The programmatic TV revolution is going to be fascinating to watch. This isn’t only because of the large number of deep-pocketed power players at the table, or because TV advertising represents such a huge slice of global advertising spend. It’s also going to be interesting because for the most part we still aren’t talking about ‘Internet TV’, so the industry has to deal with the different technical standards and set-top boxes in each market. As Jean-Pierre Fumagalli, CEO of smartclip, explains here, HbbTV will allow Europe to scale programmatic TV in a way that is comparable to the real-time, ad server delivered advertising we see online.
Smartclip recently launched an addressable TV product. Could you explain how the product works?
The addressable TV platform is part of our SmartX programmatic video ad server and makes use of the HbbTV standard. The HbbTV standard allows for serving IP-based content into linear TV broadcast and it has been adopted and implemented by all TV manufacturers throughout Europe. So today 25 percent of European TV households have a SmartTV that is actively connected to the internet and also HbbTV-enabled, or set-top box that is enabled for HbbTV.
We currently see that the number of HbbTV enabled TVs have almost doubled in the last year and are massively growing moving forward. On our platform, which also serves ads into connected TV portals and apps, we see connections rates of 65-85 percent throughout Europe for newly bought TVs. We now expect to HbbTV connected TV Households to grow to up to 70 percent penetration by the end of 2017.
Most larger broadcasters in Europe are already using the standard to serve additional content like catch up TV, news, etc. with the red button functionality. At smartclip we took the standard to go one step further with the delivery. We built a framework that allows us to serve advertising directly into the linear TV. Put simply, the content is still broadcasted one-to-many, while the ads are served in real time on a one-to-one basis via our ad server.
So is this different to what we’re seeing happen with programmatic TV in other markets, take the US for example?
Our platform delivers in real time through internet ad server standards. That is the basis and the only way for the future to really deliver and optimise multiscreen, cross devices and to execute in a fully RTB-enabled, programmatic way.
In the US there is currently a huge hype around addressable TV and programmatic TV. However, if you look behind the scenes, you realise that most players are either talking about OTT delivery, or they aren’t really changing anything other than but making the traditional TV workflow a little more automated. That means the broadcast world mainly remains a place for one-to-many, bundled and broadcast-delivered ads that are purchased in advance. On the addressable TV side, the US is mainly a set-top box driven market where different players have set up different systems to upload multiple TV spots in advance to their set-top box, which then plays out a different commercial. So it isn’t real time ad serving – as uploading to the box, play-out by the box and reporting are time shifted. Internet standards such as VAST delivery don’t even come into it.
Additionally, some of these approaches only work out technically and strategically if the owner of the set-top box is also the owner of the TV advertising real-estate. And here the European market is completely different to the US, which is first of all a cable and set-top box driven market in opposite to Europe, and where on top the cable guys also own parts of the TV ad breaks for regional monetisation.
Besides this, I am convinced that ultimately a solution that works via the connected TV, the ‘last inch’, and not the cable distributor, the ‘last mile’, will win out in the long term, as TVs and users now get their content from multiple sources and the cable is just one of many.
Do you think the shift towards addressable/programmatic TV be a disruptive force on the TV industry? Who will be the winners and losers in your opinion?
In the short term it will especially be beneficial to midsize and smaller broadcasters – which have been underrepresented in current standard TV panel measurements and thus lacked market visibility to advertisers – to fully exploit their advertising potential and benefit from new customers and revenue streams. It is no longer the mere size of a TV station that matters for linear TV advertising, but instead the content, the content quality, and its viewers In the mid to long term it will boost the complete TV market as it combines the best of both worlds, TV and internet. Mass reach, brand safe content, fully visible and emotional, including all the digital reporting, targeting, optimization and interaction that the internet has to offer.
It is innovative and supports the TV space to even allocate more advertising revenue. However, it remains to be seen who are the individual players that will benefit the most within the ecosystem of the TV industry. As always, content comes first and the control of content distribution follows. There will be a huge fight for reach monetisation and control of data between the broadcasters, the distribution middlemen like cable and satellite and the OEMS with their control over the TV device, and ultimately also Google, Amazon and Apple who approach it from the operating technology system side.
There’s a perception that the German market has been relatively slow when it comes to adopting programmatic technologies. What has been holding the industry back and are we reaching a tipping point?
When it comes to video advertising, I think that is still true for some of the local players. On our SmartX Platform we serve European markets that are far ahead of the rest of the German market when it comes to programmatic RTB – with up to 60 percent of our overall revenue generated via RTB. But if you look at the amount of inventory that is already programmatically available in the German market through YouTube, Facebook and via our SmartX Platform, there isn’t a shortage of programmatic supply. I think we reached a tipping point at Q4 last year, and in the beginning of 2015 we saw an incredible increase in programmatic video consumption and now Germany is seeing a rapid growth in programmatic revenue.