Streaming Media Europe
Economic stagnation and political uncertainty continue to dog the
Eurozone, denting global advertising spend, according to ad
consultancy Zenith. Yet ad dollars continue to pile into online.
Zenith, owned by French advertising group Publicis Media, said it would
normally expect an increase in ad spending in 2020, benefitting from the US
elections, the Tokyo Olympics, and the UEFA Euro soccer tournament. But with
major European economies (Germany, UK) teetering on a recession,
businesses have tightened their purse strings, in turn hurting advertising
budgets. Nonetheless, internet advertising is on track, globally, to surpass
more than half of all advertising spend in 2021, according to the firm's
Advertising Expenditure Forecasts published in July.
In 2018, the global total for internet ads was 47%, with growth led by
the overlapping channels of online video and social media, which are expected
to increase at average rates of 18% and 17% per year, respectively, through
2021. These channels are benefitting from continued technological improvements
to smartphone technology, connection speeds, and advertising targeting and
delivery, combined with strong growth in content investment.
Not surprisingly, TV's share is shrinking, though gradually. Zenith
forecasts that traditional television ad revenues will fall from $184 billion
in 2018 to $180 billion in 2021.
These trends are mirrored in Europe, where 2018 saw the continent's
digital advertising market grow 13.9%—its fastest rise in 7 years—driven by
video, mobile, and social spend. The AdEx Benchmark study, organised by IAB
Europe, indicates that video grew by 30.9%, to €7.6 billion, accounting
for 33% of the display market and contributing to a total €55.1 billion
digital ad market value. "Mobile, video and social continue to drive
growth across the region, with mobile now closing in on 50 percent of both display
and search, and video accounting for a third of all display," according to
Daniel Knapp, chief economist at IAB Europe.
While the UK topped the list at €18.4 billion and Germany placed
second with €7.2 billion, the top five largest growth markets in 2018 were
all emerging economies of the central and east Europe region (Ukraine, Russia,
Belarus, Czech Republic, and Serbia).
UK online ad spend, relative to the size of the economy, is now the
highest in the world, at 0.63 percent of the GDP, according to a report published
by advertising think tank Credos and Enders Analysis. UK advertisers are set to
spend 62% of their budget online by the end of 2020, making the country the
third largest by gross amount behind the US and China.
Online vs. TV (Again)
Online ad spend and internet retail expenditure have both almost trebled
since 2010, resulting in the development of a tech sector that employs tens of
thousands of people and comprises more than 300 UK-headquartered companies,
according to the Credos-Enders Analysis report.
Its findings were supported by an Advertising Association and World
Advertising Research Center (AA/WARC) study, which had UK ad spend
reaching £23.6 billion in 2018, with growth driven by increasing spend on
search (up 14.3%) and online display advertising (up 21.4%). Notably high
growth was recorded for ad investment in broadcast video on demand (BVOD),
which rose 29.4% to reach £391 million and is forecast to grow at a similar
rate for the next 2 years. Total TV investment was stable year on year at £5.1
billion. Stephen Woodford, chief executive at the Advertising Association,
commented: "We see online advertising in all its forms continuing to
perform strongly, demonstrating how the UK is Europe's leading online
advertising marketplace."
Thinkbox, the lobby group for UK commercial broadcasters, took aim at
figures for the amount of ad spend now going to online video. "In 2018, it
was £2.3bn. Take BVOD's reported £390m away from that and you have a
non-broadcaster online video ad market in the UK of £1.9bn—26% of the total
video ad market," argues Matt Hill, research and planning director at
Thinkbox, in a blog post.
Since TV, including BVOD, accounts for 95% of video advertising
viewing, according to Hill, and online video such as YouTube, Facebook, and the
long programmatic tail together account for 4% (with cinema accounting for the
remaining 1%), the amount going to online isn't bringing much value for money.
"In other words, the average person watches 17 minutes of TV
advertising a day (the 95%) and one minute of non-broadcaster online video
advertising (the 4%)," Hill says. "Yet AA/WARC figures show that
£1.9bn was poured into that single minute a day and £5.1bn into the 17 minutes.
That means 4% of video ad viewing took 26% of video ad spend; the other 95% of
video ad viewing took 70%."
The UK's most popular and expensive single campaign ad each year is for
retailer John Lewis and Partners. Its Christmas ad production budgets
exceed £1 million but prove its effectiveness by driving up sales. This
year's ad reportedly equates to £11 of profit for every £1 spent.
Addressable TV Goes Mainstream
The rise of addressable TV should be seen in this context. According to
Mindshare, addressable TV is forecast to boost its UK market share from 1% to
about 30% of total TV ad spend by 2022, making it worth more than £1.35bn.
