Dynamic Ad Insertion Is Key To Broadcast OTT

Ask local broadcasters how their OTT strategy is progressing and you’ll get a spectrum of responses. For those on the not-very-quickly end of that spectrum, a lack of revenue opportunities is often the chief culprit.

One important key to unlocking those opportunities is dynamic ad insertion (DAI) — the ability to stitch into OTT streams highly targeted advertising on a live and linear basis.

In other words, it’s to create an experience for viewers that is as seamless as it is on broadcast, albeit with individualized ads based on user data.

For local broadcasters, that would mean achieving addressable advertising even before the deployment of ATSC 3.0 and monetizing a growing audience of cord-cutters and cord-nevers who’ve largely jettisoned broadcast from their media diet.

Standing in the way, however, are a range of financial and technical complexities, some entwined with ATSC 3.0 and the programmatic market through which OTT ads are largely sold today.

Untie some of those knots, broadcasters and vendors say, and DAI might become a seamless reality as soon as six months from now.

OTT’s ‘Holy Grail’

“There’s this huge opportunity,” says Blake Sabatinelli, CEO of Newsy, the OTT-centered, millennial-focused news platform owned by the E.W. Scripps Co.

“It’s certainly more appealing to be able to deliver dynamic ads in a linear capacity over the top just because the CPMs are more favorable, you can target data against it and it makes the juice worth the squeeze.”

How much more favorable? Rob Weisbord, CRO of Sinclair Broadcast Group, says that in a linear feed, it appears the CPM would be 25%-40% higher depending on how many data points are attached to a spot. The CPM could go to $40 or $50.

Weisbord says that as the lines blur between linear broadcast and digital channels, DAI has the capacity to put broadcasters in the omnichannel game.

“That’s the holy grail, at least through my lens,” he says. “We’re going to be coming out with omnichannel solutions, and you can’t have different types of solutions for the advertiser. They should be consistent in nature.”

Jon Accarrino, executive director of business development at Bonneville Salt Lake, has been one of OTT’s more aggressive experimenters at KSL-TV. He says potential monetization is ready and waiting.

“There are a lot more revenue opportunities in linear [OTT],” he said via email. “We have several ad partners lined up. My biggest challenge has been getting all of the tech to play nicely together.”

Therein lies the rub: the complex technology undergirding it and the interconnected systems needed to execute it.

For instance, Accarrino finds that pre-roll ads are much easier than mid-roll linear insertion, “but it’s still a headache.” For Bonneville Salt Lake, he says, its live streaming partner’s pre-roll ad slot is compatible only with Google’s DFP, so it can’t use ad tags from another ad partner like SpotX. And, so, problems begin to proliferate.

Costs And Technical Challenges

Before delving too deeply into DAI’s thicket, it helps to take a few steps back to understand the costs for broadcasters, as well as the inherent nature of its complexities (and its limitations).

First, there’s the cost of entry into the space. Online video ad platform SpotX works with more than a dozen companies providing DAI technology alone. Companies in the space include Google, Freewheel, Brightcove, AWS Elemental, Yospace, Imagine and AdSparx.

“DAI companies usually charge a setup fee of upwards of $10,000 to integrate their systems,” says Kevin Schaum, senior director of the Advanced Solutions Group at SpotX, via email. “In addition, there are ongoing fees usually based on a CPM model that varies depending on the volume of the ads served.”

Other vendors follow a different model. SyncBak, for instance, launched SBTV, its own OTT channel, with partner Gray Television in May and offers DAI there.

Dean Mandel, VP of ad sales for SyncBak, says it doesn’t charge for DAI implementation for clients as long as they’re using its software to distribute their live streams.

Ian Ferreira, EVP of programmatic at WideOrbit, says the biggest direct cost drivers for DIA — and by extension OTT streaming — are bandwidth and the content delivery network.

“The biggest indirect costs are retaining a linear sales team to sell individual addressable segments and the associated software for switching from log-based to 1:1,” he says.

