TBI Tech & Analysis: Predicting the future & effects of digital ad growth

Online advertising will account for more than 70% of worldwide ad revenue by 2025. As more advertisers become accustomed to digital advertising’s data-driven approach, how should traditional media players adapt to offer similar functionality in their businesses?

Marija Masalskis, senior principal analyst for TV, video and advertising at TBI sister research organisation Omdia, looks Stateside and predicts some of the trends we are likely to see unfold as a result over the next five years.

2020’s watershed moment for ads

Covid-19 brought a major disruption to the 2020 upfront season and accelerated the shift to digital and cross-platform ad buying. NBCUniversal (NBCU) called the 2021 upfront a “watershed moment” with online video services emerging as the leading platforms commanding the highest Cost Per Impression (CPM).

We can thus expect the advent of audience-based buying for linear TV and eventual shift to audience-based TV currency. Such a shift would in turn open opportunities for split availability purchasing, which would bring linear TV advertising fully on par with digital in terms of yield management opportunities for the buy-side, and campaign efficiency for the sell-side.

Under current Gross Rating Point (GRP) purchasing methods, advertising slots are sold to a single buyer who can then use addressable solutions to target messaging to a specific household (e.g. a car manufacturer can show ads for a different class of car depending on targeted household income).

True audience-based buying would enable advertisers to “split the availability” and purchase only specific audience segments viewing that ad slot and allow other advertisers to show their ads to different audience segments within the same slot.

Building across platforms

In pursuit of efficiency, advertisers will increasingly be seeking end-to-end solutions that will allow them to manage data, execute workflow and optimise supply across linear and digital channels, including walled gardens (such as Google or Facebook).

Emergent identity and device graph solutions promise to enable advertisers to find their audience across all their media touchpoints.

Advances in these spaces will enable broadcasters to better leverage the entirety of their digital and linear portfolios to capitalise on the growth of their online video services and prop up linear TV revenue through cross-platform campaigns and addressable advertising.

Competition driving M&A

Pay TV operators will continue extending their addressable advertising capabilities to channel operators. However, smart TV device manufacturers are also eyeing the same role.

Connected TV platforms – most prominently Roku, Samsung TV and Amazon Fire TV – have already successfully replicated the pay TV operator model and require all ad-funded OTT video services operating on their platforms to yield a share of ad inventory. (Roku, for example, requires 30% of inventory, although larger services typically negotiate a lower share).

Just like pay TV operators, they are now anticipating an evolution of linear TV buying and want to carve out a key intermediary role for themselves.

This competition will present a particularly interesting battlefront in the homes of consumers who have a smart TV set and an IP-enabled pay TV set-top box (providing two overlapping opportunities for dynamic ad-insertion in the linear TV feed). Recent speculation about a Comcast acquisition of Roku is a sign of the heated competition for this space.

This article is an excerpt from Omdia’s Topical Report: Advanced TV Advertising, by Marija Masalskis.