European Connected TV Initiative

The European Connected TV Initiative is exploring the potential of connected TV advertising in Europe. This major thought leadership project is sponsored by Google, Roku, Fincons and IPONWEB.

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CTV in Europe: Opportunities & Challenges - Part 1

by Jon Watts

18 January 2021 18:11pm

Launched in November 2020, the European Connected TV Initiative (ECTVI) is currently focused on exploring the opportunities presented by the growth and development of the connected TV advertising ecosystem in five major European markets: the UK, France, Germany, Italy and Holland. Working with Google, Roku, Fincons Group and IPONWEB and supported by our media partner The Drum, the ECTVI project team is facilitating a wide-ranging dialogue with industry participants and major trade bodies across the market, to assess the opportunities, explore potential barriers, and identify the practical steps that the industry could take to unlock the full potential of the CTV ecosystem in Europe.

Although the new initiative is in its early stages, we have already undertaken an extensive programme of research and analysis, engaging with a wide range of advertisers, agencies, broadcasters, pay-TV platforms, Smart TV manufacturers, and technology, data and measurement providers, to investigate the state of the market and to explores views and perspective on the opportunities and challenges ahead. Our research is uncovering evidence of an industry in transition, with wide variations, country by country, and significant uncertainties about the way forwards.

This article outlines the opportunities being created by this fast-growing ecosystem in the US market, while the situation in Europe is addressed in a second article.

The 2020s – TV’s connected decade?

In many respects, connected TVs (CTVs) are the locus for many of the most important debates about the future of media – debates about media measurement, planning and buying across TV and digital media, about the responsible use of data to support targeted advertising, about identity resolution, the role of programmatic buying and the future of the TV trading model, and about the relationships between TV platforms and media owners.

CTV platforms are scaling rapidly, in the US and in most major European TV markets, with around 51m TV sets sold in Europe in 2019 and around 44m in North America (Source: GfK). Almost all of these TVs offer some kind of connectivity, providing access not just to broadcast TV channels but also to a wide range of streaming services. As of July 2020, around 77% of US TV households (around 92.9m households) had an internet-connected TV, either via a smart TV or an internet-connected device, like games consoles or streaming media devices.

These big sales numbers matter, because it means that smart TV platforms are able to scale quickly, creating a large mass-market distribution platform for streaming services and supporting the rapid roll out of new advertising offerings and capabilities into the TV market. The leading smart TV platform providers in the US market – Samsung, Roku, LG, Panasonic, Sony, and Vizio – are generally in as many or more households than the largest pay-TV providers, although there is clearly a substantial overlap between smart TV and pay-TV households, and many smart TVs are being used as second or third sets, in larger households.

The mass market penetration of smart TVs has played a critical role in supporting the take-up of streaming services, in the US and Europe – including broadcaster video on demand (BVOD) services, YouTube, the SVOD players, and the FASTs (Free Ad-Supported TV services). In particular, the leading international SVODs (Netflix, Amazon Prime, Disney+) have leveraged their deep pockets and global (or near global) footprints to pay for prominent positions on smart TV interfaces, as well as investing heavily to promote selected titles, resulting in rapid growth, outpacing most domestic streaming services at present.

The foundations have been laid for a decade of change and disruption ahead. However, despite the rapid growth of CTVs on both continents, the US and European markets are developing in very different directions.

CTV developments in the US

In the US, the rapid growth of CTVs has supported the development of a dynamic, competitive CTV advertising ecosystem – but the development of this ecosystem has been supported by a number of other important characteristics, unique to the US market. The US is one of the largest, wealthiest and broadly contiguous TV markets in the world, allowing CTV platform operators and streaming services to scale quickly – unlike Europe, which consists of a multiple countries, each with its own distinctive TV market, language and culture. Scaling fast, across Europe, is challenging, and requires very high levels of investment, in content, marketing and distribution.

The large, addressable base of CTVs has allowed numerous FASTs, as well as other streaming services, to grow rapidly, with services like Pluto TV, Xumo, Philo, and Tubi available to millions of US TV viewers, alongside the CTV owned-and-operated channels. FAST content offerings vary widely, but most are licensing programmes, films, feeds and channels from studios and distributors, capitalising on the unique scale and quality of the US’s secondary market for film and TV content.

Another unique feature of the US market is the over-supply of TV inventory, often at very low prices, and the strong market tradition of granting inventory rights to TV platform operators, now including MVPDs, CTV manufacturers and streaming media platforms. As a result, a wide range of US businesses have access to TV inventory, coupled with the means and economic incentives to invest in advanced advertising.

These unique characteristics of the US connected TV market are stimulating the development of innovative new offerings and capabilities in a range of areas. As well as being a mass-market distribution platform for TV streaming services, CTVs are:

1. A large-scale source of viewing data, providing very granular insights into TV and video consumption and ad exposures, and supporting new forms of targeting and attribution. CTV data is being widely licensed across the market, supporting a diverse and innovative ecosystem of measurement, identity and attribution provider.

2. A platform for addressable, targeted TV and video advertising, with targeted ads inserted either server-side and delivered in streaming services, or client side, uploaded via broadband and stored on the CTV, using specifications developed by Project OAR (Open, Addressable, Ready). CTV data allows adverts to be targeted at certain kinds of viewer – for example, heavy Netflix viewers or light sports viewers – and can also be used to develop custom audience segments for targeting purposes, using various different datasets.

3. Stimulating the development of a new programmatic ecosystem for the TV market. Many of the newer TV streaming services, the FASTs, are selling their inventory programmatically through DSPs, and TV platform operators like Roku and Samsung are also building out their own DSPs, capitalising on growing volumes of CTV video inventory. Major media conglomerates like NBCUniversal and ViacomCBS are integrating CTV inventory into their own planning and buying tools, One Platform and EyeQ, respectively, and are also acquiring FASTs, in part because of their strong presence on CTV platforms – Comcast acquired Xumo in February 2020, ViacomCBS bought Pluto TV in January 2019.

4. A platform for advertising innovation and experimentation, supporting the development of new ad formats and even randomised controlled experiments, comparing business outcomes across exposed and control groups to assess the effectiveness of ad campaigns.

These are important, exciting developments, combining the best of digital with the enduring strengths of TV as an advertising medium. It’s unsurprising that many US executives believe that the 2020s will be TV’s connected decade - a period of change and disruption, but also one of tremendous opportunity.

What is the situation in Europe? The next article in this series summarises of our emerging findings.

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