OTT viewership has increased dramatically in the last year. So, it is no surprise that ad dollars are pouring into the category. Reports estimate that advertising revenue in the market just exceeded $50 billion for the first time. And as more OTT options and channels emerge, and as OTT advertising capabilities and measurement grow more sophisticated, investments will continue to rise.
Beyond growth, however, how else will the OTT ad landscape evolve this year? 2017 saw a number of unique developments, from more traditional broadcasters entering the space to a surge in acquisitions. But what will happen in 2018?
1. AI will be used to support OTT in content and advertising.
Though it is still early, AI and machine learning have the ability to dramatically reshape OTT content creation and advertising. We will see these technologies play a bigger role in 2018. On the content creation side, a decade ago, streaming live was a forgettable experience. Mainstream TV was unchallenged when it came to quality live content. While this still holds true, parallel content consumption is rising. Today, consumers want to move seamlessly between devices and catch specific parts of live events-almost as soon as they are broadcasted live. Creating VOD and OTT segments manually can be challenging and inaccurate. On the other hand, with AI and machine learning, it is possible to generate VOD and OTT-ready segments in an instant. The machines could be taught exactly when the live reception starts, when it stops, and to remove any ad breaks in between.
AI will also, of course, change OTT monetization. Today, ad detection is largely an ad-marker driven enterprise. However, in the case of vMVPDs, the aggregated feeds don’t necessarily have ad markers placed at source by broadcasters. As a result, vMVPDs aren’t able to detect ads and replace them. Machine learning could do this cost-effectively by using intelligent ad-mining engines. What’s more, as more vMVPDs start using AI-driven detection, the accuracy of such services will further improve.
2. The shift towards server-side ad insertion.
Over the last two years, we have witnessed a significant shift from client-side ad insertion to server-side by OTT platforms. Client-side insertion means that, when a consumer watches ad-supported content, their device will pause playback at an ad break, then it makes a call to an ad server. Finally, it makes another, separate call to the ad content. Then, the ad appears. This creates a host of challenges. Given the multiple call-backs, client-side ad insertions are vulnerable to annoying buffering, they require multiple SDK integrations and are generally unsuitable for dynamic ad insertion in live sports. With server-side ad insertions, however, the ad content is there from the beginning, “stitched” in.
This year and beyond, server-side ad insertion will become table stakes for OTT broadcasters, especially as ad personalization grows more critical. Advertisers will be seeking more sophisticated targeting through digital video services. They want the same level of granularity enabled through traditional online ad buys. It is still early days for OTT to be that tailored and data-driven, however, those capabilities are in-progress through developments like programmatic buying. And this is why server-side ad insertion is so important. Compared to client-side ad insertion, server-side enables more dynamic ad-serving. This is necessary to deliver more one-to-one content to OTT viewers.
3. Traditional broadcasters will look to capitalize on OTT.
OTT services have always ruffled feathers within the traditional broadcasting industry. But as linear TV subscriber numbers continue to fall, in 2018, more broadcasters and content companies will begin to experiment with OTT services themselves. Ultimately, if you can’t beat them, you join them. As consumer preferences evolve towards digital, this year, traditional broadcasters will invest millions into developing digital apps and offerings that standalone and extend their linear programming. Others will even develop new programming exclusively for these services. For broadcasters, the more channels, the more inventory and potential for advertising revenue.
This doesn’t mean that traditional broadcast will evaporate, of course. Rather, providers such as Spectrum are launching their own competitive offerings. The challenge this creates for consumers, however, is greater app and service fragmentation which can hurt the OTT market overall down the road. But, for now, broadcasters are rightfully more interested in building new reservoirs of inventory to unlock new ad dollars. Consider it future-proofing.
OTT is a lucrative advertising channel for broadcasters. We see that in the number of new entrants in the space - from traditional TV players to pure-play digital networks. But to ensure that the opportunity is met on the back-end, OTT services and content providers will have to continue innovating ad distribution. To that end, AI and server-side innovations will be key this year.