Harmonic: The Targeted Advertising Revolution

Posted on Apr 13, 2023 by FEED Staff

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Recent innovations have been shaking up the world of targeted ads. Frequency capping, in-content product placement and ad-pod optimisation are all game changers

The video-streaming business model is evolving rapidly. Over the last few years, the number of streaming services has exploded, creating a significant increase in competition for service providers. Today, there are more than 200 for consumers to choose between.

While consumers love having options for watching premium video content, subscription fatigue is a challenge. A recent survey from Blue Label Labs found that approximately two out of three people have cancelled at least one video streaming service in the last year. Around 37% of subscribers cited the reason being that the service went unused, with about 26% saying it was because the service was too expensive.

Subscriber fatigue – in combination with growing consumer demand for unique or premium content, a superior-quality streaming experience and a lower price point – has led service providers to adopt targeted advertising into their business models. Leveraging a cloud-native streaming workflow and the latest dynamic ad insertion (DAI) technology, providers can deliver ads to viewers based on criteria including the likes of age, gender, geographical location and socioeconomic status – ultimately tapping into billions of dollars of potential revenue in the future.

The evolution of cloud streaming and targeted advertising

As competition heats up in the video-streaming space, a growing number of Tier 1 operators are taking a vested interest in delivering targeted advertising to grow their revenue streams. One of the biggest challenges that service providers face with delivering targeted ads is scalability.

Leveraging a cloud-native video-streaming workflow in the public cloud, service providers can deliver targeted advertising at scale for millions of concurrent viewers. The elasticity of the cloud enables service providers to deliver custom manifests to each viewer in real time.

The targeted ad ecosystem is complex. By adopting a cloud-based video-streaming process, service providers simplify integration with various components – including ad servers, user data platforms and more. Running the entire video-streaming and targeted ad workflow on the cloud ensures seamless communication and ultimately a superior experience for viewers.

A moving target

Until recently, most targeted advertising has been based on content, demographics or geography. However, change is underway. Streamers are experimenting with deeper targeted advertising approaches to reach specific audience segments and realise higher CPMs. Here are a few of the targeted ad innovations being utilised in the video-streaming market.

Frequency capping: A targeting approach that limits how many times a viewer sees an ad or advertiser in a timeframe. Identifiers like IP address or device ID decide if a viewer has already seen an ad or advertiser. The goal is to reduce fatigue, ensure the brand isn’t diluted and increase engagement.

In-content product placement: Service providers are exploring alternative methods of advertising, such as in-content product placement. One example is inserting a billboard for a product into video content to advertise specific brands. Embracing new ad formats like in-content placement enables service providers and advertisers to reach audiences across today’s increasingly fragmented video-streaming landscape.

Ad-pod optimisation: Service providers are selling targeted ads based on optimised ad-pod placement. An ad pod consists of a group of ads sequenced to play together during an ad break. Typically, the first and last ad in a pod receive the most attention from viewers – therefore they’re worth more. Ad pods offer service providers an opportunity to maximise revenue from each break, while giving advertisers more control over ad placement.

Revenue-per-second business model: Typically, viewers have been accustomed to a 30-second ad experience when watching premium content. However, the model for targeted advertising is evolving, with service providers and advertisers testing out the delivery of shorter ads. This change is being driven in part by the growth of free ad-supported streaming television (FAST) services.

FAST services offer a limited amount of advertising, and service providers want to maximise the value of the available ad time. Instead of running a 30-second ad, service providers may offer four seven-second ads that measure revenue per second instead of pure impressions. Collectively, this model pays more than the CPM model.

Server-side ad insertion: Targeted ads can be delivered in a couple of ways. The traditional method of client-side ad insertion involves using an SDK plug-in on the client in order to play ads at the appropriate times. Server-side ad insertion (SSAI) enables service providers to customise the video experience for each viewer by modifying the video manifest. SSAI is becoming the new standard for a few reasons.

Viewers today expect an exceptional quality of experience for video streaming. With SSAI, ads are stitched into the content stream on the server side, giving viewers a smoother overall experience. Processing targeted ads in the same pipeline as the videos will then provide consistency and frame accuracy to streaming, eliminating transition glitches.

Machine learning: An important innovation for targeted advertising is machine learning (ML). Today, FAST services are deriving viewer information such as device ID and IP address to deliver targeted ads. ML takes this use of data to the next level. Through ML algorithms, service providers and advertisers are learning more about viewer patterns, and thus coming to understand which ads resonate with viewers and optimise ad inventory decisions.

Harmonic leads the way

According to Statista, Hulu’s advertising revenue in the US will reach $5 billion by 2026. Peacock and Netflix are projected to follow with $2.7 and $1.7 billion in ad revenue, respectively. If service providers want to stay competitive and be at the forefront of video streaming, they need to adopt a cloud-native solution that supports advanced targeted advertising techniques.

By employing a cloud-native streaming solution, providers can scale to meet the demands of millions of concurrent streams – critical for live events that attract big audiences. Implementing a cloud-based streaming workflow ensures that targeted ads are delivered seamlessly, minimising disruptions and boosting engagement. Providers can also keep subscribers loyal by offering both better ad targeting and inventory optimisation.

Harmonic leads the charge for targeted ad innovation with its VOS360 SaaS platform. This simplifies every stage of media processing and delivery for premium video streaming.

Running on three major public clouds, the end-to-end platform provides unparalleled agility, resiliency, security and scalability for a superior viewing experience. With support for SSAI and DAI technologies, the VOS360 platform enables millions of ad impressions to be delivered daily by global Tier 1 operators.

To learn more, see Harmonic at NAB Show in booth W2801, or visit harmonicinc.com.

Originally published in the spring issue of FEED.

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