He also notes that moving to IP delivery shifts the basis of audience valuation from ratings to the more volatile world of real-time impressions.

Broadcasters should also be aware that DAI has its limitations. Schaum notes that it works only for content delivered by IP, and it doesn’t work in linear feeds unless those feeds are delivered via an OTT app or a virtual MVPD like SlingTV or DirecTV Now.

Next, there are the technical complexities of implementing DAI.

“The challenge is usually when you go from a broadcaster that’s managing one set of ads — think of it as curating one playlist that goes to everybody — to now switching to a world where you’re using software to make a real-time decision per user and essentially create an ad payload per user,” Ferreira says.

With DAI, a broadcaster goes from one payload a day to millions, and those can’t be hand “curated,” but rather must rely on software. That software then needs the right rules in place to make sure the user experience is consistent with broadcast. Among those rules is usually not showing the viewer the same ad twice in a commercial break.

Alas in OTT, which operates from an IP-based world, an algorithm makes the ad decisions. One of the major criteria for those decisions is revenue, Ferreira explains.

So, if one advertiser is paying a lot more than others, the software will select that ad more often. That results in the viewer seeing the ad more than once.

Repetition isn’t the only problem. When talent is involved and agencies haven’t secured digital rights, that can present another complication, often resulting in slides running in place of ads during commercial breaks on OTT channels, Ferreira says.

Of course, there’s nothing to prevent broadcasters from running the same ad payload for all viewers, which would circumvent the problems by turning one-to-one addressability into a broadcasting model. But then “you’re leaving a lot of money on the table,” Ferreira says. “You’re just doing broadcast over IP.”

Here things begin to dovetail into ATSC 3.0 territory. And as Sinclair’s Weisbord stresses, it’s important to remember that DAI isn’t just about OTT. “It’s the long tail of ATSC 3.0.”

There’s an opportunity for DAI and 3.0 that Ferreira says bears noting.

Today’s IP model has a downside: essentially content providers are delivering the same content from the same frames to multiple people with everyone paying bandwidth charges.

With 3.0, however, a provider can use a broadcast model but still deliver the same content to everyone individually. Specific smart TVs or regional TVs can have specific payloads inserted, while at the same time a fallback ad comes over the air.

Ferreira says with 3.0, DIA can become an application that can be broadcast regionally or potentially to the household level. ATSC 3.0 blends the lower bandwidth cost of broadcast content delivery with the higher yield of unicast advertising.

The Programmatic Factor

There’s one more complication to consider that, once reconciled, could hasten DAI’s user experience, WideOrbit’s Ferreira says. Currently, many broadcasters are monetizing their OTT channels through third-party exchanges, preferring not to deploy their direct sales resources to such a relatively low-yield front.

“Most of them just outsource to DFP and exchanges, which then creates the repetitive ads and missing ad-type scenarios,” he said. “If stations start setting the demand and then managing their ad payloads directly versus relying on third-party systems or exchanges, they have more control in setting up the parameters to smooth out the user experience and avoid the repetitive ads.”

In other words, if broadcasters want the DAI user experience to improve, they need to do more OTT direct selling. For broadcasters waiting on the ad tech to improve before they do so, this creates something of a chicken-and-egg problem.

“They don’t treat it like a first-class citizen in terms of advertisements, but then not doing that is going to make sure it doesn’t grow enough to treat it like a first-class citizen,” Ferreira says.

The good news is that national advertisers, if not so many local ones, are keyed in to the importance of being on OTT, says Newsy’s Sabatinelli. “A lot of the national advertisers are definitely paying attention and are starting to make concerted efforts to ensure they’re placing parts of their budget there.”

SyncBak’s Mandel concurs. “As we launch this platform, more and more advertisers are going to understand what we’re doing.”

And while advertisers warm up, Sabatinelli, who has been at the DAI game for the last three years, is confident of its steady improvement.

“We’re probably going to see it accelerate rather than decelerate,” he says. “My guess is you’ll start to see cohesive frameworks come out from most of the major vendors within the next 6 to 12 months.”