content. It has proven to be a strong stimulus in other markets, and where good content goes, eyeballs and ad revenues follow.
More AVOD Please
Once supply really takes off, this creates incentives for TV providers to innovate. Currently we have an extremely limited number of AVOD and SVOD services available in the UK. As an industry, we must encourage more AVOD services to expand to the UK, especially those with their own original content or global license rights for programming. Even better than expansion would be a home-grown AVOD service purpose-built for our highly-regulated market. This brings me to my next point.
Let’s Evolve Programmatic Capabilities
The real-time nature of programmatic advertising brings challenges along with opportunity. Strict programming procedures and regulation mean that TV ads must be approved by Clearcast and pass stringent advertising guidelines. These infrastructure hurdles make it more difficult to transact via an auction environment which go some way to illuminating the relatively slow adoption of programmatic within traditional UK broadcast companies. In one sense, we’re well-positioned, with the high broadband penetration and the uptake of smart TVs (100% of new TVs sold in the UK have smart capabilities). We must make the development of innovative technical solutions a priority if we want the benefits of CTV to really manifest via programmatic advertising.
It’s no easy task, to overhaul a legacy industry with such strong regulation. But when we consider viewers’ love for CTV as well as the significant benefits for publishers and advertisers, we have all the motivation we need to solve these challenges. It goes to the heart of effectiveness: the data we are able to harvest from CTV is very rich. We can track almost anything from viewability to time spent, to brand awareness and household frequency capping or more. This provides transparency to advertisers and allows them to effectively measure ROI on their ad spend. On top of this, fraud is almost non-existent and brand safety is vastly improved in comparison to display advertising.
With CTV, we’re simply bringing together the best of digital and linear TV worlds, and that’s a truly revolutionary opportunity. It feels like we’re close to a tipping point, and I believe that over the next 18 months, there will be a steep growth (and learning) curve in CTV advertising in the UK.
Andy Morley, Managing Director, EMEA, Telaria