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Smart TV and Multi-screen Advertising: Prospects for 2012
In-depth analysis addressing the major technical challenges, investment opportunities and innovations that are changing advertising in the connected era By Lisa Roner and Tom Sapsted
With Insights from:
Introduction With smart TV revenues set to reach $95 bln by 2015 and 15 bln video enabled connected devices predicted by 2020, advertising on Smart TV and across multiple platforms will inevitably mean big business. The opportunities are endless. That being said, advertisers, broadcasters and technology vendors are exploring this nascent industry only tentatively. Last year alone $29 billion was spent on TV advertising. On online video advertising a further $3.1 billion was spent. Online video ads are expected to grow 20% in 2011 and then average 20% global growth through 2016 [Magna Global] Huge problems hinder the growth of the Smart TV advertising market. The move away from linear broadcasting means the industry must adapt. With the new opportunities on Smart TV and across multiple devices, broadcasters, content owners, TV manufacturers and advertisers are changing their strategies, adapting to new technologies and offering new services. This can only mean increased exposure for advertisers- new ways to reach the masses. Research covering 124 advertisers across 16 major industries discovered that there is experimentation with advanced ad placements [Forrester]. Nearly half of the advertisers said they were testing or planning to test advanced TV ad placements in the next 12 months via platforms such as video on connected TVs. All the signs are there: advertisers are now tuning into the opportunities.
Smart TV and Multi-screen Advertising Summit 13-14 November, Hotel Kabuki, San Francisco Build effective business models and increase scale and reach for innovative advertising in the connected and multi-screen TV era
www.smarttvsummit.com/advertising
Despite these remarkable figures uptake with Smart TV and multi-screen advertising has been tentative at best. Fragmentation is a massive deterrent for investment, increasing scale and reach needs to be a priority, creating an effective business model is now vital. Questions need to be answered. How to form effective partnerships be formed between advertisers, broadcasters and the leading technology players? How can we overcome a fragmented market? How can we build a business model that suits both advertisers and publishers alike? What can be done to get the reach and targeted style commercials that advertisers desire? What will the tablet mean for broadcasters and advertisers? How do we get investment from the major brands?
The Smart TV and Multi-screen Advertising Summit takes place on 13-14 November in San Francisco will bring together leading content owners, broadcasters, advertisers, brands, OEMs and platform providers to allow you build effective business models and increase scale and reach for innovative advertising in the connected and multi-screen TV era Ahead of Summit, Smart TV Insider spoke to four of our speakers who have kindly given their thoughts on the most important questions:
What are major technical challenges that are currently

hindering the growth of Smart TV and Multi-screen advertising?
What are the new and exciting innovations with Smart TV

