Social media, off-screen shopping and companion TV content will be viewed not through a connected TV set but a portable second screen device, and that is where the new advertising opportunities lie.
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The promise of convergence has been a long time coming. As long ago as 1989, Nicholas Negroponte of Mit Medialab predicted that "by the year 2000, you're going to have a very hard time telling me whether your TV set is a computer or a TV". While most people would still say fairly confidently that their TV set is a TV, connectivity creates the opportunity for TVs to take on some of the capabilities of the PC. But what do people actually want to use connected TVs for, and where do the opportunities lie for advertisers? Our research has shown us that, while connectivity opens the door to all sorts of new uses for the TV, viewers will still overwhelmingly want to use their TV for its original and best use, watching TV.
That is not to say that viewers don't want to augment their viewing with the opportunities that connectivity presents, namely social TV interaction, programme prompted transactions, and companion content. Rather, these behaviours will sit more naturally on the second screen, be that a tablet/iPad, smartphone or the humble laptop, leaving the connected TV to display TV content in its full glory. For advertisers, while the connected TV will allow for greater targeting through addressable advertising, we think there is greater potential and diversity of application to be had by concentrating efforts on the second screen. Ultimately, the fact that viewers are themselves connected will be more significant for advertisers than connected TVs.
If we take the broadest definition of connected TVs, including internet connectivity via games consoles, set-top boxes as well as internet enabled TVs, then we are already at a comparatively high penetration of 50% in the UK (source: enders analysis). Most of this though is driven by games consoles and the need to connect for online gaming or extra gaming content, as well as pay-TV set-top boxes, such as Virgin Media's TiVo, which need to be connected to the internet.
There are question marks, though, over consumers' genuine desire for connected TVs themselves. Criteria for TV set purchase are heavily dominated by screen size, picture quality and, of course, price, with internet connectivity considered only marginally more important than 3D. On top of this, consumer confusion over the benefits of connected TV is hardly helped by retailers' unfortunate habit of leaving TVs unconnected in store. Finally, the proportion of households that currently connect their connected TVs once they've got them home is lower than might be expected, with manufacturers reporting connection rates below 50% in some cases.
By contrast, second screen usage in tandem with TV viewing has grown organically and with comparatively little encouragement from TV platforms or broadcasters. If we include laptops, smartphones and tablets in our definition of second screens, then penetration is already considerably higher than connected TV penetration and this gap is unlikely to be closed. Around 40% of people in broadband homes are now using second screens while watching TV at least once per week (source: O&O), and TV content is a natural source of inspiration for that second screen activity. In contrast to connected TVs where the consumer experience will, to a large degree, be determined by the pay platforms and the TV manufacturers, the second screen experience is, in effect, platform agnostic and as such is likely to develop in a much more organic and freer fashion.
With smartphone penetration now at 50% and tablet penetration growing rapidly, and greater stimulation from both broadcasters and third-party app developers, we expect second screen interaction around TV content to become increasingly mainstream behaviour over the next two to three years. In effect, the second screen is ahead of connected TVs in terms of both penetration and usage, and likely to stay ahead.
A connected TV opens the door to many opportunities which can broadly be summarised into five categories:
Mindshare's work with our online research community, the Hive, has shown us that the fundamental role of TV is likely to remain the same. It has always been a provider of passive entertainment that helps people unwind at the end of the day and a social focal point within the home, and neither of these roles is likely to change. At the same time, in the emerging hierarchy of screens within the home, the TV is still seen as the primary screen for the best quality viewing experience. The enduring appeal of these factors makes the majority of the applications of connected TV better suited to a complementary role on the second screen.
Companion content, such as additional information about the programme or access to outtakes, is much less intrusive and more in tune with the communal nature of the viewing experience if delivered to a second screen than if accessible through the connected set itself.
Similarly, our research has found that, while there is a strong appetite for social interaction around TV content, most prefer this interaction to take place on the second screen. this is partly because tweets or other chat around a programme are seen as distractions from the TV show/movie when displayed on the main screen. But it is also because social overlays on the main screen can end up at odds with the inherently communal nature of TV viewing, with conflict within families between those using the screen for social things and those using it for entertainment.
The same tension between the individual viewer and the group arises when socially driven programme recommendations are integrated into the EPG or overlaid on the screen, as one person's recommendation is seen as another's distraction.
Finally, the ability to buy products direct from the TV screen at the click of a button is an attractive one, but again this is better suited to the second screen, partly because of the same issue of interruption, but also because of the greater ability to browse and price compare on the second screen. Ultimately, delivering connected experiences to the second screen allows for personalisation, while keeping the main viewing experience communal and uninterrupted.
