Convergence of TV and digital platforms: increased innovation and competition for advertisers’ budgets

This paper explores recent dynamics in the advertising market and uses case studies to demonstrate the increasing convergence between TV and digital advertising in terms of technologies, audiences, data and products, with a focus on the USA and the three largest EU countries (France, Germany and the UK).

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Summary of the report

Digital advertising has grown at a tremendous rate, and now accounts for nearly half of the total advertising market expenditure in many developed countries. TV advertising revenue has remained resilient, as TV continues to attract large audiences. However, the consumption habits and the age profile of TV audiences are changing. Changes in the consumption of TV content have, so far, largely been focused on the rise of on-demand consumption.

These changes are leading to a broader commercial convergence between TV and online digital advertising, and increasing innovation in TV advertising products. TV players are developing digital capabilities to complement their traditional strengths (access to a large amount of attractive content, direct relationships with advertisers and the increased ability of audience metrics to produce comparable outputs across platforms). Some of these new capabilities relate to technology, with a focus on ‘addressable’ advertising, which is the ability to serve advertisements dynamically depending on the profile of viewers. Meanwhile, US-based TV players have invested to position themselves as advertising technology and solutions providers for the TV value chain both in the USA and internationally.

In response, online players are increasingly seeking to integrate third-party audience metrics into their platforms to improve comparability and transparency, although much remains to be done to fully align measures. These dynamics mean that TV and online players are moving closer together in terms of the characteristics of the advertising products they offer, enabling a higher level of competition for advertisers’ budgets.

Figure: Matrix of digital advertising integration by different TV players [Source: Analysys Mason, 2017]