What next for commercial TV?

As 2015 draws to a close, Sky Media’s Jamie West reflects on TV’s crowning achievements and current challenges – and gives his thoughts on what next year will have in store.

TV’s technological advances have never been as plentiful as now, and confidence in commercial television has never been higher. Is this cause and effect, or just coincidence?

I think they’re closely related, but I’d urge advertisers to keep their advertising objectives front of mind as we approach 2016 because it cannot possibly be the case that every new development is right for their circumstances. For instance when every mention of programmatic is fawned over it’s a sure sign that our industry’s critical faculties need recalibration.

TV advertising expenditure has been on a sustained growth path for a few years now. I would suggest this is broadly in response to a recovering economy, higher programming investment, increasingly engaged audiences and a growing conviction among marketers of TV’s outstanding effectiveness.

However, technology is also playing its part. There have been significant advances in TV ad tech recently which has helped open up television to more brands. Every week we see new-to-TV advertisers using the improved audience targeting, campaign control and data-driven capabilities. They’re joining the ranks of existing advertisers who are investing more on TV for those reasons and many more besides.

With these points in mind, looking at the market as a whole I have tried to identify some of the areas where we anticipate above-average growth next year.

US and us

I’m expecting the big tech giants like Facebook, Apple, Microsoft, Twitter, Amazon, and Google to grow their TV advertising further in 2016 – I want to say ‘paradoxically’ but it’s precisely not. They know better than most how TV advertising works, and how it powers product searches and social media comment.

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The UK is also familiar territory to them which must help, with programming like Game of Thrones, Modern Family and Homeland, and broadcasters like Discovery, FOX and Viacom.

Incidentally we can expect US companies to continue driving advances in ad tech too. In data, programmatic and services like on demand and online, US companies are leading the way: Cisco provides expertise behind Sky AdSmart, Freewheel are working with Channel 4 and Sky, RadiumOne with ITV, VideoAmp and Spot Xchange with RTL in Germany and of course Videology have just begun a proof of concept with Sky.

That said, UK broadcasting doesn’t merely replicate US trends. The misapprehension that we do has been comprehensively debunked by Decipher, among others. We have different TV infrastructures, advertising cultures, regulation and everything else.

The UK adopts US tech, programmes and ads as its own – but cord-cutting, Super Bowl ads and excessive ad minutage are alien to us. We are fortunate in benefiting from the best aspects of contemporary TV without suffering the worst ones.

Sky AdSmart

I’m sure you’ll forgive me if I say it’s great to see Sky AdSmart opening up TV to SMEs and niche brands. More than 700 advertisers have used Sky AdSmart since it launched two years ago, and around 70% of them are new to TV or new to Sky.

The ability to target specific audiences using a combination of 400 audience attributes, postcodes and even advertisers’ own data is proving to be extremely popular. Sky AdSmart will grow rapidly in 2016 and for many years beyond.

Programmatic

Programmatic trading is accelerating rapidly. The automated trading of audio-visual ads in online and on-demand, using extensive data sets to target audiences with more precision than conventional trading, has opened up a whole new world.

When it is used well – e.g. in partnerships between agencies, advertisers and publishers – it offers novel solutions for defined planning approaches, brand needs and communication requirements, and therefore it will grow.

While the development of programmatic adds another string to advertising’s bow, I do however strongly question whether its momentum stems from decisions being made in pursuit of ad effectiveness, or just for profit through yield, arbitrage and margins.

Clients in both the US and UK are right to question media placement motives and quality parameters. The new investigation into trading practices by the ANA in the US suggests that clients’ trust is fragile – unsurprisingly you might think, given that they will have paid for impressions, that real people won’t have seen, for a start. The latest botnet, Xindi, will reportedly cost US advertisers $3bn if not stopped.

For programmatic trading to flourish there needs to be fair value exchange, as in any market. Publishers are looking to safeguard their valuable first party data. In Sky’s case, the security of our first party data is absolutely paramount. We won’t be allowing others to harvest our online commercial data for their own ends.

Publishers like Sky are seeking to apply the rigour of broadcast standards to programmatic advertising, rather than online display’s looser regulation and oversight.

To that end we’ve recently announced we are licencing technology from Videology to develop a proof of concept for Sky which faces the challenge of managing regulatory compliance, clash codes and time of day, not to mention optimising our inventory and protecting first party data. Much of this is labour-intensive at present; automation is creating a higher value ad platform. Which leads me to mention…

Sky AdVance

Another example close to home, I know, but Sky AdVance launches on 1 January and is the first service to fully co-ordinate advertising across TV and online, at scale. The media planners’ dream of seamless, integrated campaigns across TV and digital is now a reality.

Just by reading the above, you can see that each tech development has opened up new angles, avenues, perspectives and possibilities. Some link TV directly with complementary channels like online; some use large-scale data; some use technology to target viewers more precisely than has ever previously been achieved.

My note of caution though is that tech businesses and agency holding groups might be more motivated to pursue arbitrage margins than improve advertising outcomes, and clients must be aware of the potential conflicts of interest.

Commercial TV has developed a momentum that not one person predicted five, 10 or 15 years ago. This is at least in part due to the continuous flow of new TV ad tech creating a more accessible and effective medium for advertisers.

However, the main propellant of TV’s success remains the creation and broadcast of superb programmes that viewers love. Whether your preference is The X Factor, Gogglebox, The Great British Bake Off, Big Brother or Game of Thrones, you can enjoy some of the world’s best TV at home or on-the-go this week.

Jamie West is deputy managing director at Sky Media.