WHITE PAPER A UK ADVERTISER’S GUIDE TO PROGRAMMATIC TV Table of Contents INTRODUCTION TV AD MARKET: INEFFICIENCIES TV IS NOT JUST A BOX IN YOUR HOUSE HOW DOES IT WORK? TV AD MARKET: OVERVIEW PROGRAMMATIC TV: THE PROMISE HOW ARE ADS BOUGHT & PLACED? WHAT SHOULD THE TRANSACTION CURRENCY OF PROGRAMMATIC TV BE? MEASUREMENT IN THE UK BARRIERS TO PROGRAMMATIC TV MEASUREMENT CHALLENGES A LOOK AHEAD ADDRESSABILITY VS. CONTEXTUAL TARGETING CONCLUSION WHY PROGRAMMATIC? GLOSSARY INTRODUCTION: Television is many things... To brand marketers, TV is the original brand-building medium — the largest screen in the house that rightly commands the lion’s share of their ad pounds and pence. TV ad buying is also one of the last frontiers largely untouched by buying automation – where billions of pounds are spent largely based on methods that have changed little over the past 30 years and targeting that is limited to age, gender and socio-economic demographic classifications. But that is starting to change. This introductory guide is designed to serve as a roadmap for marketers on TV’s past, present and future. At the outset, we should define what ‘programmatic TV’ means. In eMarketer’s white paper on the subject, programmatic TV is defined as ‘an automated, technology-driven method of buying and delivering linear TV ads.’ This guide takes a broader definition by including video on demand (VOD) and addressable TV. Of course, to consumers, all of these distinctions are nonsense – we live in a world where viewers move seamlessly between devices and platforms. The primary goal for any advertiser is to mimic this behaviour in their ad buying, moving toward a centralised approach that is agnostic about how or where an ad gets watched. 1 WHITEPAPER > AN ADVERTISER’S GUIDE TO PROGRAMMATIC TV TV is not Just a Box in Your House It is worth pausing to ask: what does “TV” actually mean in today’s world? After all, viewing now takes place in many forms across many screens. From a viewer’s perspective, this is the golden age of TV. Not only is the content better than ever, but viewers can now stream TV shows, live sports, movies and much more on nearly every screen. TERRESTRIAL TV For their part, terrestrial broadcasters and Pay TV providers continue to innovate Over the air broadcast their offerings. Most commercial TV companies enable viewers to watch both live and broadcast networks TV and video on-demand on almost every device. BBC, ITV, Channel 4, Channel 5 The growth of video has not escaped the notice of advertisers, who are following viewers online. According to data from Ofcom and broadcasters that has been compiled by Thinkbox, the marketing body for commercial TV in the UK, the proportion of overall TV viewing accounted for by broadcaster VOD was 2.9% in PAY TV 2014 – and growing. Sky reported similar numbers in an interview for this paper, Linear satellite and stating that between 2-3% of catch-up viewing is done on their on-demand cable TV content app, Sky Go. Today, 40% of the UK watches TV programmes using broadcaster catch-up services, such as ITV Player and 4oD, with an additional 16% using non- Sky, Virgin Media, BT broadcaster services (such as Amazon Prime). VOD via web 4oD, SkyGo, Virgin TiVo, ITV Player, Demand5 CONNECTED TV Internet-enabled TV and apps Roku, Amazon Prime, AppleTV, Sony PlayStation, Xbox, Netflix Source: Ofcom CMR 2013 2 WHITEPAPER > AN ADVERTISER’S GUIDE TO PROGRAMMATIC TV TV Ad Market Overview In the UK, the sellers of television ad inventory can be divided into two categories: broadcasters (i.e. ITV, Channel 4, Channel 5), and Pay TV broadcasters (i.e. Sky). The market is dominated by national advertising, but regional advertising is also possible. The UK is divided up into regions with some local programming tailored to specific regions. ITV offers advertisers the option to buy across 14 regions, while Channel 4 and Channel 5 offer six and four, respectively. Some content, such as local news broadcasts and community lifestyle programmes, are tailored to the region covered – but this is limited. Unlike in the United States, where local TV stations can (and often do) target local car dealership and retailer advertisements to a specific town or city, British advertisers are unable to target regionalised audiences in this fashion. However, Sky’s AdSmart, which allows advertisers to target Sky subscribers through their set-top boxes with tailored ads based on viewing habits, demographics, third-party data and geographic locations, is driving increased demand for local-level targeting capabilities. PAY TV VS NON PAID TV REVENUE Who Owns TV Inventory? The number of British households receiving free-to-air terrestrial broadcast programming versus Pay TV is roughly equal. Of Pay TV subscribers, the majority favor satellite over cable and other options. Source: Ofcom CMR 2013 3 WHITEPAPER > AN ADVERTISER’S