Exploring the Impact of Streaming Platforms on the Future of Virtual Advertising
Is the Future of Virtual Advertising tied to OTT and Streaming Platforms?
In short. Probably. But let’s explore why…
The way we consume media shifts regularly and rapidly. Not even 20 years ago, “streaming” content was virtually unheard of. We had no Netflix (beyond mail-based rentals), no YouTube, and only the most sophisticated mobile phones provided any kind of connectivity to the internet, and even this was rudimentary at best. Television viewers waited patiently for their favorite programs to be aired once a week, and the only way to consume a televised football match was to watch it in full, save bathroom breaks for half-time, and try not to blink.
Fast-forward to 2023 and the world looks very different. We can “binge-watch” a limited series in an evening, and pause, rewind and record so we can consume what we want, when we want. Sports fans engage with live sports content in ever more flexible ways, streaming live games from all over the world, consuming highlights and exclusive content not broadcast as part of the main game. The key advent that has made this possible is OTT and streaming platforms.
OTT (Over The Top) refers to the delivery of video content over the internet directly to viewers, bypassing traditional cable or broadcast television platforms, and according to Nielsen, in the USA, streaming outperformed cable and broadcast TV for the first time in 2022, and signs point to the rest of the world following suit. In the big five European markets (UK, Italy, Germany, France and Spain), at least, the proportion of total spend on sports rights coming from OTT services reached 20% in 2022, up from 12% in 2021. Which is huge growth in just one year. (Source)
And the opportunities presented by OTT are not limited to the fans, but to sponsors and advertisers as well, particularly when combined with virtual advertising technology.
Virtual advertising, also known as digital board replacement or virtual board replacement, involves the digital insertion of content into the broadcast feed of live sports. New (virtual) advertising content can either replace the existing advertising on the advertising signage within the sports venue or can be placed onto an otherwise empty surface, such as the field of play.
Typically, virtual advertising adds value for sports rightsholders and brands via the splitting of the main broadcast feed into multiple virtualized feeds, so that different audiences around the world are exposed to advertising content that is more relevant to the fans in those markets. However, the increasing shift in the consumption habits of sports fans towards OTT and streaming platforms opens up considerable potential for enhanced audience targeting and even greater value creation for those rightsholders and brands.
The move to subscription OTT platforms provides the opportunity for a greater understanding of fan data, preferences, and behavior in addition to basic demographic information, which would enable better audience segmentation. What this means, in short, that rather than merely tailoring advertising to different geographical markets, brands could effectively target only those particular segments of subscribers that are likely to be interested in their product or service. There is also potential for a more programmatic approach, whereby individual subscribers are targeted based on individual data, so each subscriber is exposed to in-game advertising content that is personalized, in the same way as social media advertising or Google Ads.
How would this impact current sponsorship models?
This very much depends on volume. If personalized advertising becomes commonplace, this will necessitate a shift in traditional sponsorship models as much more diversity in advertisers and messaging will be required in order to provide a valuable personalized experience for fans. In addition, the current ways in which sponsorship agreements are made would have to change. It is likely that an exchange platform for buying and selling advertising inventory would be required. The publishers (rightsholders) would make their inventory (the pitch-side LED boards, for example) available on the ad exchange and advertisers, after defining their target audience, budget, and campaign goals would “bid” on the advertising inventory. Those familiar with online ad exchange platforms, such as Google Ads, will be familiar with this model and the level of personalization and data capture that is possible.
What is more likely, in the short term at least, is what we looked at already – grouped “personas” or audience segments where audiences are split into groups based on common interests, demographics, or user behavior. This approach would still enable rightsholders to maintain traditional sponsorship models to some degree, as fewer additional sponsors would be required, so some level of exclusivity and brand affiliation would still be possible and manageable. However, 20 different audience groups might still require 20 times as many sponsors, so some degree of automation would be advantageous and time-saving.
What is the added value?
Advertisers can leverage user data and analytics collected by these platforms to deliver relevant advertising to specific audiences. With these increased targeting capabilities, brands could focus on reaching only those with whom they believe their brand and messaging will resonate. This eliminates the wastage that comes with targeting a global audience with a single message. For rightsholders, this enables them to sell the same piece of advertising inventory multiple times over and increase the ROI from sponsorship or advertising. Additionally, virtual advertising can be seamlessly integrated into the content, providing a less disruptive and more immersive advertising experience for viewers, when compared to current “interruptive” in-stream or bumper ads.
OTT platforms are particularly suitable for virtual advertising because they offer a controlled and measurable environment. Brands can accurately track ad impressions, and if interactivity with the advertising itself is implemented, even engagement rates and conversion metrics.
What about privacy?
Privacy concerns and regulations surrounding data usage and targeted advertising are significant considerations. From 2024 onwards, third-party cookies are being eliminated by Google, which means that advertisers will no longer be able to target audiences based on user behavior across the web and will instead need to rely on first-party cookies. While this will present a considerable challenge for many advertisers and platforms, OTT and streaming platforms could stand to benefit from this change as their audiences can be segmented into groups of viewers with similar preferences by using subscriber data profiles. In the short term we must assume that without third-party cookies it will not be easy to implement hyper-personalized programmatic ad targeting such for OTT as is common practice with ad tech today. However, segmenting to large groups or “cohorts” of similar people will make greater market segmentation possible for in-game advertising on OTT platforms.
And the Conclusion is…
To sum all of this up, we can predict with some confidence that the future of virtual advertising is tied significantly to the ever-increasing consumption of sports via OTT platforms. The ability to deliver targeted, personalized and non-disruptive advertising within the stream offers advertisers an effective way to engage with their desired audiences. As OTT platforms continue to evolve and technologies advance, virtual advertising will continue to offer more immersive and interactive experiences that redefine the boundaries of advertising in the digital era. Advertisers and rightsholders who embrace these opportunities and adapt their strategies accordingly will be well-positioned to thrive in this dynamic landscape.
Interested in learning more about virtual advertising?
Get in touch with the team.