By contrast, the primary use that viewers will put their connected TVs to will be increased access to on-demand video whether that be long-form TV or movie content, or, to a lesser extent, shorter form video such as YouTube. When we asked our respondents what apps they would like to use on a connected TV, five of the top six delivered TV or video content.
However, there will be some new uses of the connected TV set itself. Connected TV applications that depend on inter-device connectivity are likely to gain some traction. The most common example of this is the sharing of content, such as photos or movies, between screens on a home network, or even screen sharing so that smartphone apps can be used on the main screen in a group setting. This is also likely to extend to 'content bookmarking' whereby consumers can access content they have stored in digital lockers when they are in a friend's home or viewing on another home network.
But there is little evidence of an appetite for the 'long tail' of TV apps. The TV's fundamental lack of mobility means it is unlikely that TV apps can deliver the same sheer variety of applications that we have seen with smartphones. There are also question marks about whether people really want to do more with their TVs.
As the connected home matures, we can expect to see different devices developing specialisms. The role of the connected TV is likely to be the primary screen for viewing content, whether that be on-demand video or content shared between devices or locations. The second screen will be the screen that is best suited to most of the emerging activities that complement the main viewing experience – social interaction, transactions and companion content.
Addressable advertising, or advertising delivered to specific households, is the connected TV opportunity that has arguably received the greatest attention to-date. From the consumer perspective, our research has indicated that viewers are generally receptive to the idea of more targeted advertising, on the basis that it will increase the relevance of the advertising they are exposed to. Interestingly, viewers are more relaxed about addressable advertising on TV than they are to behavioural targeting online, largely because they already have a relationship with the parties involved (the platforms such as Sky, or broadcasters) as opposed to the largely faceless organisations driving behavioural targeting on the web.
While we believe addressable advertising will grow, there are, however, a number of largely structural reasons why it will be a slow journey. Detailed understanding of customers is the preserve of the pay platforms rather than the broadcasters, and the pay platforms will be proceeding cautiously with addressable advertising to avoid any damage to their (much larger) subscription revenues that might be caused by poorly executed addressable advertising models.
Additionally, advertiser demand for addressable advertising is still largely undetermined. For large, mass-market advertisers, there is considerable value in the free exposures that are delivered outside of their traded target audience, which they may be reluctant to give up for what is ostensibly a more efficient, addressable advertising approach. To illustrate this, Jeremy Bullmore has spoken in the past about the need for 100% of people to understand what the Mercedes brand stands for in order for the 2% who are final purchasers to want to own the car.
Finally, from a creative perspective, there are question marks over whether the current agency model is geared up to delivering the tens or potentially hundreds of different pieces of copy that would be required if addressable advertising is to live up to its promise of personalisation and relevance. Our view is that these factors, collectively, will constrain the growth of addressable advertising, so that it will account for a maximum of 8% of TV ad revenues by 2016.
By contrast, the second screen is platform agnostic, in that it is used independently of the household's TV platform; it has greater potential reach due to the higher penetration of second screens; and it has much greater diversity of application from the advertiser perspective. The second screen allows advertisers to add extra layers of content to both traditional TV advertising, and, arguably, for the first time, to programming.
The opportunity in connected households around traditional TV spots is to deliver additional content automatically through synchronised ads on companion apps. This could be additional brand communication designed to complement what is being shown on the main screen. Or, more likely, a content tag that is triggered via audio recognition and invites the user to take a further action, visit further content, order a free sample or actually purchase the product. While the ability to buy via the second screen is clearly not new, the real significance comes in the reduced friction on that path to purchase. The second screen call to action makes an impulse purchase off the back of a traditional TV spot that much simpler.
More significantly, the second screen opens up commercial opportunities in a space that, hitherto, has been relatively commerce-free – the programming itself. Product placement, which has had a slow start in the UK, could be considerably boosted by the ability to buy products via the second screen. There are also considerable opportunities for brands to create companion content, such as games or further layers of interactivity, which is designed to augment the programme itself. The standout example of this to-date is Heineken's star player app which allows viewers to predict in real-time what is going to happen in a champions league match. While this is likely to be the natural territory of a programme sponsor, it presents the opportunity for other brands to associate themselves with particular content areas, or even storylines.
About the author
Jeremy Pounder is client director in Mindshare's Business Planning division, where he runs the agency's ongoing media futures research programme 'Future Of…'