Ever since the first cable networks launched in the 1970s, a major trend driving the programming of pay tv providers has been targeting. As more and more channels have launched to target specific interests, viewers have self-segmented. This, combined with the ability of cable networks to segment their networks into ad zones, has enabled advertisers to target their ad dollars with increasing precision.
Today, the rise of streaming and over-the-top (OTT) video has allowed content to be delivered to a growing array of connected devices. The transition to streaming and the subsequent development of IP advertising technologies now enable service providers to take their advertising precision (and value) to a whole new level.
Many Multiple System Operators (MSOs) are betting on a transition from traditional Quadrature Amplitude Modulation (QAM)-based cable TV to IP video based on Adaptive Bitrate (ABR) streaming using Internet-based approaches. To do so successfully, cable providers need a strategy that will enable them to gradually transition their legacy set-top box advertising platforms to the newer adaptive bitrate (ABR) dynamic ad insertion (DAI) systems without disrupting their existing, successful advertising businesses.
Growth of IP video
The use of IP and ABR video is increasingly prevalent. According to Mordor Intelligence, the streaming market was valued at USD 72.24 billion in 2020 and is expected to reach USD 194.21 billion by 2026, at a compound annual growth rate (CAGR) of 17.89% over the forecast period 2021 - 2026.
Parks Research shows that 76 percent of consumers have an OTT service and 22 percent of broadband households have four or more services. To be competitive, multichannel video programming distributors are also transitioning to IP-based video services.
One of the benefits of IP video is the ability to target addressable ads. Even today, the addressable ad market is well-established. According to USIM, currently there are about 54 million multichannel video programming distributor (MVPD) households (cable, telco or satellite) that can be reached by linear addressable and 35 million that are ad supported video-on-demand addressable households.
However, the ability to target using traditional video delivery techniques to STBs is limited. Transitioning to ABR-enabled dynamic insertion offers more precise targeting and allows operators to charge more for the ads they deliver. Ultimately, the newer technology will provide benefits that the traditional set-top box can’t offer. But as MVPDs build up the number of streaming subscribers to fully leverage this new technology, they need a strategy that allows for a graceful and gradual transition.
IP advertising
There are two main approaches to inserting ads into ABR video, Client-Side Ad Insertion and Server-Side Ad Insertion. Both rely on the content being prepared so that video segments align with ad insertion points and the appropriate markers identify the location of the ads. Client-Side Ad Insertions works by having the client call to an Ad Server to obtain the ad decision and then to a CDN to retrieve the ad. IP ad insertion is increasingly driven by Server-Side Ad Insertion, which will be the focus here.
In Server-Side Ad Insertion when an ad event is present, the Manifest Manipulator, using VAST or SCTE-130 standards, passes metadata from the client to an Ad Decision Service (ADS) and requests a decision on which ad to insert. The Manifest Manipulator then modifies the manifest (the list of segments that are sent to the client) to include the new content, making the ad insertion transparent to the end client.
Business goals for the transition to IP
As operators make the transition to IP video and IP advertising, they must consider that traditional QAM video will continue to be delivered for some time and ensure that their existing advertising business is still efficient, profitable, and relevant. At the same time, they must invest in new solutions that leverage the capabilities of IP video, knowing that the number of viewers might remain relatively small for a given period of time. This requires trade-offs and a concerted strategy that optimizes the existing business while positioning for the future.
Some of the business goals operators must consider when making this transition includes:
- Defending the current advertising business while making the transition to IP video
- Optimizing their legacy QAM advertising solutions to increase revenue
- Improving operational efficiency
- Capitalizing on new business models that leverage their unique knowledge of the end customer and their position as owners of the delivery network.
Through these goals, there are many different models that can address these different business goals - such as the Siloed Model, Hybrid Model and Unified Models.
- Siloed model - This is the current model for most operators who have started to implement IP advertising. The QAM and IP advertising systems exist as separate entities with their own processes, sales models and workflows. This model represents serious challenges to achieving the business goals set out previously.
- Hybrid model - The next step in the transition is a Hybrid Model, where both the IP and QAM advertising systems exist side-by-side but start to exhibit coordination and see reduction of redundant processes and components. For example, with integration between systems schedule-based ads sold on the QAM footprint can be executed on IP devices. Conversely, existing ad servers can be upgraded to support dynamic decisions for traditional STB advertising.
- Unified model - The last step is a Unified Model in which the advertising ecosystem has been consolidated into shared systems that support both IP and QAM devices. This model continues to deliver ads to traditional STBs, yet fully supports the capabilities of IP video advertising from a single source of ad decisions and content.
The decision of how fast to proceed must be based on the return on investment, which will be unique for each operator based on factors such as the size of their subscriber base, sophistication of data collection and analytics, the maturity of their existing advertising business and the speed with which they intend to migrate to IP video. But while the migration can be complex and involve careful planning, the benefits of moving to IP Video advertising can more than outweigh the costs.