A study released by Sky in August suggests that addressable TV cuts
channel switching by half and boosts ad engagement by more than a third. With
its addressable platform AdSmart, Sky has created 17,000 campaigns for
1,800 advertisers since its launch 5 years ago. It is expected to reach 60% of
UK households by 2021.
UK commercial broadcaster ITV continues to plough its own path. Working
with Amobee (owner of ad-tech firms Turn and Videology) since the beginning of
2020 to develop an addressable TV network on ITV Hub, it plans to launch the
service as Planet V in February 2020 as a rival to Sky AdSmart.
With ITV Hub hitting 30 million registered users and as the primary ad
space for the ITV/BBC-owned streaming service BritBox, this is a significant
step for ITV.
Planet V combines ITV's unparalleled mass simultaneous reach with
targeted advertising. Kelly Williams, managing director of commercial at ITV,
said in a press statement, "It will be a continually evolving platform,
providing the very best frictionless, data-driven buy, in a premium, brand-safe
environment, for our clients."
However, AdSmart has already locked down Channel 4 and Channel 5 as well
as access to linear TV channels in Virgin Media households, while the BBC is
experimenting with AdSmart to run personalised promotional content.
According to Enders Analysis, "the adoption of Sky AdSmart and
similar services on YouView and Freeview could take addressable TV ads from a
sideshow to a pillar of revenue."
All of this is a drop in the ocean compared to the grip that Facebook
and Google have over the UK ad market. According to eMarketer, the US tech
giants will command 68.5% of the £14.56 billion ($19.41 billion) UK digital ad
market this year, a figure expected to surpass 70% by 2021.
Elsewhere in Europe, three French broadcasters, France Télévisions, M6,
and TF1, have created Sygma, a common standard for advertisers who want to buy
inventory on their video-on-demand (VOD) services programmatically. The idea is
to make it easier for buyers to access inventory from all three broadcasters,
plus reduce wastage and types of fraud.
The European Broadcaster Exchange (EBX) is a joint venture of four
broadcasters in the five leading European TV markets: Germany's ProSiebenSat.1;
TF1 of France; Mediaset, covering both Italy and Spain; and the UK's Channel
4—although there is little word on its success.
Germany's
RTL Group sells inventory for its properties and represents partners, including
RAI, DPG Media (formerly Medialaan) in Belgium, and ITV internationally through
RTL AdConnect, which owns ad-techs SpotX and Smartclip. In the summer, it
expanded operations in North America by opening a branch in Los Angeles to go
with its East Coast office.
Stephane
Coruble, CEO of RTL AdConnect, laid out the rationale: "Europe, as a
fragmented market, can be difficult to enter and it is tempting to go to the
online giants to build global campaigns. We leverage our position as RTL
Group's 'total video' sales house to offer unique one-stop solutions for high
quality content and brand safe environments, providing access to millions of
consumers daily through Europe's leading online video platforms and high reach
broadcast channels."
Total
Viewing Measurement Advances
Subscription
video-on-demand (SVOD) viewing on the TV set continues to march upward, taking
up 19% of total activity in 2018, according to the ratings agency Broadcasters
Audience Research Board (BARB).
It's
been a source of heated debate that the main SVOD services, including Netflix
and Amazon, have refused to share their data with the measurement service,
forcing it to make a best guess about changing habits and trends.
That
might change if CEO Reed Hastings is taken at his word. At a Royal Television
Society event in September, the Netflix boss admitted that SVODs had been
"guilty of being simplistic" over data and rights and said he would
be happy for Netflix to be measured by BARB in line with UK broadcasters.
"The best solution is to have BARB report on us in a consistent way,"
he said. "No one wants to rely on us to do our own measurement. To a
strong degree, it would be good for us and the industry to be on the BARB
panel."
BARB
commissioned Kantar to install its broadband router meter technology into the
panel of 5,300 BARB homes to track streaming activity by any member of the
household on any device. This will provide greater insight into unidentified
viewing (TV set viewing that BARB cannot identify, which accounted for 20% of
total TV set use in 2018). A significant portion of unidentified viewing is
believed to comprise viewing to SVOD and online video services.
The
meters will track video streaming activity from a designated list of BVOD, SVOD,
and online video services, including Amazon, Netflix, and YouTube.
"Whether
it is live streaming or watching on-demand, people around the UK are getting
used to watching content that's been distributed through BVOD services and
other online platforms," said BARB chief executive Justin Sampson in a
press release. "This is why a meter attached to the broadband router
in panel homes is a vital capability for BARB to have."
The
data will be reported at an aggregate, rather than programme level, with hopes
it will start to become available toward the end of 2020.
AVOD Gold
Rush
While
the streaming market has been driven by subscription, ad-supported streaming
services came to the fore in 2019, as did hybrid models that combine both
subscription and advertising.
