Myriad Smart TV Opportunities Are Poised To Open Up

As with all new technology, any attempt to timeline the smart TV’s developmental curve is bound to be speculative. That said, key factors are lining up in a way that are enabling advertisers to at least start exploring some of the myriad new opportunities enabled by smart TV capabilities.

Tracey Scheppach, founder and CEO of “next gen” marketing and media agency Matter More Media, says that that assessment is based on many years of experience in evaluating new devices and technology while working at big agencies, as well as knowledge borne of having implemented hundreds of campaigns within the advanced television arena in recent years.

Scheppach, speaking at a recent MediaPost TV Insider Summit, offered an optimistic but balanced summary of where smart TV stands, the advertising opportunities ahead, and some issues and obstacles that will need to be addressed to realize that advertising potential.

Good News On Device Penetration, Privacy
The first good piece of news is that smart TV penetration is scaling quickly. To date, 74 million have been shipped in North America, and 10 million new sets were sold in the U.S. in this year’s first quarter alone.



Scheppach estimates that 75% of the smart TVs already sold in North America are connected — and notes that that will increase now that Netflix, Roku, Hulu and other platforms are giving owners more reasons to connect their sets.

Samsung and Vizio dominate the market, with 41% and 29% shares, respectively. The advertising community will be watching them closely as they set the pace for this new technology.

At the same time, privacy issues stirred up by Vizio’s data collection practices, which “upset the apple cart quite a lot,” now appear to be well on the way to being resolved, said Scheppach, who cautioned that she is not a lawyer.    

“Vizio was the first to, what I would call ‘free the data,’ and I thank them for that,” she said, but its practices drew attention that resulted in a series of class-action lawsuits against Vizio — with some agencies (including her own) and other third parties involved in having used the data also being named as plaintiffs along the way.

Vizio also received an FTC complaint, but was able to resolve that in February, by agreeing to a resolution that makes it clear that smart TV manufacturers must get TV owners’ consent, in very specific ways, before collecting and sharing viewing information, she said. (According to news reports, Vizio also paid a $2.2-million fine, and agreed to delete data collected prior to March 2016, as part of the FTC settlement.)

“I would argue that with this FTC resolution, television is going to be one of the cleanest pieces of data collection out there,” Scheppach asserted.This has given us really good guidelines to follow, and Vizio is taking the lead.”

Vizio has upgraded its TV software to enable implementation of revised disclosure and approval procedures for data collection and sharing. Data collection permission is in the “off” mode as the default on its TVs now. When the owner turns on the TV, he or she sees an explicit description of Vizio’s data collection and sharing terms/practices, and can choose to accept or reject these, she said. Owners that don’t respond the first time will be shown the agreement/option up to five times (five TV turn-ons), and will be assumed not to grant permission if there is no affirmative response after those attempts. To date, about 60% of owners are agreeing to the terms, Scheppach reported.

While there is still one active class-action suit in California, all plaintiffs except Vizio have been removed from the suit, she said.  “That should make all of our lives easier,” she observed, again indicating that legal reviews point to privacy concerns not continuing to be an issue or obstacle going forward.

How Do Smart TVs Change Viewing?
Because of data access restrictions required by some content owners and Netflix, smart TV viewer behavior trends still somewhat sketchy, Scheppach said.

However, based on Vizio information, it’s known that whereas about 90% of usage time on “dumb” TVs is devoted to viewing programming from traditional television sources, that viewing goes down to 81% among connected smart TV owners, she reported. Nine percent of those connected viewers’ usage is on connected devices, 7% on gaming, and 3% on DVD.

“The ‘smarter’ you are, the fewer ads you are watching,” she said, which makes it imperative for the advertising community to make sure that ads are “relevant and completely measurable.”

Smarter TVs, Cross-Platform Capabilities
Scheppach pointed out that next-level smart TVs — specifically those developed by Vizio sister company Inscape — can collect second-by-second data on all content and advertising viewing across broadcast and cable networks, local broadcast stations and over-the-top content. Vizio can report granular data to a “slew” of licensees by day, hour or in near-real time, including real-time event triggers. Vizio is looking to use the data to provide analytics, targeting and measurement for licensees.

Smart TV, as a whole, will offer expanding opportunities for advertisers “to be content providers and provide more utility for consumers” through platforms including YouTube, Hulu and (assuming it goes ad-supported) Netflix, she noted.

Scheppach stressed, however, that she believes that the biggest opportunities lie in “glass-level” data capture with IP address capabilities, because they will enable replacing the current by-platform siloes in agencies with true cross-platform planning and implementation. The ability to use that IP address across platforms to enable real attribution is one of the key things we should now be looking for in evaluating smart TVs, she said.

Cross-platform optimization is another major opportunity. “Once you know where they are and what they’re doing, you’re going to want to optimize that,” she said.

