James R | On 12, Nov 2014

Channel 4 will offer Europe’s first programmatic VOD ads next year.

The announcement, made at Channel 4’s Upfront 2015 event, sees the broadcaster make its first big step into the UK VOD advertising landscape, offering advertisers a digital marketplace to buy advertising against its unique audience segmentation. The service will launch as part of its new integrated VOD and TV platform, All 4, which arrives next year.

While the line between linear broadcast and catch-up is becoming blurred, there is arguably yet to be an equivalent advertising infrastructure in place for Internet TV. Channel 4 is well placed – if not uniquely so – to introduce such a system, thanks to its sheer volume of data.

The broadcaster’s growing database has over 11.5m registered viewers, which includes half of all 16-34 year olds in the UK. This database has been strengthened with feedback via surveys and testing – and lets Channel 4 and its commercial partners automatically match a viewer’s survey data with their true VOD behaviour data. In other words, advertisers can target people based on their interests (e.g. beauty, fashion, gadgets) together with what they watch.

Brands currently signed up for the trial version of the service include Baileys and Rightmove.

Channel 4’s automated, big data approach can only be rivalled by two other VOD services at present: Netflix and YouTube.

Netlix has around 3 million users in the UK, which is nowhere near as many as the terrestrial broadcaster. Its big data, though, is even bigger: the whole catalogue is tagged into genres and features and filtered via viewer ratings, with members automatically shown their own personalised home page, customised to match their interests. When House of Cards Season 2 was being promoted, they even targeted specific segments of users with different adverts.

Netflix, though, does not carry any external advertising – “Every time [the discussion comes up], we shoot it down,” an exec told Fast Company – as it makes enough money from its subscription fees, which, as they have already proven, they are willing to raise when necessary.

YouTube, on the other hand, has an astonishing 1 billion unique users every month – with over 6 billion hours watched by viewers, almost an hour for every person on Earth. According to Nielsen, YouTube reaches more US adults aged 18-34 than any cable network. It is, without a doubt, the major driver of the online video sector – and, depending on who you talk to, the future of TV.

Not every viewer, though, is a member, which could limit some of YouTube’s potential for targeted adverts – although it does have Google’s data within arm’s reach, which is a hugely powerful tool. And, last year, it started incorporating third-party tracking tags from Nielsen and Comscore, which gives detailed metrics to clients.

While YouTube’s ad rates have dipped because of its almost unlimited room for advertising – with 75 per cent of their in-stream ads skippable – it has countered that by stepping up its own advertising game one level further. Earlier this year, YouTube announced new Google Preferred channels. The theory is simple: reserve their top channels for clients willing to purchase ad space in advance, guaranteeing they will reach a specified portion of their target eyeballs.

Brands are already on board.

“People are now spending more time with online media than they are with traditional media,” PepsiCo CMO Frank Cooper paid at the site’s annual Brandcast presentationM. “So the idea of relying solely on TV to drive your Brand is not a particularly sane one.”

Relying solely on old-fashioned TV is certainly not the future of advertising. U.S. interactive advertising revenues for 2013 hit an all-time high of $42.8 billion, according to the latest IAB Internet Advertising Revenue Report, exceeding broadcast TV advertising revenues ($40.1 billion), for the first time ever.

Channel 4’s unified All 4 approach, though, places it in a strong position. And it is not being shy about taking on YouTube: the broadcaster’s announcement of its programmatic VOD ads was accompanied by “pioneering research with Cog Research and Neuroscientist Dr Amanda Ellison at Durham University”, which argues that advertising on TV on-demand players outperforms YouTube (and other network, social and auto play video platforms).

The research, including eye tracking which measures where viewers are looking when exposed to ads, and monitoring electrical currents in people’s skin, it claims that Channel 4’s on-demand player (4oD) grabbed 80 per cent of respondents’ attention versus YouTube’s 20 per cent.

“YouTube’s cluttered visual environment increases the work a viewer’s brain has to do by 50 per cent as they process what to watch next whilst the ads are playing, reducing their ability to concentrate,” says the report.

“Five seconds of free YouTube airtime is unlikely to be of any significant benefit as viewers were impatient to skip the ad when given the option to do so and less inclined to engage and opt in.”

Speaking at the Transforming TV segment of the Channel 4 Upfront event, Jonathan Lewis, Head of Digital & Partnership Innovation, said: “Our data strategy has enabled Channel 4 to lead the global digital TV ad market. Channel 4’s unique first party data already offers advertisers superior targeting against our engaged, young, upmarket audience on our growing VOD platform – and the radical addition of automation and programmatic buying is a another game-changer for the commercial TV VOD industry in 2015.”

“The ‘way’ in which viewers consume VOD content is as important as ‘what’ they consume,” the broadcaster’s research concludes.

Its verdict that YouTube is “inferior” may be taken with a pinch of salt, but the game is definitely changing. Demographic, automated targeting now represents over 20 per cent of Channel 4’s total digital advertising revenue, while personalised digital campaigns with Coca-Cola and Burberry launched on 4oD this summer. Yahoo!, meanwhile, has just bought out advertising company BrightRoll.

As advertisers follow viewers into the on-demand landscape, the way in which people consume video is undoubtedly as important as what they consume. But the same question now faces marketers: which way will they choose to advertise?

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