GUIDE TO PROGRAMMATIC TV How Ads are Bought and Placed “Brand advertisers make campaign decisions at the beginning of their financial year and then decide a full year of placements in consultation with their media agency,” says Gawain Owen, Digital Lead of Nestle UK. “An ‘AB’ (advanced booking) deadline is then set In the US, TV content owners traditionally premiere their approximately eight weeks before transmission. Penalties autumn show line-ups at the ‘upfronts’, where they sell of varying degrees are placed on advertisers if they miss the the bulk of their inventory to advertisers for the entire AB deadline, change any aspect of the approved campaign programming year. The UK does not follow this pattern, laydown or cancel the campaign completely once the AB primarily for two reasons: deadline has passed.” 1. UNLIKE IN THE US, PROGRAMME PREMIERES OCCUR The UK TV market works on a monthly Station Average Price THROUGHOUT THE YEAR AND ARE NOT LIMITED TO THE AUTUMN (SAP) model across 14 traded audiences. A dynamic price for OR MID-SEASON (JANUARY) PERIODS. each traded audience is calculated by taking all broadcaster 2. UK TELEVISION PROGRAMMES HAVE TRADITIONALLY BEEN revenue and dividing it by the commercial impacts of each MUCH SHORTER IN DURATION. TOP-RATED ITV PROGRAMME individual audience. The higher the revenue and the lower DOWNTON ABBEY HAD ONLY EIGHT EPISODES IN ITS FOURTH the audience, the higher the SAP, and vice versa. SEASON, WHILE THE FOURTH SEASON OF CBS’ THE GOOD WIFE BOASTED 22. In order to secure advantageous rates, brands will commit to a volume or share of TV investment with a broadcaster on TV ad spots are typically planned on a Television Rating an annual basis. The buy and trading negotiation is usually (TVR) basis against age, gender and socio-economic done by a media agency - working on behalf of the brand - demographics. Ratings measure the popularity of a that will typically negotiate a discount off the SAP and airtime programme by comparing the number of actual viewers of quality parameters based on the share or volume offered by a programme against the total potential viewers as a whole. the advertiser. Higher levels of peak airtime, centre breaks Buying one TVR is the equivalent to reaching 1% of the and first or last in break ad placement all demand a higher target audience once. The measurement methodology is premium. This benefits brands, as the rates they receive are explained in the next section. often far lower than what others might pay on an ad-hoc or campaign-by-campaign basis. It is common practice in the UK for media agencies to negotiate an agency deal directly with a broadcaster where the collective spend of numerous brands is pooled together - usually resulting in even more significant discounting. The UK broadcast industry places strict regulations on creative approval , requiring clearance from Clearcast to ensure that all claims and statements can be verified and proven. Clearcast approval is a legal requirement as UK broadcasters are liable for any ads they broadcast. 4 WHITEPAPER > AN ADVERTISER’S GUIDE TO PROGRAMMATIC TV Measurement in the UK In the UK, television ratings are the responsibility of BARB. BARB (The Broadcasters’ Audience Research Board) is Sky’s AdSmart offering differs from BARB’s standard by an organisation joint-owned and funded by the BBC, drawing its ratings data from a household panel of over ITV, Channel 4, Channel 5, BSkyB and the Institute of 500,000 subscribers who provide viewing habits via their Practitioners in Advertising, is responsible for measuring set-top boxes. This data is cross-referenced with regional TV ratings. and lifestyle attributes, household composition and socio- demographic information to inform ad buys. There are around 5,100 households (approximately 11,500 individuals) across the UK that make up the BARB panel via special set-top boxes that record and track their viewing habits. Each panel member represents approximately 5,000 people in the UK. Using a special remote control issued by BARB, panel members are able to record minute- by-minute television viewing behaviours of all household members. The information is then collated and published the following morning as ratings. Few changes have been made to BARB’s ratings system since it was introduced in 1981. However, BARB is working on a new system called ‘Project Dovetail’ that will combine panel data and device-based data to create a hybrid measurement system solely across the broadcast market. The goal is to bridge broadcasters’ digital viewership information with BARB’s TV panel data, creating a more holistic measurement solution across traditional TV and digital video TOTAL UK TV AD CONSUMPTION: EQUALS BARB VIEWERS 2013 2014 THE UK 5,100 VS COLLECTIVELY BARB HOMES 11,500 WATCHED AN AVERAGE OF 2.65 TOTAL BILLION ADS PER REPRESENTS PEOPLE 38 45 DAY IN 2014.