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The State of Video Monetisation 2020
With dwindling linear viewing and rocketing online video ad spends, broadcasters have teamed up to form joint initiatives spanning OTT services, content pacts, and advertising.
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Economic stagnation and political uncertainty continue to dog the Eurozone, denting global advertising spend, according to ad consultancy Zenith. Yet ad dollars continue to pile into online.

Zenith, owned by French advertising group Publicis Media, said it would normally expect an increase in ad spending in 2020, benefitting from the US elections, the Tokyo Olympics, and the UEFA Euro soccer tournament. But with major European economies (Germany, UK) teetering on a recession, businesses have tightened their purse strings, in turn hurting advertising budgets. Nonetheless, internet advertising is on track, globally, to surpass more than half of all advertising spend in 2021, according to the firm's Advertising Expenditure Forecasts published in July.

In 2018, the global total for internet ads was 47%, with growth led by the overlapping channels of online video and social media, which are expected to increase at average rates of 18% and 17% per year, respectively, through 2021. These channels are benefitting from continued technological improvements to smartphone technology, connection speeds, and advertising targeting and delivery, combined with strong growth in content investment. 

Not surprisingly, TV's share is shrinking, though gradually. Zenith forecasts that traditional television ad revenues will fall from $184 billion in 2018 to $180 billion in 2021.

These trends are mirrored in Europe, where 2018 saw the continent's digital advertising market grow 13.9%—its fastest rise in 7 years—driven by video, mobile, and social spend. The AdEx Benchmark study, organised by IAB Europe, indicates that video grew by 30.9%, to €7.6 billion, accounting for 33% of the display market and contributing to a total €55.1 billion digital ad market value. "Mobile, video and social continue to drive growth across the region, with mobile now closing in on 50 percent of both display and search, and video accounting for a third of all display," according to Daniel Knapp, chief economist at IAB Europe.

While the UK topped the list at €18.4 billion and Germany placed second with €7.2 billion, the top five largest growth markets in 2018 were all emerging economies of the central and east Europe region (Ukraine, Russia, Belarus, Czech Republic, and Serbia).

UK online ad spend, relative to the size of the economy, is now the highest in the world, at 0.63 percent of the GDP, according to a report published by advertising think tank Credos and Enders Analysis. UK advertisers are set to spend 62% of their budget online by the end of 2020, making the country the third largest by gross amount behind the US and China.

Online vs. TV (Again)

Online ad spend and internet retail expenditure have both almost trebled since 2010, resulting in the development of a tech sector that employs tens of thousands of people and comprises more than 300 UK-headquartered companies, according to the Credos-Enders Analysis report.

Its findings were supported by an Advertising Association and World Advertising Research Center (AA/WARC) study, which had UK ad spend reaching £23.6 billion in 2018, with growth driven by increasing spend on search (up 14.3%) and online display advertising (up 21.4%). Notably high growth was recorded for ad investment in broadcast video on demand (BVOD), which rose 29.4% to reach £391 million and is forecast to grow at a similar rate for the next 2 years. Total TV investment was stable year on year at £5.1 billion. Stephen Woodford, chief executive at the Advertising Association, commented: "We see online advertising in all its forms continuing to perform strongly, demonstrating how the UK is Europe's leading online advertising marketplace." 

Thinkbox, the lobby group for UK commercial broadcasters, took aim at figures for the amount of ad spend now going to online video. "In 2018, it was £2.3bn. Take BVOD's reported £390m away from that and you have a non-broadcaster online video ad market in the UK of £1.9bn—26% of the total video ad market," argues Matt Hill, research and planning director at Thinkbox, in a blog post.

The cost-per-thousand for 30 seconds of non-broadcast online video advertising in the UK in 2018 was a whopping £45, compared to £6 for broadcast online video, according to Thinkbox.

Since TV, including BVOD, accounts for 95% of video advertising viewing, according to Hill, and online video such as YouTube, Facebook, and the long programmatic tail together account for 4% (with cinema accounting for the remaining 1%), the amount going to online isn't bringing much value for money.

"In other words, the average person watches 17 minutes of TV advertising a day (the 95%) and one minute of non-broadcaster online video advertising (the 4%)," Hill says. "Yet AA/WARC figures show that £1.9bn was poured into that single minute a day and £5.1bn into the 17 minutes. That means 4% of video ad viewing took 26% of video ad spend; the other 95% of video ad viewing took 70%." 

The UK's most popular and expensive single campaign ad each year is for retailer John Lewis and Partners. Its Christmas ad production budgets exceed £1 million but prove its effectiveness by driving up sales. This year's ad reportedly equates to £11 of profit for every £1 spent.

Addressable TV Goes Mainstream

The rise of addressable TV should be seen in this context. According to Mindshare, addressable TV is forecast to boost its UK market share from 1% to about 30% of total TV ad spend by 2022, making it worth more than £1.35bn.

A study released by Sky in August suggests that addressable TV cuts channel switching by half and boosts ad engagement by more than a third. With its addressable platform AdSmart, Sky has created 17,000 campaigns for 1,800 advertisers since its launch 5 years ago. It is expected to reach 60% of UK households by 2021.

Across linear TV, time-shifted TV, and online, addressable advertising will rise to 30% of the overall TV ad spend by 2022, according to Mindshare.

UK commercial broadcaster ITV continues to plough its own path. Working with Amobee (owner of ad-tech firms Turn and Videology) since the beginning of 2020 to develop an addressable TV network on ITV Hub, it plans to launch the service as Planet V in February 2020 as a rival to Sky AdSmart. 

With ITV Hub hitting 30 million registered users and as the primary ad space for the ITV/BBC-owned streaming service BritBox, this is a significant step for ITV. 

Planet V combines ITV's unparalleled mass simultaneous reach with targeted advertising. Kelly Williams, managing director of commercial at ITV, said in a press statement, "It will be a continually evolving platform, providing the very best frictionless, data-driven buy, in a premium, brand-safe environment, for our clients."

However, AdSmart has already locked down Channel 4 and Channel 5 as well as access to linear TV channels in Virgin Media households, while the BBC is experimenting with AdSmart to run personalised promotional content. 

According to Enders Analysis, "the adoption of Sky AdSmart and similar services on YouView and Freeview could take addressable TV ads from a sideshow to a pillar of revenue."

All of this is a drop in the ocean compared to the grip that Facebook and Google have over the UK ad market. According to eMarketer, the US tech giants will command 68.5% of the £14.56 billion ($19.41 billion) UK digital ad market this year, a figure expected to surpass 70% by 2021.

To put things in perspective, all of the increases in online video ad spending are a drop in the bucket compared to the grip Facebook and Google have over the UK ad market. The tech giants commanded 68.5% of the UK market in 2019.

Elsewhere in Europe, three French broadcasters, France Télévisions, M6, and TF1, have created Sygma, a common standard for advertisers who want to buy inventory on their video-on-demand (VOD) services programmatically. The idea is to make it easier for buyers to access inventory from all three broadcasters, plus reduce wastage and types of fraud.

The European Broadcaster Exchange (EBX) is a joint venture of four broadcasters in the five leading European TV markets: Germany's Pro­SiebenSat.1; TF1 of France; Mediaset, covering both Italy and Spain; and the UK's Channel 4—although there is little word on its success.

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