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InContext / An inside look at the business of digital content

Ads are coming to streaming TV. But will consumers buy in or opt out?

August 30, 2018 | By Mark Glaser, Founder and Publisher – MediaShift @mediatwit

One nice bonus of being a cord-cutter is that you don’t get inundated with a lot of ads. Many over-the-top (OTT) streaming services offer ad-free viewing, and those with ads have tried not to anger viewers. But as streaming services gain more and more viewers, advertisers are finally getting a chance to reach the “unreachables.” And the numbers back that up: The connected TV advertising spend will hit $8.2 billion this year, according to Tru Optik, rising to $20.1 billion by 2020.

Recent acquisitions and new technologies signal that companies such as AT&T, Sinclair, Adobe, and even Netflix are planning to add advertising to the mix, which will give targeted ads on OTT programming a new path forward. This heavy investment in OTT shows where advertisers are placing their bets. But ultimately, good advertising — advertising that’s relevant and interesting for audiences and profitable for marketers — is what will make these moves worth it.

A Megamerger for Addressable Ads

Now that the AT&T/Time Warner acquisition has finally closed (despite an ongoing lawsuit from the Department of Justice), AT&T can take advantage of the data trove Warner offers to focus on addressable ads that scale. This means it can take viewer data and information to craft highly specific, highly targeted advertising. AT&T has been experimenting with addressable TV for a while, as I previously wrote.

In June, it announced it would also acquire the digital ad platform AppNexus, which helps AT&T expand advertising beyond its own devices and partner with media companies. The goal for AT&T is to reach both the streaming audience and the traditional TV audience; it wouldn’t matter where a viewer is watching from or whether they have a cable or satellite subscription.

And AT&T’s plan is not a completely novel concept, as CNBC’s Michelle Castillo wrote:

“The service would be similar to Comcast’s Freewheel, which is used by TV networks and major video distributors to serve ads on their streaming content. Freewheel places addressable ads on NBCUniversal content (owned by Comcast), as well as partner networks like Viacom and Disney. Ads can appear on traditional (linear) television programming, on video-on-demand content accessed through cable set-top boxes, and on streaming OTT services that use a device to connect to the internet.

Emerging Ads, Emerging Tech

Not to be outdone, Sinclair Broadcasting Group recently launched CompulseOTT, an ad product to help sell local ads into streaming services around the country. CompulseOTT currently has more than 2,000 segments advertisers can use to target audiences and is available on multiple OTT platforms.

Recent deals in the ad tech world also show that both networks and advertisers are making bigger bets on targeted ads on OTT. Liveramp, an identity unification platform, recently inked deals with the data company Inscape as well as Adobe. With Adobe, Liveramp will use its data to oversee Adobe’s Advertising Cloud. With Inscape, Liveramp will be able to better merge TV and digital audiences, and therefore offer a more fluid audience to marketers.

iSpot has also been helping marketers move more easily between digital and TV audiences. It’s been tracking advertising throughout the entire TV ecosystem and recently developed a custom-segments feature that advertisers can match their digital segments against. Theoretically, iSpot’s tools can help brands optimize their spending.

And even Netflix, the bastion of ad-free viewing, has started experimenting with ads that promote its own shows. That move definitely ruffled users’ feathers. Subscribers expressed disdain at the breaks they were paying to avoid – not to mention worrying if pay ads might come next for the highly leveraged streaming giant.

Making the Audience Happy

But here’s the rub: As much as addressable advertising is becoming more and more possible, giving marketers detailed targeting for streaming audiences, the question remains if the public will buy in or opt out.

Seventy-four percent of Americans don’t believe TV advertising is relevant to them, according to research by Adobe Digital Insights. Nearly 60% of Americans are streaming content, and mostly with Netflix (and don’t forget: its viewers were pretty angry at the idea of ads). Skipping and blocking ads is just as routine as paying money to have no ads at all.

In other words, the route to reach audiences may be different with OTT programming. But the experience of reaching them will likely mirror advertising elsewhere. So, before marketers can claim a breakthrough with streaming audiences, let’s see what the new process of making ads interesting and relevant will be — and make sure the costs of doing so don’t exceed the benefits.

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