Advertising-supported
video-on-demand (AVOD) platforms are not directly competing with the large
SVODs, suggest Ampere analyst Isaq Chowdhury in a blog post. Instead, they
present an alternative option for consumers who are seeking more content at a
lower cost.
According
to Ampere, the more SVOD services a household takes, the more likely viewers
are to be tolerant of advertising. This is most likely among younger consumers,
who have a higher tolerance for advertising. Plus, as consumers reach online
video spending limits, they may be more willing to watch ads as a trade-off for
a service that is cheaper or even free.
AVOD
revenue growth is expected to increase dramatically over the next few years as
viewers switch to OTT and ad dollars move accordingly. Initiatives in this area
include broadcaster portals like ITV Hub, where inventory is being sold
programmatically. Netflix's recent overtures about joining BARB perhaps signal
its intent to launch an ad-supported tier, following in the footsteps of
Amazon's Internet Movie Database (IMDb)-affiliated Freedive. Viacom's AVOD
Pluto TV was made available on Apple TV and mobiles in the UK, Germany, and
Austria in 2019 and also debuted in Switzerland.
Netflix
and other premium SVODs would need to tread wisely in the UK. Almost
three-quarters of UK TV subscribers voted against sponsorship or ads on VOD
services in a survey by consultancy Differentology. A fourth of people would
upgrade to an ad-free service, and 39% would either cancel their subscription or
switch to another paid service.
In
the US, Facebook and YouTube are expected to continue leading the market
through 2023, trailed by Hulu, Roku, and Tubi, according to an
end-of-year report from IHS Markit | Technology. "The AVOD goldrush
is here, and it represents a prime opportunity for service providers, new AVOD
entrants, and content companies," writes Sarah Henschel, senior research
analyst for media. "Ultimately, the winners and losers in the AVOD
industry will be determined not only by content, but also by data strategies
and user acquisition."
The
degree of product placement in original content used by SVODs to supplement revenue
came to light in a survey by Branded Entertainment Networks. All of
Amazon's original programming contains brand integrations; 91% of Hulu and 74%
of Netflix originals do. For example, Netflix worked with Coca-Cola to weave a
new drink into the core plot of Stranger
Things season three.
Monetisation
Strategies
"Overwhelmed
consumers will become more discerning and focus their time on services with
algorithms that provide the greatest enjoyment," says Kantar in its Media
Trends report. "Among subscription-funded services, the winners will be
those with the highest quality original content and understanding of different
audiences."
Yet
having great and exclusive content is no longer enough to keep customers truly
entertained and engaged. There was a heightened realisation this year of the
importance of the user experience in attracting and retaining viewers.
The
UI should get users where they want to go in the least number of clicks. It's
the Netflix model to which others are still playing catch-up. Vodafone Portugal
updated its UI in July, describing the change as "simpler, intuitive and
intelligent," and including the basic ability to resume viewing at the
point when it was interrupted. A summer update to Sky Q included
"simple, one-touch destinations" for functions that help customers "find what they want to watch quickly and easily on any device."
"simple, one-touch destinations" for functions that help customers "find what they want to watch quickly and easily on any device."
QoE
is another vital part of the equation. A Brightcove survey found that too
many ads and poor video quality are the key spoilers for live-streaming
experiences, with respondents also abandoning a live stream because of
buffering and the live stream crashing.
Ad
delays of just 5 seconds lead 13.6% of viewers to abandon content, a report by
Conviva has found. With nearly half of all streaming ads failing (per
Conviva), that's a big risk for service providers as more ad dollars head
for the streaming world.
SVODs
should focus as much effort on retention as acquiring subscribers in the first
place. "A significant rise in acquisition costs (the marketing cost of
fresh subscribers for Netflix US alone is around $100), coupled with the
pressure to encourage viewer loyalty beyond a handful of months, means that
subscriber retention [is] a far more economically feasible growth option for
today's OTT players," Cleeng strategist Dimitar Serafimov argues in
a blog post.
The
fragmentation of content options is expected to exacerbate viewer fatigue as
well as max out their wallets, leaving the field open for platforms best able
to aggregate multiple accounts and to deliver an array of targeted content and
services like contextuality, second screen, and voice control. This puts
content discovery at the top of the list for service providers.
Vodafone
Portugal, for example, introduced a voice-driven search engine to its UI that
uses natural language recognition. The next stage of sophistication will likely
include tools to discern the viewer's emotional state to refine content
recommendations.
Even
if machine learning is used to drive personal content recommendations, the
sheer scale of available content and datapoints renders traditional grid or
tree-based UIs unfit for purpose going forward.
The
advent of 5G is expected to boost video advertising, particularly over mobile.
Faster speeds and high-resolution ads might encourage viewers to stop scrolling
and watch more ads. There will be opportunities to create personalised video ad
storylines to push up engagement rates, and creatives could exploit the
potential of AR games to get people to interact with brands.
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