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Advertisers Not Interested in Connected Devices, Finds Study
While video viewing on devices is increasing, advertisers aren't reaching the increasingly fragmented audience.

Video viewing across connected devices in Europe is growing quickly, with Europe leading the United States when it comes to IP-delivered video on devices. Advertisers, however, don't yet see the potential, announces a study by ad management platform Videoplaza and analyst IHS Screen Digest. Advertising on connected devices isn't keeping up with the rise in viewership.

A whitepaper that contains the study's results, "A Future for TV: IP-Delivered Video Advertising in a Connected World," finds that brand advertisers are far more willing to market to viewers on desktop and notebook computers than those on mobile or living room devices.

The study takes a cautionary approach, warning brand advertisers that they will miss out on growth by not reaching out to a range of connected devices. Videoplaza notes that for its broadcaster clients, ads to connected devices grew from 2 percent to over 16 percent in the past year. The paper suggests that advertisers need to serve multiple platforms to reach a fragmented viewing audience.

"Even through TV is strong, remains the world's biggest ad medium and still takes every third ad euro being spent, the fact is that growth has now flatlined," said Videoplaza CEO Sorosh Tavakoli in an interview with Streaming Media. "Broadcasters have to find growth elsewhere. Luckily there is a massive growth opportunity in IP-delivered advertising thanks to the explosion of IP devices. The infrastructure is out there but it is currently untapped potential."

The research suggests that broadcasters' understanding of the TV audience has changed for the better, but that they must advance their IP-delivered video advertising strategies to ensure sustainable growth in the monetisation of content.

Specifically, it found that in Europe, TV remains advertisers' first choice for reaching audiences at a national scale, and for building brand awareness, but flat growth over the past five years (1.4% Western Europe, 2.5 % U.S.) means it is facing stiff competition from connected platforms, taking over its audience share.

Moreover, IP-delivered video advertising is not matching the upward trend of content consumption on connected devices at the same rate. "The future of TV is IP-delivered, and the battle for how that's going to play out is happening now," commented Tavakoli. "Advertisers and publishers are not investing in cross-platform opportunities fast enough to gain the needed market share for when IP overtakes broadcast."

With IP-delivered video ad revenues at around €300 million across the top five European countries and with audience reach still the most critical asset, advertisers are looking for in-media properties, states the report. With an increase of 53% in Europe and 43% in the U.S. just this year in online display ad revenues, publishers cannot ignore the fact that their audience is beyond the TV and PC, it says.

The report stated that there are 124 million connected living room devices in Western Europe and North America right now. By the end of 2014, there will be more connected living room devices than PC or TV households. The growth in connected devices is leading to a double fragmentation—of the traditional audience and of increasing sources of content, driving up costs and increasing the competition to reach viewers scattered across platforms and devices.

"Content consumption via connected devices is outgrowing monetisation," warns Tavakoli. "IP offers more flexibility and reach, raising the bar for successful content monetization with a device agnostic approach.

He continued, "The shift from broadcast to IP delivery has started to happen and while proactive media companies are starting to leverage this, those that don't will lose out. The reality is that this is a question of survival and if a broadcaster does not manage to shift their audience online they will not only leave money on the table, they will lose their audience.

"For those media organisations that don't currently have a broadcast operation, the barriers of entry are down and they can play the TV game. The $200bn of global TV ad spend is up for grabs. For Bloomberg, Facebook, Google and others it's a mouthwatering opportunity.

"Regardless of who they are they need to act now and gear up. You need to align your business from board to operational level and invest according to the potential you see. You need 12-24 months to get up to speed which, for many, means hiring-in knowledge and developing a content, device, distribution and a technology strategy," he argued.

Content shouldn't be a problem for broadcasters but they need to make sure that it is syndicated to where the audience can find it. Moreover, advises Tavakoli, "they need to make sure that advertisers can only buy against that content from you" to avoid hemorrhaging revenue."

On devices he says, "you need to be very committed but agnostic."

"The tipping point is happening now. Media companies realistically have a 12-24 month window of opportunity to get prepared before the audience significantly shifts on to multiple devices," emphasised Daniel Knapp, Director of Advertising Research, IHS Screen Digest. "With fewer and fewer barriers to IP-delivered video, the competition from new players in the connected space is also set to intensify. This means that broadcasters should act fast to monetise their content equity."

Ad revenue for IP-delivered video is currently at €300 million for the five largest European countries, the study notes.

The white paper is available for free download, although registration is required.

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