I want to realize a "TV advertisement that can be aired and replaced the next day after putting the material"

In the ad tech world, the terms OTT and CTV are becoming increasingly common. However, this area is still in the developing stage. We asked the two companies, who are tackling various issues behind the scenes for the coming future, to talk about the essentials of OTT and CTV. (Sponsored by PubMatic)

- Please introduce yourself.

Mr. Hirose (left photo): My name is Michiteru Hirose, Country Manager at PubMatic Co., Ltd. I've been working at PubMatic for about 7-8 years, and during that time I've learned a lot about online ad delivery methods, from ad distribution through ad networks to programmatic ad trading, from banner ads to video ads, from PCs to smartphones and CTV. Formats and destination terminals have changed rapidly. Among them, OTT and CTV are expected to grow steadily in the future, and at the same time, we are working on various issues.

Mr. Yanashima (same as right): Ryoji Yanashima, President and CEO of Intimate Merger Co., Ltd. Our company, which develops and operates DMP, is currently focusing on developing digital marketing methods that do not rely on third-party cookies, and as part of this, we are working on advertising distribution on CTV using our data.

-Why are you interested in OTT/CTV?

Mr. Hirose: In Japan, it is said that 61.2% of the population are users of video distribution services. On the other hand, in the United States, 230 million people, equivalent to 70% of the population, use full-fledged flat-rate video distribution services. While more than 50% of Japanese households own a smart TV or CTV, 82% of US households have at least one internet-connected TV. OTT/CTV viewing is expected to become more popular in Japan as well, following the US trend.

Of course, the environment surrounding the market in the United States and Japan is very different. Watching TV in the US has long been predicated on expensive cable TV packages. In such an environment, the OTT/CTV market grew rapidly in response to the demand of viewers who wanted to "watch only the programs they want at a reasonable price." In Japan, where you can watch TV for free as soon as you buy a TV receiver, there probably isn't much demand for it.

However, I feel that the growth of the OTT/CTV market in Japan is accelerating at a stretch as a result of people spending more time online due to the corona crisis and TV manufacturers actively producing CTVs. I have. Also, it seems that viewers have gradually become accustomed to the method of paying for viewing on a channel or content basis.

Mr. Yanashima: The fact that a data company like ours receives inquiries about targeting distribution means that the evaluation of the distribution destination is increasing. This is because, when trying out new platforms and ad distribution methods that still lack success stories, it is rare that fine-grained targeting is required. Only after a sufficient distribution scale has been established and the advertising effect can be expected to some extent, the demand for "more efficient advertisement distribution" will become apparent.

In the last six months or so, the number of inquiries regarding targeting delivery to OTT/CTV has increased dramatically. It is proof that the OTT/CTV advertising market is steadily growing.

-Is there progress in improving the distribution environment in line with the increase in demand?

Mr. Hirose: To be honest, it is still in the developing stage. The biggest feature of digital advertising is that it is possible to "precisely target" and "measure effectiveness", but CTV, for example, does not use third-party cookies, so targeting based on browsing history through programmatic transactions is not possible. At present, it is technically possible to do device targeting such as "delivery to model B terminal of Company A" or contextual targeting related to "the title of each episode of drama C".

Also, in measuring effectiveness, there is no click action on CTV. On the other hand, for viewability measurement, major companies have already established sophisticated measurement environments.

Yanashima: Another feature unique to CTV is household viewing. In other words, it is possible to target by household unit such as "three households" like TV advertisements. However, as with other digital advertisements, an efficient advertisement distribution environment based on interests and purchase intentions has not yet been sufficiently prepared. We would like to establish an appropriate targeting delivery environment by building a sufficient data environment and defining appropriate segments.

Effect measurement, on the other hand, is a bigger challenge. It is possible to measure the presence or absence of ad display, that is, impressions, but it is very difficult to measure inflow, that is, attribution, starting from browsing and clicking. Cross-device tracking of inflow within a few days after OTT/CTV contact is becoming mainstream, but there is still a need to improve accuracy.

However, the fact that attribution has not been measured properly means that the advertising effect may be higher than what we can grasp at the moment. Many marketers who have already started OTT/CTV ad distribution may have the feeling that "actually, it should be more effective."

-Is there a demand for targeted distribution for OTT and CTV in the first place?

