A FierceCable eBrief

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CONNECTED TV ADVERTISINGS
GROWING POTENTIAL
Te lack of industry standards coupled with an uncertain business model is making connected
TV ads a challenge, but many companies are preparing for what could be a huge opportunity
By Kevin Downey
he next big thing in TV is here
with the majority of people
projected to own an IP-
connected TV within just a few
years. But advertising revenue for
connected TVs interactive ads and targeted
ads will likely lag behind.
Connected TV will have to overcome a few
signifcant hurdles before it starts taking
away some of the $74 billion that Kantar
Media estimates advertisers spent on
traditional TV advertising in 2013. Tose
hurdles span basic issues like consumers
learning how to use interactive ads, to
complex issues like of a lack of industry
standards for the way connected TV ads are written.
Tis is a big opportunity to create an even more engaging advertising marketplace, said Mark Lieberman,
president and CEO at Viamedia. But there are some fundamental questions that need to be asked frst.
Business model uncertainty
Unlike traditional TV, manufacturers have the capability to place ads onto smart TVs, meaning they can potentially
sell ad time.
Ten, what kind of ads can be placed on those TVs? Lieberman asked. Are they overlay ads? Can they be
synchronized with national ads? Whats the business model? Whats the [cost per thousand]? How do you post
against these ads?
A more signifcant hurdle is the lack of standards. Advertisers have to recreate the same ad over and over for
diferent connected TV platforms.
T
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CONNECTED TV ADVERTISINGS GROWING POTENTIAL

Tats the challenge a fragmented authoring

environment, said Sachin Sathaye, vice president of
strategy and product management at ActiveVideo.
Tere are no standards. A websites interactive ads are
written in HTML5. Its fairly standard. When you try
to bring that to television, whether its a set-top box or
a directly connected television, there is a vast array of
operating standards.
Te lack of standards means placing a media buy can be
challenging for advertisers and their agencies.
If you want to use interactive TV ads, you have to
keep changing these ads to work on a cable network
and then an IP network, Sathaye said. Tey have to
change content and the creative. Te third challenge is
the lack of consistent metrics. If you go to a website,
everything is standard. Who clicked where? Which
web page did they click? How long did they stay on the
page? Tats not so for connected TV ads.
Revenue potential is increasing
Today, connected TV ad revenue is a tiny fraction of
traditional TVs $74 billion.
Ad revenue for these IP-connected platforms is low
compared to overall television advertising, said Brett
Sappington, director of research at Parks Associates.
However, these revenues are increasing and ad rates are
increasing as advertisers and ad sellers become better at
valuing ad inventory on these connected platforms.
PricewaterhouseCoopers is projecting that advertisers
this year will spend $4.4 billion in the U.S. on
multichannel systems, which includes connected
TVs but also pay-TV providers and digital terrestrial
television.
Te Carmel Groups Jimmy Schaefer estimates
that advertisers are spending close to $5 billion on
connected TVs and other IP-connected platforms.
Youll see single-digit billion-dollar growth for the
next three to fve years, Schaefer said. It will take
a long time to get to the point that it will challenge
traditional TV.
TV manufacturers poised for opportunity
Once connected TV ad revenue takes of, analysts
expect the revenue to be split among pay-TV providers,
smart TV manufacturers and third-party platforms.
Lots of folks are trying to get their foot into the door
of the TV business through hardware or software:
Roku, Google TV, Apple TV, Amazon Fire, Xbox,
said Dave Morgan, CEO of Simulmedia, an audience-
targeted TV advertising company. However, in our
mind, the only hardware certain in the future of TV is
the TV. Tus, the TV manufacturers are in a very good
spot if they are smart in creating a robust and open
developer ecosystem, not unlike what Apple has done
with iOS and Google with Android.
Despite challenges to connected TV advertising
reaching its full potential, it will eventually get there.
Te size of the ad market is getting bigger as more
consumers buy connected TVs for their homes.
In 2014, an estimated 113 million people are using
connected TVs, up 107 percent from just two years
ago, according to research frm eMarketer. Moreover, a
projected 191.4 million people will use connected TVs
in 2018 a 69 percent increase over 2014. At that time,
58 percent of people in the United States will have
connected TVs.
Tere are a couple of factors happening in parallel
that explain [this], said David Hallerman, principal
analyst at eMarketer. Tere are more and more
devices for connected TV, whether its smart TVs
from manufacturers, set-top boxes like Roku, or game
players from Microsoft or Sony or even computers with
HTMI output that you put into the TV.
Second, consumers are attracted to Internet-based
services such as Netfix that are creating original
programming like Orange is the New Black that they
can get on connected TVs, he added. l
millions, % of population and % of internet users
US Connected TV Users, 2012-2018
2012
54.7
17.4%
23.0%
2013
83.6
26.4%
34.0%
2014
113.2
35.5%
45.0%
2015
138.8
43.2%
54.1%
2016
160.9
49.7%
61.7%
2017
177.2
54.3%
67.0%
2018
191.4
58.2%
71.4%
Connected TV users % of population % of internet users
Note: individuals of any age who use the internet through a connected TV
at least once per month
Source: eMarketer, June 2014
174380 www.eMarketer.com
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CONNECTED TV ADVERTISINGS GROWING POTENTIAL
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How Does placemedia Work?
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Better Audience Targeting
One persistent challenge with linear TV is
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End-to-End Automation
Linear TV is also challenged by legacy systems and
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Sound Logic
Te placemedia solution is also designed to get smarter
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HOW PLACEMEDIA IS USING BIG DATA TO DELIVER AUDIENCE BASED
TARGETING ON LINEAR TELEVISION
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CONNECTED TV ADVERTISINGS GROWING POTENTIAL