advertising?
How can we encourage investment form the major media

buyers, advertisers and brands? What needs to be done?
What is the forecast for Smart TV and multi-screen
advertising in the future? When will widespread adoption take place?
Expert Speakers: Michael Bologna, Director, Emerging Communications, GroupM
Mike Bologna, Director of Emerging Communications at GroupM is known throughout the industry for his expertise in the field of digital communications. Mikes primary role is to assist in the development of marketing and advertising applications for GroupM clients on advanced digital platforms, including Addressable Television, interactive iTV, video on-demand, DVR and wireless; he has handled key digital campaigns for American Express, Conaga Foods Paramount, Mattel, and AT&T. As more and more clients choose to explore these new digital platforms, Mike helps them identify suitable partners and manages their initiatives to maximize learning, ROI and client satisfaction. Mike has been featured on Television Weeks Hot List as one of the top 10 players, age 35 or younger, who are making a mark on the industry. He is currently a member of the 4As Digital Video Innovation Committee and regularly authors an agency newsletter which provides news, views, and insights from the cutting edge of Emerging Communications.
Dietrich von Behren, VP, Digital Media & Investments, A&E Television Networks
Dietrich von Behren is Vice President, Digital Media and Investments for A+E Television Networks. He leads business development on the west coast, identifying new ventures, partnerships and investment opportunities for distribution,
enhanced revenue and increased engagement for all online properties within A+Es portfolio. Dietrich opened and manages the companys flagship west coast digital media office located in San Francisco. Prior to A+E, as founder & CEO of ParentsClick Network, Inc., Dietrich established MothersClick.com as the recognized flagship site and successfully positioned it as one of the worlds first social networks for the rapidly growing audience of moms online. ParentsClick Network was acquired in 2008 by Lifetime Entertainment. Dietrich is a director of the Connected TV Marketing Association (CTVMA).
Wendell Wenjen, Director of Strategic Alliances, LG Electronics
Wendell Wenjen is director at LG Electronics Innovation Development Group located in San Jose where he is responsible for the US Smart TV advertising business and interactive TV strategy. Previously he has held marketing and business development positions at Intel and Acer. Wendell received Bachelors and Masters degrees in Electrical and Computer engineering from Harvey Mudd College and an MBA in Marketing from UCLAs Anderson School.
Kemal Altintas, Senior Manager Business Development and Product Innovation, LG Electronics
Kemal is an expert business development and product management professional focusing on Connected Consumer
Electronics, Digital Media and Pay TV space. Currently, he is a part of LG Electronics Innovation Development Group, bringing new technologies, services and business models to LG Smart TV products. Specifically, he is bridging the gap between tablets and smart TVs, introducing social TV experiences to the market and building cloud based services on the platform. Prior to LG, he spent time at DivX, working with global pay TV operators and set top box manufacturers. He spent many months in Europe talking to operators and manufacturers and still enjoys jumping on the plane and going there. He holds BS and MS degrees in Computer Science and an MBA with a focus on Technology Marketing.
What in your view are major technical challenges that are currently hindering the growth of Smart TV and Multi-screen advertising?
Michael Bologna: Advertising today operates fairly consistently across the majority of traditional media outlets. In most cases, media is planned using the content as the surrogate for the audience and messages are distributed according to an advertisers reach and frequency goals. There are creative and economic standards for each channel that keep the business operating on course. Unfortunately, similar standards and processes do not yet apply when talking about Smart TVs. As with any Connected device, a Smart TV presents significant advertising potential once scale is achieved and some of the complexities are reduced and potential conflicts resolved. In an ideal world, the advertiser would have access to the entire footprint of Smart TVs regardless of the manufacturer; this would allow them to seamlessly insert their message to reach the appropriate audience within that national segment. We would then overlay the necessary interactive features which would be consistent across the desired footprint. This is not the case today, as advertisers must cut specific deals with each manufacturer (Samsung, LG, Panasonic, Sony, etc.) and cobble these together to generate scale. This process is complex, time consuming, and costly, and it is currently hindering the short term growth of the medium. These challenges are consistent with all of the Advanced Television business, where the primary technology and capabilities reside within each system. Advanced advertising on Comcast is different from advanced advertising on TimeWarner versus Direct TV versus Dish. In many cases, advertisers express interest in the benefits of advertising on these platforms, but are ultimately discouraged from campaign execution because it is costly to build the applications for all the different systems. This is the key hurdle we are faced with today in Smart and/or connected televisions. Over time, this will improve. Technology will evolve, creating a consistent platform and multiple consistent platforms equal scale. This evolution has already begun with companies like YuMe and Rovi that have cut deals with several of the Smart TV manufacturers to represent their inventory and act as an insertion engine for deploying an advertisers message consistently across more than one manufacturer. Multi-screen viewing is defined as the consumers ability to watch a piece of content on their own terms across a variety of different screens. There are 7 to be exact: TV, DVR, VOD, FEP, Tablet, Smart Phone, and Connected TV. This applies to
programming that originated on television as well as nonTV based video content that was produced and deployed specifically for non-linear formats. Today, our biggest challenge is that there is no single source that measures the viewing of a piece of video across the multiple screens in a consistent manner. Multiple data sources like Nielsen and ComScore are used to measure each medium individually, but it is currently not feasible to measure the sum total of all video viewing, specifically when it relates to tablets, smartphones and connected TVs. Multi-screen viewing is a good thing because it gives viewers the ability to watch what they want, when they want, however they want, and on whichever device they choose. It benefits advertisers, because it allows us to get our message out to a myriad of different consumer targets, regardless of their viewing habits. The number of alternative screen viewers continues to grow, however, for efficiencys sake, we need consistency of measurement so that the advertiser can achieve an accurate count of a campaigns impressions, reach, frequency, and unduplicated audience across all screens. Dietrich von Behren: Technical challenges are actually secondary to marketplace pressures. The primary issue for Smart TV and cross-platform advertising is audience size. While digital consumption is growing rapidly, the numbers are still greatly outweighed by broadcast. However, given the adoption curve of connected devices and future projections, advertisers will soon see more viable sales opportunities and should start considering fully integrated campaigns. Secondly, as the Smart TV and multi-screen opportunity develops, the ad industry and content distributers will define standards and measurements which will both improve and encourage growth around social engagement and experience. Kemal Altintas: Generally, there are no major technical difficulties right now. Its more an issue that there are not many examples yet. This lack of experience is the biggest
