Addressable TV in Europe: is the flame already fading off?

In our last publication on the matter, we went through the status of addressable TV offers in each of European top 5 biggest advertising markets. To follow up on this and complete our overview of the segment, we will now expand our analysis to Northern, Central and Southern European markets. If the choice of deploying addressability on either HbbTV or STB in Western Europe usually depends on existing market structures and mostly revolves around technical capabilities, other challenges arise in countries where ad markets offer more limited perspectives.

Coming across technical and commercial reality checks: when addressable TV faces discouraging limitations

In smaller European markets, addressability is a limited promise. The efforts and costs induced by linear dynamic ad insertion along with legal barriers have been deterrents to launching the full spectrum of addressable TV capabilities in several markets. In the Nordics, the rather small size of ad markets and the very limited interest that operators have in this segment led to very limited projects so far. Telia in Sweden was the most active in this field and launched addressable campaigns on its VOD service TV4 Play on ComHem’s platform, while also opening addressable capabilities to partnering broadcasters Discovery and NENT on its own pay TV platform. But generally, broadcasters focus their efforts on improving targeting capabilities directly on their streaming platforms, like TV2 Play in Denmark. In Switzerland, a catch-up-only iteration of addressable TV was launched last year in a quite limited version. Historical telcos like Swisscom and UPC Sunrise but also younger players like Zattoo came together to build a common framework for the whole country that enables addressable campaigns on catch-up services with geolocalization targeting mostly.

In Portugal, Playce was launched in 2020 bringing together NOS, MEO and Vodafone to offer addressable campaigns on their catch-up services. They offer targeted ad campaigns across over 120 channels and we estimate that they currently reach around 2.8 million households. There has been no sign that dynamic ad insertion will be launched later on in the market.

Key markets are still missing out on addressable TV opportunities

Several key markets still miss the mark, notably the Netherlands. The development of its addressable TV capabilities suffered a huge blow when KPN announced its retractation from the cooperation that was started with Talpa, RTL and VodafoneZiggo back in February 2021. We expect the latter to launch an offer soon nevertheless to capitalize on its footprint of 3.2 million digital TV subscribers. Group owner Liberty Global also already benefits from a strong expertise in this field since the launch of Telenet’s dedicated offer back in 2017 and after Virgin Media started collaborating with Sky AdSmart in 2019.

As we look at the opportunities in Central Europe, the picture gets blurry. Only two countries have shown interest in developing addressable TV offers on HbbTV so far: Poland and Czech. They’re the biggest TV ad markets in the region, and local publishers are more likely to seduce advertisers there than in smaller markets where the technical costs and resources required for implementation have been highly dissuasive so far. The penetration of HbbTV-connected devices is also limited in those markets despite a rapid renewal of TV sets in the last few years following the migration towards DVB-T2 standards, achieved in 2020 in Czech and expected to be completed next year in Poland.

Addressability on pay TV platforms in Central Europe is led by United Group with its project VIDA, which was rolled out first in Serbia and Slovenia, and is progressively expanding towards the other territories of the group. Other key players in the region are seriously looking at addressable opportunities, like PPF which owns CME TV networks across the region along with operators O2 and Yettel. If United opted for dynamic ad insertion straight away, PPF has rather shown interest in ad insertion in video catch-up to counter advertisers’ loss of earnings on delayed TV viewing. Preventing ad skipping and opening new premium inventories with targeting capabilities for advertisers are critical issues for pay TV operators in the region, and are likely to be key innovation drivers.

Missing the mark on advertisers’ onboarding?

One of the main promises of addressable TV was to create incentives for smaller and rather localized advertisers to get on TV, but this engagement has yet to be met across the different markets where offers have been launched. In France, official figures from the AF2M (association of local telcos) and the SNPTV (syndicate of national broadcasters) stated that 700 advertisers launched an addressable TV campaign last year, and considering that the country counts around 2000 advertisers on the TV medium, it’s a rather encouraging figure. But the overall number of broadcasted campaigns stood at 1300 for 2022. That’s just 2.5 times more than the previous year, while addressable TV was only active in the second half of 2021.

Is addressable TV really scaling up the overall TV advertising market? The question remains open when looking outside of AdSmart’s domestic market. There, Sky claims to have broadcasted a total of 30k addressable campaigns since launch. AdSmart has come a long way to gain trust from smaller accounts and prove addressable TV’s efficiency by injecting significant resources in their sales teams to grow their client base, but also into market research to share figures on addressable campaigns’ ROI and raise awareness around this new medium. Such an effort took time, and the clock is ticking for other actors in this field if they don’t want to get outpaced by competing ad sellers in the digital space.

Being a pioneer, Sky also managed to create a whole ecosystem around their own proposition, offering a one-stop shop for addressable advertising on STB across the UK after they took Virgin Media in, while way more complex solutions are currently being implemented in other markets with a whole bunch of stakeholders standing on the same stage. That much complexity could discourage smaller advertisers with limited resources to allocate to understanding this level of technicalities, and industry actors really have to come together to facilitate buying mechanisms for addressable TV.

Addressable TV offers are a bet that various broadcasters and operators have hopped on in the last few years to counter competition from digital inventories in the ad space, but the technical implementation has proven to be a long and complex project, that some are likely to forsake altogether. For it to scale, the race for relevance has already started against CTV manufacturers, which also offer their own ad inventories with targeting capabilities on the big screen, all the while getting involved with content services and becoming challengers in the TV distribution market as well. Nevertheless, TV publishers keep hold of significant market shares in their respective countries and can fight several battles: ad-supported BVOD and digital ad revenues more generally represent a growing share of their revenue mix and bring them at the forefront of digital ad markets on their national scope.

Ophélie Boucaud | Senior Analyst at Dataxis

This research highlight is based on our data coverage of Online media and advertising and Connected devices in Europe. Please contact us to get a demo and see the depth of our service. This topic will also be addressed during the 3rd edition of the Nextv AD Europe that will bring together the whole TV advertising ecosystem to explore the latest developments in TV advertising and how programmatic and TV strategies integrate.

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