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The U.K.—Not the U.S.—Leads the Shift to Programmatic Advertising

Programmatic trading is well on its way to dominating the digital ad space and momentum is building to transfer its benefits to TV, with the U.K. arguably leading the way. Barriers blocking the technology's path will likely see broadcasters and agencies adopting the automation and data gathering efficiencies of programmatic transactions first, while real-time auctions lag some way behind.

"Programmatic TV makes sense around automation, the area which will really start to gain traction in 2016," says Thomas Bremond, European managing director of video technology company Freewheel. "However, programmatic has to solve a few questions before broadcasters fully embrace it from a technical and a business standpoint."

Advertising_LGThe technical barriers vary from country to country, he says. Those with a high penetration of digital terrestrial TV—a one-way street as far as return path data is concerned—make addressable advertising methods hugely difficult.

"Even for those countries with more set-top box-driven markets there are [privacy data] laws preventing change to the advertiser dynamic," says Bremond. "This also makes programmatic in its full sense a tough value proposition."

Rich Astley, U.K. managing director for online ad platform Videology, is more bullish. "2016 will be a seminal year for programmatic TV and for the U.K. in particular," he says. "There are a lot of products launching from broadcasters and tech companies and the end goal is simple: Advertisers are requiring better access to audiences and more granular information about audiences, and agencies are looking for more automation and efficiency in the way they trade."

The U.K. is well placed for programmatic TV's introduction, he argues. "It has a strong infrastructure for both programmatic and addressable TV. It has very advanced platform operators in Sky, Virgin, and, to an extent, BT, but also a very forward thinking trading economy where there's a lot of innovation pushing for change. From an infrastructure standpoint it has high broadband speeds and a very strong adoption of connected TV in both internet connect STBs as well as app-based devices."

By contrast, the U.S. market, Astley says, is much more fragmented. "There are a few players like Cablevision which are very advanced in programmatic and addressable, but some bigger media companies are delivering only a fraction of their inventory using addressable techniques," he says. "In many cases, the infrastructure is dated and may not even be IP-enabled so dynamic insertion won't exist for some time."

Recent research by media regulator Ofcom (in its International Communications Market Report 2015) suggests the U.K. is more advanced in terms of online video consumption than nations such as the U.S., Japan, and Australia. Some 42 percent of homes own a connected TV, more than half of U.K. adults own a tablet, two-thirds own a smartphone, and 31 million adults (70 percent) use free-to-air digital catch-up services like BBC iPlayer and ITV Hub.

In January 2016, Sky launches Sky AdVance, an evolution of the Sky Adsmart addressable ad platform, which connects ad buys across online and TV screens. Sky Media, the pay TV broadcaster's ad sales division, expanded its TV audience measurement capabilities to harvest data from 3 million households in October, providing program, spot, and sponsorship viewing as well as recency and frequency data.

"This combined TV, online, and mobile knowledge opens the door to advanced cross-platform understanding and delivery," said Jamie West, deputy managing director of Sky Media, in a statement. "The scale of the data we now possess gives us the ability to interweave TV and digital advertising like never before."

Commercial broadcaster Channel 4 has rolled out a programmatic market around its nonlinear VOD and live streaming offering All 4; and ad-supported broadcaster ITV has struck a programmatic deal with RadiumOne enabling TV and online ads to be synced. ITV Ad Sync+ will extend reach "to include people who may be watching the TV show but start multi-screening during the ad break" according to RadiumOne "or those who fit the target group of the TV ad but weren't watching TV in the first place, but are currently online."

Astley, however, identifies compliance as a "huge challenge" to the pace at which the industry can evolve. In the U.K., all spot ads for broadcast are managed by clearance service Clearcast, and it is not clear how this longstanding regulatory process can transition to a dynamic ad-insertion model.

"With multiple different ads potentially rotating in from multiple brands you need to make sure that when an ad request is made you can return an ad that manages the compliance for a particular show and day part [time of day]," he says.

Bremond agrees; "There is a lot of regulation in the U.K. which makes it very cumbersome to introduce programmatic. Broadcasters need to be 100 percent sure what ad is going to come back. TV is still a very premium medium and needs to be managed in a different way to digital."

However, Nick Reid, managing director of ad-buying platform TubeMogul, believes compliance is only an issue if programmatic TV involves real-time bidding and airing. "Programmatic is simply the use of software to optimize (and potentially buy) advertising. It would be very easy to introduce an approval process to the system if required."

Tubemogul, Videology, and Freewheel have been working to address compliance issues with Channel 4. "The issue with TV is how to make this happen in a STB or broadcast manner," says Bremond.

Channel 4 is exploring a solution that delivers ad break scheduling and ad decisioning, potentially in real-time, and potentially using BARB and the broadcaster's own first party data. "We believe this has greater value long term since it is less reliant on third-party STB technology," explains Jonathan Lewis, C4's head of digital and partnership innovation. "We are deliberately not referring to this as programmatic but as automated ad allocation. It will be probably by ready by the end of 2016."

All U.K. broadcasters are working out their long-term direct-to-consumer strategies. "For example with All 4, Channel 4 now has a very strong direct-to-consumer product which can be accessed by any connection and doesn't require a user to have any bundle or package," observes Astley. "It's a totally dynamically addressable product. The next step is to manage the relationship with platform operators, such as Virgin or Sky, which requires a lot more cooperation for making an addressable product via their STBs. I do think we will start to see strong levels of addressability of direct-to-consumer product in the U.K. market, but programmatic and addressable products via STB and platform operators will take more time to get agreement on."

Freewheel's Bremond agrees that real-time bidding of broadcast premium video will take a while to fully introduce.

"Online display ads will soon be 80 percent traded, but premium video is a very scarce and policed inventory," says Bremond. "Does it make sense for those with scarce inventory to go down that road? Most players are taking time to understand the impact it will have from a pricing and metric perspective. The key question for broadcasters is 'do they want to jeopardize reach and impact to get down to individual level?'

"Broadcast sellers are more driven by automation and use of data," he says. "These are the cornerstones of programmatic and will be the focus in 2016—not real-time bidding."

Adrian Pennington's article first appeared on OnlineVideo.net

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