challenge right now. But in terms of technical difficulty, making the two devices talk to each other is possible today. Twoway communication channels on the cloud and syncing to applications and devices is possible. So I dont really see a major challenge in terms of technology. If anything, its about settling on a standard technology that everyone agrees upon. But otherwise, I think the technology is almost there. Wendell Wenjen: In terms of the Smart TV based advertising, I concur that there are very few major technical challenges. LG launched an advertising service last November on our Smart TV platforms. And in March, we launched the second generation of that. Other manufacturers have done similar initiatives. We are continuing to work on new types of ad units that are more engaging and more immersive. There are some technical improvements that allow multiple video screens to be shown simultaneously, but were in the very early stages of developing these types of ad experiences. I think that as advertisers and agencies get more experience in trying out different concepts, and testing and measuring their effectiveness at audience engagement and increasing brand awareness, those kinds of experiences will be more common.
Smart TV and multiscreen possibilities with advertising are endless, what are the new and exciting innovations in this space from your perspective?
Wendell Wenjen: Were in the very early stages of these kinds of advertisements. I think right now were seeing whats been adapted from the Web and online worlds shuttled to the connected TV and multi-screen. Things like banner advertisements, pre-roll and mid-roll video advertisements and different kinds of interactive advertising models are beginning to be seen on these devices. Whats very interesting now is that were starting to see the TV and tablet paired. That content can be pushed from one device to the other. Different kinds of interactivity can be placed on the device type that most easily provides a user interface for interactivity. And there are new types of technology under development to detect the kinds of content being viewed on the TV in order to provide relevant recommendations and companion content, and doing that relatively automatically. Those are interesting areas that well start to see expand in the next year or so. Kemal Altintas: I think the device types have their own distinct advantages. For instance, TV is a larger screen, and by definition is a device for viewing content. But mobile devices are very good at interaction - you can touch it, you can do gesturesshake it even - and it will respond in a certain way. I think a combination of the two has advantages. Depending on what you want to achieve, or which device youre focusing on, you can create a lot of great experiences. For instance, if the focus is on the mobile device, you can continue to interact on that one while Im simultaneously showing a video on the TV. Or vice-versa, while your attention is on the big screen TV, you can start showing interactive advertisements on the second screen. If the user chooses to interact with it, its always in their hands. They also can put it aside for awhile without interrupting the main content on the big screen. I think the real key is a pairing of the two devices. But were really at the early stages. We dont necessarily understand all the possibilities or opportunities out there. Were just scratching the surface right now. Dietrich von Behren: I believe the real excitement for advertisers tapping into the new digital platforms comes around contextual targeting and leveraging time-based meta data, which is being built out by content providers and other services. New revenue channels and real-time commerce opportunities are going to explode with Smart TV and second-screen interactions. The unique ability for advertisers and marketers to increase brand awareness through more meaningful engagements with consumersreaching them at the right time, while also being able to measure campaign performanceis driving the industry evolution.
Michael Bologna: Smart TVs offer advertisers a very powerful capability - the ability to make a national 30-second commercial interactive. Providing viewers with the option to spend more than 30 seconds with an advertisers brand is something wed love to offer, but we currently do not have the functionality to do so on a national basis. A Smart TV has the ability to read an embedded code, which triggers interactivity on a 30-second commercial. This capability allows a viewer to click on the TV spot and link through to an enhanced advertising experience, which provides viewers with the opportunity to engage more deeply with the brand through additional video content or a game. This presents a great potential value to advertisers, however, the key will be, again, for manufacturers to make the execution of such campaigns as easy, consistent, and scalable an experience as possible. If an advertiser is forced to create a different commercial overlay and a different virtual channel for each and every manufacturer, then the potential value to clients is significantly reduced and no longer makes sense.
How can we encourage investment form the major media buyers, advertisers and brands? What needs to be done?
Michael Bologna: All major advertisers need scale, measurement and accountability. Just having a cool, new platform isnt enough. We need to know more about the actual audience, as well as the potential audience. Its a challenge to get an accurate assessment of how many Smart TVs are out there, let alone how many are currently in use, who is using them, and what theyre using them for. To get mainstream advertisers excited and involved, its going to take a little bit more clarity surrounding who the audience is and how many people we are talking about. The vast number of smart TV manufacturers and their projected growth in sales is not what is important to advertisers. There are too many other ways to reach the consumer. Most major advertisers are involved in advertising across multiple screens, and have been for some time now. Its been five years since ABC made Greys Anatomy available on the internet, and now its available on the 4 other screens. Advertisers are involved in the multi-screen environment; were just not where we need to be in terms of accurately measuring the audience. Wendell Wenjen: I would say this is a new medium for advertisers. The TV itself is not new, but connected TV or Smart TV-based advertisements, as well as paired tablet advertisements, are new. And anytime theres a new media, advertisers go through a period of testing and experimentation to understand the best ways of developing their creative experiences to take advantage of the media. With the advertising service we launched in November, were seeing a lot of very interesting experimentation going on with a number of leading brands and agencies trying out different concepts. Weve been fortunate to have some advertisers McDonalds, Toyota and American Express, among others - that are trying out different kinds of ad models and learning to develop different kinds of campaigns. Kemal Altintas: We need examples. If we have great examples that will grab attention and bring focus to this new domain, which is not very well known yet, that will help a lot. People will start thinking more about it and build more of the interesting stuff. I think thats the first step. If you think about how internet advertising evolvedin the beginning it was just banner ads. At first it was interesting, but then it got boring because there was too much of it. There were
too many advertising pieces on the screen, and people didnt really pay attention. And then some companies, including Google, came up with key word targeting and ad words. These models made a lot of sense and made the whole advertising space more interesting for users and advertisers. Banner advertising has evolved to video advertising, which is more entertaining and interesting for users. So I think it takes time for these kinds of things to reach a level of maturity, where its interesting and useful for the users, and interesting for the advertisers. Companies, advertisers and users must find that middle ground where it works for everyone. And we will get there, we just need to experiment and fine tune. In a year or two, I think well have great examples. Dietrich von Behren: Education about evolving consumer behaviors, the rise of TV everywhere, and the unique opportunities that cross-platform digital advertising has to offer will go a long way toward bringing investment to the space.
