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Connected TV and OTT combine the “living room” viewing experience of linear TV with the data and targeting capabilities of digital, presenting a fascinating opportunity for advertisers.  However, the question of how to approach this opportunity is still up for discussion, providing the framework for an expert panel at the recent VideoNuze SHIFT event. Here’s who was on the stage:screen-shot-2017-01-03-at-10-46-36-amSpotX SVP of Global Revenue Sean Buckley joined the panel to analyze the environment of connected TV and provide insight on how advertisers and media owners approach it.

The conversation hinged on 3 central topics:

The Future of Ad-Supported Content on Connected TV

Consumers are the key to driving value for media owners, who must strike a delicate balance in order to monetize their audience while preserving the user experience. Connected TV devices can host both ad-supported and subscription-based services, but what are the proportions? The panelists agreed: ad-based content is experiencing high growth, but won’t necessarily replace subscriptions. Scott Rosenberg of Roku attributes this trend to the fact that the market for subscription services is maturing. People who are moving away from linear TV already have Netflix or Hulu—they’re not looking to stack another ~$10 service on top of that. They’re looking for value, which ad-supported media can provide.

Watch the full panel:

SpotXer Sean Buckley approached the question from a different angle, considering the economics of subscription and ad-based services. Media owners on ad-supported television earn about 30 cents per viewer per hour of view time, whereas with a model like Netflix, the number is closer to 11 cents for the same viewer. This, he reasoned, makes the case for a hybrid monetization model which offers both a free ad-supported option and a subscription.

Balancing Value for Media Owners, Consumers and Advertisers

Connected TV offers choice and personalization that isn’t available through linear TV—a noticeable value add for consumers which advertisers and media owners must take into account. This begs the question: what type of ad load is appropriate for the connected TV environment? According to Rosenberg, the ad load on CTV is generally lighter, but the panelists agree that there is still a lot of work to be done to improve that ad experience for consumers. Brands need to think outside the box of pre-roll and interstitial ads and find innovative ways to gain exposure to consumers through media content. Beyond this, personalization and ad targeting should help define the balance, perhaps even lightening the ad load. Seth Walters of Modi Media said that the goal is to define a value system that allows for fewer ads and a better consumer experience while still enabling media owners to earn enough money. One possible solution would be for media owners to charge a premium for ad inventory on connected TV, justified by the increased data and targeting capabilities that are available in that environment. Walters maintained that the ad load challenge is what makes the case for programmatic buying in connected TV—as consumers continue to signal that they don’t want too many ads, it’s more and more important for those ads to be targeted, which can be done programmatically with the data made available on connected TV.

Addressing Scalability Issues

Advanced targeting is the goal for media owners and advertisers alike, but there is a tipping point, beyond which the cost of that targeting will no longer make financial sense. This creates another challenge: how to reach audiences at scale while still making use of the data and targeting capabilities that make connected TV unique. One roadblock is simply that the technology needed to do this effectively hasn’t been adopted across the market. Connected TV usage is on the rise, but available technology differs from household to household. So, while viewership on traditional linear TV may be declining, more consumers need to adopt connected TV in order for it to achieve the scale that was available through linear. Walters answered the scalability question from the agency perspective: The process and practice of connected TV buying needs to be organized in such a way that the buy side—leadership included—understands exactly what a connected TV purchase means and appreciates its value.

It’s clear that connected TV will play a major role in the future of video advertising, but the industry still needs to find a consistent way to articulate its value for advertisers and media owners while preserving a premium user experience that will continue to drive adoption among consumers.

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