Challenges and Opportunities in the Land of Connected TV
“The Handmaid’s Tale.” “The Man In The High Castle.” “Stranger Things.” It’s no longer a surprise to hear that digital-only, fully on-demand TV shows from the likes of Netflix, Amazon, and Hulu are a force to be reckoned with at industry awards.
The fact that so much of the best content is now digitally-native is a sign that the entertainment industry is finally succeeding in its ongoing game of catch-up with consumers, who have fully adjusted to an expectation of instant gratification and complete control. They want to watch their preferred content when and how they want to, with as little friction if possible…and preferably on an actual TV. Netflix and Hulu recently stated that the share of total viewing minutes coming from customers using over-the-top (OTT) or connected TV devices is already dominant at 65% and 78% respectively. Google echoed this by announcing strong YouTube growth of over 70% year-over-year for viewing on connected TV sets.
Where audience goes, marketing potential follows: It’s clear that the living room is where users want to watch premium content, and the immersive environment lends itself to prime access to quality consumer attention. But advertising support isn’t jumping to OTT as quickly as we might have expected it would — why? It’s not that publishers and media buyers aren’t trying hard enough, and it’s also not the case that only ad-free subscription services want to put their content on OTT.
Coming from the engineering side of the ad-tech business, I can attest that many of the problems are technical. OTT comes with some added challenges, nuances, and inefficiencies in comparison to other platforms that mean we can’t just replicate the digital video advertising playbook. But once these are addressed, OTT has the potential to be the most exciting environment for advertising yet — and not just advertising, but good advertising, with the reduced ad loads that consumers want and the industry has started to realize are inevitable. But failing to address the challenges in the connected TV landscape means that ads on OTT will be doomed to low quality and high volume, meaning that ad-supported content will fail to compete with ad-free subscriptions. Given the staggering growth in connected TV viewing, this is not a battle that the ad industry can afford to lose.
So what do we have to tackle? Let’s start with the obvious: the fragmentation, and subsequent lack of standards. The audience shift to connected TV experiences has spurred a gold rush, with a constellation of different device vendors attempting to grab a piece of a rapidly expanding pie. There’s Apple TV, Google ChromeCast, Amazon Fire TV, and many products released under the Roku and Android TV banners; there are TVs with “smart” features built in; and let’s not forget video game consoles. It’s somewhat simpler from a technical engineering point of view. For us, the major environments for development are Apple tvOS, Android (TV and ChromeCast), and Roku. This is made a bit easier still with the fact that there is some continuity with the well-understood Apple-Google technical duopoly on mobile devices.
But a critical gap was introduced when tvOS and Roku — which, combined, account for the majority of OTT usage — elected not to include web view (HTML5) functionality in their devices. This might sound minor, but from a technical standpoint, it’s massive. Not being able to lean on web technologies is challenging IAB standards such as VPAID (video player-ad interface definition) and the products dependent on it. In this non-standardized environment, an increasing number of vendors are developing bespoke client-side technologies enabling richer — albeit proprietary — interaction systems. (Think Adobe Flash, but for connected TV.) These technologies all invariably then need to be integrated and deployed through the software development kits (SDKs) that accompany the hosting media streaming products or apps. This introduces a level of complexity and fragility to the hosting products, and best-case scenario, it’s a slow way to drive reach.
That’s not the only way that the ad tech industry has, in its attempt to deal with the lack of standards, made the OTT advertising landscape more complicated. Many companies have chosen to offload an ever-increasing share of responsibility to the cloud, for elements like the stitching of video advertisements in streams by server-side ad insertion (SSAI) vendors. This technology stitches video advertisements inside of the content video streams consumed by players, producing a manifest that is compatible with all client-side platforms and removing complex logic necessary to drive advertising interactions. While this enables easy consumption of advertiser-funded content by devices and players, it comes at a loss of interactivity; those services output linear video streams, eliminating the potential to create compelling, interactive user experiences and leaving unmet a possible desire for customers to interact and learn more about the brands.
Measurement standards are also woefully inconsistent on connected devices. This poses an additional technical challenge for advertising there. The digital measurement standards that guide how advertisers are paying for the media they buy are focused on raw impression and click volumes and are not doing a good job at capturing the quality of the experience and providing a clear and actionable picture of brand lift. This is a problem across digital, but it’s particularly resonant on connected TV, which when done well can be a very compelling affair, engaging a prospective customer with maximum share of voice and a multi-layered interaction. This kind of experience could be revolutionary in engaging consumers at the top of the purchase funnel. Unfortunately, when the metrics available are effectively the same as for desktop banner ads, that’s not exactly going to encourage the development of ads that reach new creative limits.
This is crucial, because improvements in measurability and effectiveness are a prerequisite to offering high-quality ads at lighter volumes, and so unless we have better ways to measure, the effectiveness of ads on OTT devices will never reach its potential. Finer-grained, real-time data that assesses how effective a given creative is at supporting the advertiser objectives for the campaign is essential to positioning connected TV experiences as viable and meaningful components of any media plan. Furthermore, with brand safety top-of-mind, OTT advertising needs to be enabled to be fully transparent and open to third party measurement, enabling not only accountability, viewability and fraud monitoring but also new and innovative measurement metrics — like those for brand lift, as called out above. Again, the implementation of this is a challenge for those of us on the engineering side of the business. Ad tech won’t be empowered to make these leaps in OTT unless we build it, and are able to cooperate industrywide, cross-platform, and cross-device.
The challenges and complexities of monetizing connected TV are already having a direct impact on advertisers, publishers and customers. But many possibilities exist to curate and create an improved customer experience with a lighter ad load as well as innovative and effective measurement methodologies — and then balance those across a scalable, normalized and standardized publisher ecosystem. There are some positive signs already: the IAB is keeping up with the times and VAST 4.0 evolved to encompass SSAI head-on, pointing hope to a new version of VPAID that similarly modernizes and enables interactive experiences on new platforms. Prominent vendors such as AppNexus and Amazon are taking a more modular approach to the development of connected TV SDK and SSAI capabilities, enabling a more open and liquid marketplace.
Moreover, progress will be made if industry players understand that connected TV is no longer an experimental platform — it now needs to be taken into account in any advertising product development. Our own team at true[X], for example, has had to keep connected TV front-and-center in our recent development of our UP//LIFT brand lift measurement methodology. We’re optimistic for a more open and transparent future that expands well beyond the connected TV environment — seeking to avoid the mistakes of the past when taking stock of this major new platform wave.
