Kate Bulkley, Media Analyst.

Digital advertising is the future

By Kate Bulkley

Broadcast News

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For Broadcast January 22, 2020

Commercial broadcasters need hit shows but should also offer targeted ads, says Kate Bulkley

Love Island

While the battle heats up among the big SVoDs, action is developing around the edges as content makers, distributors and producers rethink their models and look to align with audiences in more focused and monetisable ways – often going direct to consumer.

The stonking success of the ad-free Disney+ streaming service in five markets outside of the UK is getting a lot of attention, and no wonder: this month, Barclays valued Disney’s various streaming businesses at $107bn (£82bn), which represents nearly a third of the $320bn (£245bn) enterprise value of the entire Disney company.

Remember, this is a media powerhouse that includes several Hollywood movie studios and TV networks, as well as theme parks and a vast consumer goods business.

How can that be? Clearly, the appeal of streaming ad-free content like Disney’s original space-cowboy series The Mandalorian is part of a big, ongoing consumer trend that only seems to be accelerating.

Bank analysts like to see growth and value it accordingly. Thanks to Netflix, Amazon and now Disney and others jumping onto the ad-free train, the streaming business looks set to increase its financial worth.

Clearly, the UK debut of Disney+ on 24 March will only heat up the streaming wars here, where the marketing campaign for joint ITV and BBC venture BritBox trumpets its ‘no ads’ status.

All of this means that the ‘available audiences’ for TV advertisers are shrinking, and that, in turn, is having a significant impact on the business models of free-to-air commercial broadcasters. For marketers, having fewer TV shows that attract big audiences means that reaching large audiences is increasingly expensive.

ITV and others can charge more for big shows because most marketers know that TV is still the best way to build a product brand and reputation.

“Finding the next must-see hit is important but expanding into digital and online advertising is imperative”

However, broadcasters must also work harder to find hits that cut through, such as ITV’s Love Island (pictured above) and, more recently, The Masked Singer, whose debut audience peaked at 6.9 million.

Finding and securing the next must-see hit is important but expanding into digital and online advertising is now imperative to any broadcaster’s future.

The commercial success of Love Island for ITV was not simply about selling 30-second ad slots but included a dozen sponsors and digital extensions. This is what made the ITV Studios-produced series a commercial winner and a magnet for advertisers looking to reach younger audiences than those ITV typically reaches.

In a year when the prime minister promises to ‘deliver Brexit’ and markets are talking of a so-called ‘Boris bounce’, advertising firm Group M forecasts the UK’s TV ad market will be flat. Spend will increase by 6.7%, it predicts, but the big action will come from digital advertising – next to none of that additional spend will find its way to telly.

Google and Facebook continue to lead in targeted advertising but ITV’s new targeted, online TV advertising service for ITV Hub, Planet V, is set for a belated launch in February, while Channel 4agreed late last year to include its channels on the rival Sky-run AdSmart targeting platform, alongside Virgin Media, Channel 5 and the BBC.

Splitting the market between ITV’s addressable solution and Sky’s AdSmart may prove problematic but, according to ITV, there is “room for multiple technologies, given that only 1% of UK TV ad impacts are currently using addressable technology”.

With its longstanding ability to produce and showcase professional video content, TV has a big advantage, but the big tech platforms’ growth is not slowing.

Indeed, as Vice Media chief revenue officer Dom Delport says, to reach younger people, you have to be in their lives – and that means being in their social media feeds, like Facebook’s Instagram.

Facebook is forecast to overtake ITV to become the UK’s second biggest media owner after Google, measured by ad sales. However, maybe 2020 will be the year when the UK finds its addressable TV ad mojo – and some big new hit shows. ­

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