Mr. Hirose: I believe that the essence of OTT/CTV lies in the fact that it is possible to place TV advertisements using digital functions. Television advertising certainly has the greatest broad reach, but there is definitely a demand for targeting. However, the only targeting that can be done with general TV advertising is area distribution. If a more sophisticated targeting mechanism is prepared, it should be used to the maximum.

Mr. Yanashima: In fact, we have already received inquiries about targeting delivery to OTT/CTV. If you imagine the background to this, whereas ordinary TV advertising costs tens of millions to hundreds of millions of yen per advertisement, OTT/CTV advertising costs around 3 to 5 million yen if the distribution target is narrowed down. It's because you can publish.

In other words, for advertisers who have been interested in TV advertising but have not been able to get their hands on it, whether or not precise targeting is possible is a matter of life and death.

Mr. Hirose: Until now, TV advertising was something that only a few major advertisers could handle. OTT/CTV is likely to be expected as a carrier of TV advertisements that can be placed by small and medium-sized enterprises and startups, and as a place for test marketing.

-Do you think there is a demand for different ad creatives for each user in OTT/CTV?

Mr. Yanashima: Ideally, we would have 100 different ad creatives for 100 people. However, if you prepare 100 full-fledged video advertisements for OTT/CTV, the production cost will increase and it is not realistic. Maybe we should consider developing an alternative format like Instagram Stories where you can create video ads cheaply and easily.

-There are still a lot of problems with targeting.

Mr. Yanashima: The distribution format of general digital advertisements has developed in the following order: (1) broad distribution → (2) content matching → (3) audience targeting → (4) dynamic creative. CTV is still working on the issue of "how to achieve targeting based on interests", which is located between ② and ③.

In place of third-party cookies that cannot be used on CTV, it is necessary to make the most of member information registered on the OTT platform and device IDs such as IDFA and Android ID.

-When do you expect the environment to be ready for targeted distribution and effect measurement similar to other Internet advertisements?

Mr. Hirose: It will take a little more time.

Mr. Yanashima: However, if it takes too long, it may not be accepted as a companion of Internet advertising.

Mr. Hirose: OTT/CTV is an intermediate existence between conventional digital advertising and TV advertising. That is why traditional digital and TV advertising metrics cannot be applied as they are. There is an urgent need to develop a unified index dedicated to OTT/CTV.

- What kind of unified indicators can be considered?

Yanashima: I think view-through search conversion will become mainstream. In other words, it is a method of displaying the message "Please search" at the end of OTT / CTV advertisements and measuring how much conversion or search lift occurs through search after that.

Mr. Hirose: Users who are interested in the content of the advertisement will search for it on their smartphones. I think it would also be effective to link the device that viewed the OTT/CTV ad with the smartphone that performed the search or purchase by IP address.

-Please tell us about future market challenges.

Mr. Hirose: In the Japanese market, the number of media companies in OTT/CTV is quite limited. In fact, current OTT/CTV ads are often sold as pure ads without going through DSPs, which is in contrast to the US market where programmatic buying and selling of ad space has become active. Another issue is that ad creative screening is rigorous and it is extremely difficult to implement automatic bidding.

Mr. Yanashima: In Japan, OTT/CTV advertising is still positioned as a “trial medium”. In other words, it has not become a regular in Internet advertising. Considering the current situation where it takes a lot of time and effort to put out advertisements and measure the effect, I think it can't be helped.

That's why, while developing our own standards, we have to come up with a method to streamline and optimize ad delivery to the same extent as other digital ads as soon as possible. If it can't be realized, it will be regarded as a subspecies of TV advertising or TV commercials limited to young people.

But OTT/CTV is not a subspecies of TV. By utilizing digital advertising technology, we will be able to establish the raison d'etre of "TV advertising that can be replaced the day after tomorrow based on the performance of the material that is put in today and the advertisement that will appear tomorrow."

Mr. Hirose: I really want more streaming media companies to revitalize the market. I understand that creating content is costly and time-consuming, so it is quite difficult, but overseas there are businesses that specialize in aggregating OTT and his CTV content.

In the Japanese market, many TV companies that manufacture smart TVs provide program guides and OSs, but if you monetize advertising while running your own content on that screen, new OTT / I think it can be a CTV medium. We would like to support the future growth of the OTT/CTV market in Japan together with media companies, including the perspective of monetizing advertising.