The Future of Ctv Advertising in Europe January 2021
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THE FUTURE OF CTV ADVERTISING IN EUROPE JANUARY 2021 Commissioned by: 2 Contents Methodology ........................................................................ 3 Key Findings ........................................................................ 4 European Market Overview ............................................................ 7 UK................................................................................. 10 Germany ........................................................................... 14 France ............................................................................. 18 Italy ............................................................................... 23 Spain .............................................................................. 28 Sweden ............................................................................ 34 Recommendations ................................................................... 38 Introducing VideoWeek Research is a division of PubMatic (NASDAQ: PUBM) delivers VideoWeek (formerly Video Ad News, superior revenue to publishers by founded in 2010), the vertical-leading being an SSP of choice for agencies trade publication covering the video and advertisers. PubMatic’s cloud and CTV advertising market. Our infrastructure platform for digital mission is to leverage our uniquely advertising empowers app developers strong international network and years and publishers to increase monetization of experience to provide market-leading while enabling media buyers to drive insights. return on investment by reaching and engaging their target audiences in As the video and CTV advertising brand-safe, premium environments market becomes increasingly complex, across ad formats and devices. stakeholders increasingly require research that is rooted in data and Since 2006, PubMatic has been backed by integrity. Our aim is to help expanding its owned and operated customers and the wider market grow global infrastructure and continues by giving them the information required to cultivate programmatic innovation. to make the right decisions with Headquartered in Redwood City, confidence. California, PubMatic operates 14 offices and eight data centres worldwide. www.videoweek.com www.pubmatic.com Methodology This study covers six markets; the European ‘Big 5’ markets of France, Italy, Germany, Spain and UK, as well as Sweden. The ‘Big 5’ commonly denote the countries with the largest populations in Europe. By extension, they are also the top media markets in many regards and most notably, Europe’s biggest TV advertising markets. In addition to their size, their geographic distribution from Western to Central Europe and across North and South makes them compelling entities in comparative studies. We have also included Sweden in order to get a reading on Nordic markets. Sweden also operates as a corrective factor - it is a market that experienced a relatively late liberalisation of the free TV market and the ad funded TV model, paired with one of Europe’s highest broadband and Pay TV penetrations. Due to the still nascent stage of the CTV market in Europe overall, we have deliberately focused on a curated selection of markets. We believe that the different stages of development exhibited across these markets will serve as a bellwether and provide opportunities to apply learnings to adjacent markets as well. In future studies, we plan to widen the scope to include additional markets. Between July and October 2020, we conducted 60 in-depth interviews in the markets under study across the buy (agencies and advertisers) and sell side (broadcasters and publishers). In addition, we have gathered data on connected TV penetration, broadband infrastructure, SVOD uptake, and advertising expenditure in order to develop scorecards for market development and opportunities. These scorecards have been blended with the feedback from interviewees. The choice of methods reflects the emergent state of CTV advertising. Standardised questionnaires would fail to capture the nuance between countries, company- specific approaches and the crucial role of specific trading cultures and local market structures. Indeed, a too rigorously quantified approach would introduce error and prediction bias. We believe our methods provide direct and granular feedback from each markets with a view to ensuring our recommendations for market development are relevant and practical. 4 KEY FINDINGS Two Speed Europe Programmatic is Moving from Afterthought to Market participants in the European connected TV (CTV) advertising space Infancy are moving at two different speeds. Large global players, often with unified content, In most markets, CTV has been an evolution technology and data infrastructure, are from broader addressable TV offerings. The moving quickly to disrupt the market. combination of this heritage, paired with Local players are moving more slowly, concentrated high quality supply and the but are nonetheless actively deploying need to develop a roadmap for CTV first, next generation TV advertising solutions. has meant that programmatic has thus far However, adapting existing market been an afterthought. While programmatic structures and incentives to a CTV-first CTV advertising is small in comparison to world remains challenging and complex. the US, the sell-side is already building for a future where programmatic advertising will be a driving force for future growth. The Local Innovation is Ramping buy-side sees programmatic advertising as Up a means of bringing their own data to CTV advertising. CTV in Europe has moved from abstract intentions to tangible solutions. While the The TV Heritage Conundrum industry has been talking about CTV for the last ten years, most markets in this Many TV industry respondents were study exhibit an unprecedented density of hamstrung by internal competition and initiatives and market offerings that have a continued focus on the core revenues just been deployed. Respondents agree generated through linear TV advertising. that Europe as a region for CTV advertising While CTV is universally acknowledged lags behind the US, but that in the last 12 as a growth area, development is under- months markets have broken through the resourced compared to the magnitude glass ceiling of innovation. of change imposed by the diffusion of connected devices and new market entrants. 5 Incrementalism vs Market Making Buy-Side Power has the Potential to Erode TV’s Moat Respondents recognise incremental development is the most practical, economical and uncontroversial path The spend controlled by agencies has so far acted as a to CTV advertising offerings, but that they are missing moat that protects incumbent TV players. Rebates and out the opportunity to stake their claim in TV’s fastest deal structures have so far kept TV relatively immune growing sector. There is widespread concern that from falls in spending as agencies had a commercial deploying incremental innovations leaves the making self interest in allocating ad spend to TV. But shifting of the market to internal dynamics, TV manufacturers, advertiser expectations in measurement, targeting and new streaming services and platform operators. reacting to consumption change is expected to upset the existing trading advantages of TV. Paying Lip Service to Collaboration is Not Enough Widening Pool of Advertisers Expands Revenue Opportunity Incumbents recognise that the CTV advertising market will need to be proactively built through systematic CTV advertising’s ability to provide more granular target collaboration between local and regional players. Yet group segmentations and campaign delivery options developing sustainable alliances requires overcoming widens the pool of potential advertisers. In particular entrenched views of friend and foe, robust governance in the least mature markets, brands that have not structures, universal standards, and data sharing previously booked TV campaigns are among the early beyond mere sales house integration. adopters of CTV advertising. This opens a diverse pool of new spend, including local/regional advertisers and Double Fragmentation Creates direct to consumer (DTC) brands. Friction for Buyers Crossing the Psychological Buyers need CTV advertising to work in a frictionless Threshold towards a ‘CTV-First’ manner across sell-side offerings. However, inventory currently resides in multiple silos. Traditional TV Future advertising owes its success in part to the ability to deliver reach across different broadcasters in a CTV advertising is regarded by some as a bolt-on to harmonised manner. Yet individual CTV advertising ‘digital’ and not as the reality of how TV advertising will deployments from broadcasters and limits of technical look in the 21st century. Respondents highlighted how interoperability currently restrict the ability to recreate these industry attitudes have created a psychological this benefit in the domain of CTV. This is further barrier when it comes to accepting the need to exacerbated by TV manufacturers and digitally native redefine the business of TV, hampering the necessary CTV platforms who have introduced additional CTV investment in CTV apps, data strategies and the ecosystems which are often proprietary and lack deployment of programmatic technology. interoperability. 6 Protecting Market Sustainability Digital Acceleration During Covid-19 Through Managed Innovation Exposes Strategic Weaknesses Europe’s sell-side and media owner ecosystem has had Connected TV has seen a sudden consumption