What in your opinion is the forecast for Smart TV and multi-screen advertising in the future? When will widespread adoption take place?
Michael Bologna: Multi-screen is happening now. Every major Broadcast Network makes its programming available on the internet and on set-top-box video on demand. And many make it available on tablets and smart phones. This also is true for most of the Cable Networks. So multi-screen viewing is here, and usage is growing. Every year, we see more and more television viewing on nonlinear multi-screens. Right now, roughly 97% of viewing is done on the big screen and 3% via multi-screen. Fast forward to 2015, and were going to see 85% on the big screen and 15% across multi-screen. So we see multi-screen viewing growing exponentially, and we are working hard with advertisers and Network partners to follow it as accurately as we can so that we can place the clients message in the correct environment. As technology improves and the ability to hyper-target and dynamically insert messages across all these digital screens grows, it will only enhance the power of advertising by reducing waste and improving return on investment. On the Smart TV side its a bit more difficult. Everybody likes to talk about how many tens of millions of Smart TVs have been sold, but just because units are sold, this doesnt mean the connected capability is actually being used. We believe there are about 50 million Smart TVs in the US now (total connected TVs), but less than 1/3 are actually being used regularly. If somebody goes out and spends $4,000 on a beautiful Smart TV and doesnt connect it, that viewer cannot be engaged with on an interactive level, so that TV doesnt mean anything to us. And thats happening very frequently. Until very recently, people were hanging it up above the fireplace and looking for that blue internet wire to plug in, and not finding it. Now, most of the new sets are wirelessly enabled, so its less of an issue. But thats a recent advance within the past 18 months or so. The other element within the landscape thats helping increase actual Smart TV use is the auxiliary box. For less than $100, you can buy a Google TV box and within 15 minutes, your TV becomes a Smart TV. But we still dont really know what people are doing with them. We hear tidbits that the majority of the video viewing on Smart TVs comes from Netflix, Hulu Plus and Amazon, but we dont know that for sure and nobodys willing to give up that info. Advanced advertising is a very selfish business. Everybodys looking out for number one, and we cant build a business that way. We can criticize TV advertising all we want for being old
and archaic, but at the end of the day, we know exactly whos watching, which programs theyre watching, when theyre watching, and can message accordingly. We dont possess the same level of information for Smart TVs at this point in time, and these are the parameters upon which the economics of video advertising are built. My prediction moving forward is that there will be a couple of companies that will create an alignment with Smart TV and/ or connected device manufacturers, and a couple of different players that will handle the advertising on behalf of all of them. Its really the only way I see it working to any scale. Its starting to happen now. As was announced in January at the Consumer Electronics Show, Rovi and YuMe together probably have about 60% or more of the Smart TVs out there. So with two phone calls, right now, I can get a message across to more than half of the Smart TV universe. And thats good. Its a step. There are still measurement and targeting issues, but this is a positive step toward consistency and scale. Dietrich von Behren: The future of television and broadcast media is nothing to be scared of and certainly cant be avoided. Consumers demand choices and the shift is already underway. Yet, theres tremendous opportunity ahead and early-adopters are going to have an advantage. Smart advertisers are not bystanders, but already taking part in the evolution. Wendell Wenjen: I would say I would leave it to professional market forecasters to make predictions. But what weve seen in our discussions with agencies and advertisers is that theres a learning period of experimentation thats going on. As we go through that, I think the volume will continue to go up. At the same time, the installed base of enabled devices will continue to grow. So while were still at a fairly early stage in developing this installed base, when it reaches a critical mass, and that is dependent on the different views and different agencies in terms of what scale theyre trying to reach, that will significantly contribute to expanding this market. Kemal Altintas: I agree with Wendell; its really hard to put any numbers to this. But if you think about smartphones, its been only a few years since they came out. Today we use them for all of our live seminars, and many of us have multiple phones. But still, about a quarter of the installed base is in the US - one of the more advanced markets in the world. So we still have a long way to go even in the smartphone spaceand Smart TV just came out last year, so its a new domain.
Bringing the two devices together, reaching that installed base and having the right experiences is going to take a few years. But once were there, I think its going to be huge. Everybody has their smartphones with them all the time. If you can make that experience interactive - even if not synced in real-time but so that if you start the advertising on the TV at home, and then jump in your car or on the bus and it somehow continues that experience through gaming or videos or something, its going to be a huge step. I think once we create those kinds of experiences, its going to be a huge market. Were working on an SDK to bridge the gap between two devices. Were just now announcing that publicly and bringing it to the developer community as well as some of the advertiserrelated companies. It will enable the communication between a smart phone and a Smart TV, both android and IOS devices. This is one step forward on the behalf of LG to address this domain, including the advertising space, and make more tools available for partners were working with.
END-NOTE:
Its clear moving to a smart, multi-screen TV advertising world is a complex endeavor. The challenges range from disparate technologies and market inexperience to a lack of measurement standards and a critical mass of users. But perhaps the only thing that outweighs the challenges is the promise of the opportunities. Connecting with consumers on their terms, in their time and in a format of their choosing is the holy grail, if you will, for advertisers. Smart TV and multi-screen advertising promises to deliver the ultimate pull scenario that all marketers seek to drive a more targeted and tailored form of advertising to consumers. Its time to partner and push forward to overcome the technical challenges and explore the possibilities - or risk simply slipping away.
Smart TV and Multi-screen Advertising Summit All three of the industry pioneers will be speaking in this report will be taking part in the Smart TV and Multi-screen Advertising Summit in San Francisco on 13-14 November 2012. They will be joined by over 25 expert speakers, including Shazam, Razorfish MySpace, Samsung, Sony, Kantar, Disney and Turner. They will be debating the major technical challenges, investment opportunities and innovations that are changing advertising in the connected era. For more information and opportunities to reserve your place at this landmark event, visit: www. smarttvsummit.com/advertising
EXCLUSIVE TICKET OFFER: As you have downloaded this report, you can use the discount code REPORT12 and receive an extra $100 discount off the current listed price when you reserve your place at: www.smarttvsummit.com/advertising