Various tech companies are also coming to market with products enabling sophisticated retargeting, in real time — although the equipment manufacturers are at this point restricting that because of concerns that users might at this stage find it “creepy” to see that what they’re watching on their smart TVs is also showing up on their mobile devices, according to Scheppach.

“The ability I’m most excited about is ad replacement in live linear,” she said. Samsung and Vizio now have deals with Sorenson Media for Spark, tech for smart TV that enables dynamic ad replacement on smart TVs, “completely bypassing the box and cable infrastructure, to go right to the glass,” she reported. “And again, this could be in real time. Those of us who’ve executed addressable or programmatic opportunities in advanced TV know that it’s not real time — and the ability to replace ads in real time will definitely open new opportunities.”

Scheppach showed an example of how ads can be digitally synched across devices/channels, and noted that Spark will enable sending different, targeted ads to different people watching a program (for example, on addressable) at the same time, as well as live, real-time triggering of ads in linear programming based on content identified as relevant to the specific advertiser.

At some point, smart TV should also be able to emulate what’s already possible with online video, via the latest version of the Liquidus product: using demographic and geographic data to target-deliver some 5,000 different creative versions, she said. However, “significant data integrations” will be required to make dynamic creative possible on smart TV, she stressed.

Scheppach said that while Spark capabilities aren’t reality for advertisers yet, it is clear that with their deals with Sorenson in place, Samsung and Vizio will be “moving aggressively” to get those capabilities into the marketplace.

“And I know for sure that dynamic ad replacement is going to drive real value in the marketplace,” she emphasized. “In the last three years, I’ve placed 250 campaigns addressably, which is the code name for dynamic ad insertion, just a different way to do it. I can confirm that there’s a ton of value for the entire ecosystem to share” — including dynamic ad replacement’s “incredible measurement” capabilities.

Major Considerations
Scheppach outlined several key considerations and potential hang-ups in the smart TV arena.

Perhaps the biggest is how inventory will be sourced, she said. For example, in technical terms, dynamic ad replacement will make it possible for a TV ad placement that’s part of one advertiser’s upfront television buy to be bumped or “conquested” by another advertiser’s ad on TV or mobile, depending on the deals involved. “I would not recommend doing that, but it will be technically possible,” she said. The way it’s currently being approached is to approach local broadcast networks to try to source local inventory “and then sell it a different way,” she said.

Other considerations:

How are addressable impressions reconciled against the impressions delivered by the box?  “We’ve all got to get along, because otherwise it’s going to be a slow road for ads delivered through the smart TV,” given the “freight train” of other ads being delivered through the box, she said. 

How does IP address delivery compare with household address delivery?  “So far, the almost $1 billion worth of addressable TV advertising is really based off of household addresses,” she said. “Sometimes yes, we’re making conversions off of IP addresses, but the match rate is not very good. We have an entirely new, IP address-based opportunity, but a lot of these linkages among [third-party data suppliers] could cause a significant drop-off that makes the opportunity not as valuable.”

Does it actually work?  The reality is that these advanced smart TV advertising capabilities are still untested in the marketplace, “so there’s still a lot of debate about whether it’s going to work,” she said.

How does this strengthen the programmer’s insight into viewing data?  “Right now, going through the box, one of the reasons that the operators don’t want to share data is that it gives programmers, the third leg of the stool, insight into ratings per platform, which gives them leverage in negotiations of affiliate fees,” she noted. “So there’s a reason that this data is not flowing. But Vizio doesn’t care about that. They’re on incredibly thin margins, they’re looking for additional revenue streams, and data is clearly one of those. So like it or not, this data is clearly coming, and we need to get our arms around that.”

Can you add voice?  “Looking at what an Alexa open API can do, the logical question is, ‘Why not apply this in TV?,’” Scheppach said, noting that, for instance, viewers might be able to respond to an ad by simply voice-directing the interface to put an item in their shopping carts.

Might corruption in South Korea impact smart TV progress? Given that Samsung’s CEO was recently arrested on charges stemming from a corruption probe, the company may find it difficult to focus on advanced TV products development, Scheppach observed. “There are always possible wild cards” in the form of complications at major players in the business, she added.

In short, smart TV presents “many disruptive opportunities, and many issues to solve,” Scheppach concluded. 

2 comments about "Myriad Smart TV Opportunities Are Poised To Open Up".
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  1. Ed Papazian from Media Dynamics Inc, April 28, 2017 at 5:40 p.m.

    Yep, the possibilities seem endless and boundless, don't they?

  2. Mario L Castellanos from New Ventures Technologies, May 1, 2017 at 1:01 p.m.

    Good article about where smart-TV advertising is headed. Thing is, we're already there. We are a non-subscription, ad based start-up TV Network with a global reach and have our own proprietary Addressable Advertising Delivery Technology Engine, or SPAADE™. And we do this without becoming invasive to someone’s private information.

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