Within the next few years connected TV ads will

start chipping away at the $74 billion traditional
TV ad market, according to industry experts. But
to do that, content networks and advertisers will
need ad solutions that make it easier than it is
today to place ads onto connected TVs.
Companies like Canoe, Google/DFP, ActiveVideo
and dozens of other companies are developing
solutions that place ads onto connected TVs and
tailor those ads to the individuals who see them.
Tese solutions also take a multitude of diferent
standards, reconfgure them in the cloud, and then
stream them back to IP-connected platforms.
Engaging viewers with targeted ads
Te sofware company Canoe, for instance, has
been placing ads on cable set-top-box VOD
systems for several years. But, now, it is expanding
its VOD ad-insertion technology to IP-connected
devices such as smart TVs, set-top-boxes and
gaming consoles. Canoe is a consortium of
pay-TV providers Brighthouse Networks, Cox
Communications, Comcast and Time Warner
Cable.
With the same workfow and process were using
today with the classic set-top box, when our cable
operators have an IP-delivered product in the home
with that same VOD service on it, we can also
deliver an ad to that device, said Chris Pizzurro,
head of products, sales and marketing at Canoe.
We have the IP capability ready to go. Well test
it this summer with some of our operators. We
expect to deploy it in fourth quarter.
Canoes IP workfow system will work with ad
monetization systems Black Arrow and Comcasts
Freewheel.
Black Arrow delivers targeted ads to IP devices to
some 30 million users.
We get a connection from a video player and we
usually [fnd out] which asset was requested, which
station was tuned in and we get a time stamp,
said Chris Hock, senior vice president, product
management and marketing at Black Arrow. Ten
we fgure out which ad to deploy.
Tat happens in real time and the ads are tailored
to individual viewers.
With our Black Arrow product, we take the cookie
information of the device and put it up in the
server, Hock said. When [a content distributors]
user connects and goes to an ad, we get a device ID.
We check that against the Black Arrow audience
the broadcasters subscriber base, which gives us
information for targeting.
Te targeted ads do a better job of engaging
viewers, said Hock, who expects content networks
to charge higher CPMs for these ads than for
traditional TV spots.
Time-Warner Cable began using the Black Arrow
last year.
Meantime, automatic content recognition (ACR)
sofware helps to identify the programs that
SOLVING THE CONNECTED TV AD CONUNDRUM By Kevin Downey
Companies are developing new solutions that will overcome many of the hurdles associated with connected
TV advertising
We get a connection
from a video player
and we usually [fnd
out] which asset was
requested, which station was tuned
in and we get a time stamp.
Chris Hock, senior vice president, product
management and marketing at Black Arrow
A FierceCable eBrief
CONNECTED TV ADVERTISINGS GROWING POTENTIAL

connected TV viewers are watching. A projected

2.5 billion devices will be equipped with ACR
technology by 2017, according to NextMarket
Insights.
Te Holy Grail of all this is targeted advertising,
said Jimmy Schaefer, principal analyst at Te
Carmel Group. Tats tomorrows advertising
environment. Te idea is that, if you can put a
viable advertising mechanism in place, then IP-TV
thrives.
Solving standards issues
Still, there are obstacles to getting from where
we are today to a time when a good chunk of
traditional TV ad revenue shifs to connected TV.
Perhaps the biggest obstacle is a lack of standards.
Unlike web ads, connected TV ads are not
uniformly written in one language. Instead, there
are many, which means media buyers have to buy
multiple connected TV ads, not just one ad buy.
And its tough for advertisers to create ads thatll
run on traditional TV and various IP-connected
devices.
But ad solutions are being deployed to make the
lack of standards less of a headache.
If you write an interactive ad for DirecTV, you
have to write the interactive ad specifcally for
that, said Sachin Sathaye, vice president of strategy
and product management at ActiveVideo. If the
same brand wants to bring that ad to AT&T set-
top boxes, they have to now create it in a diferent
writing. If you go to cable, you have to change it
again.
In January, at CES, ActiveVideo in partnership with
BrightLine launched CloudTV AdCast. It enables
pay-TV providers to deliver targeted, interactive
ads to connected TVs.
We render this application in the cloud on
HTML 5, Sathaye said. We convert that as an
interactive video stream. Tat allows a consistent
experience across devices. Suddenly, the device
becomes agnostic.
Building a better experience
Te companies take it a few steps further, to help
advertisers get their ads in front of connected TV
viewers and to gather information about who they
are and what they are watching.
BrightLine would build something like a Home
Depot connected-TV microsite, said Mike Fisher,
director of strategy and innovation at BrightLine.
We would go to our client with a list of all the
places they should make a media buy. We might say,
What we built for you is supported in Samsungs
banner inventory. It is supported inside a publishers
app. Its supported in a publishers pre-roll video.
Its supported on the legacy side on DirecTV. We
provide rollup analytics of how they got to it, who
goes to it and what they do afer they go to it. l