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Smart TV and Multi-screen Advertising: Prospects for 2012

With Insights from:

Smart TV and Multi-screen Advertising: Prospects for 2012

Smart TV and Multi-screen Advertising: Prospects for 2012

What are major technical challenges that are currently

What are the new and exciting innovations with Smart TV

How can we encourage investment form the major media

What is the forecast for Smart TV and multi-screen

advertising in the future? When will widespread adoption take place?

Smart TV and Multi-screen Advertising: Prospects for 2012

Expert Speakers: Michael Bologna, Director, Emerging Communications, GroupM

Smart TV and Multi-screen Advertising: Prospects for 2012

Wendell Wenjen, Director of Strategic Alliances, LG Electronics

Smart TV and Multi-screen Advertising: Prospects for 2012

Smart TV and Multi-screen Advertising: Prospects for 2012

Smart TV and Multi-screen Advertising: Prospects for 2012

Smart TV and Multi-screen Advertising: Prospects for 2012

Smart TV and Multi-screen Advertising: Prospects for 2012

Smart TV and Multi-screen Advertising: Prospects for 2012

Smart TV and Multi-screen Advertising: Prospects for 2012

Smart TV and Multi-screen Advertising: Prospects for 2012

Smart TV and Multi-screen Advertising: Prospects for 2012

Smart TV and Multi-screen Advertising: Prospects for 2012

Smart TV and Multi-screen Advertising: Prospects for 2012

Smart TV and Multi-screen Advertising: Prospects for 2012

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