AT&T wants to selling ads on connected TVs and devices

Right now, the only way to reach the streaming audience is to piece it together by buying ads from multiple sources, including streaming services from Hulu and Amazon, services from TV networks that allow brands to buy ads on their streaming content and direct from devices like Roku. While Facebook does offer Watch shows and Google has YouTube content, some marketers argue it doesn’t hold your attention the same way traditional TV programming does. Google also has its TV service YouTube TV, but it only had 300,000 subscribers as of Jan. 2018, according to sources.

“With Google and Facebook, you have the ability to place the ads, but you don’t have the same kind of content where users will spend 30 [minutes] to an hour undisturbed,” said Raghu Kodige, chief product officer and co-founder of television data analytics firm Alphonso.

Not only will AT&T’s proposed ad platform reach streaming audience, it will stand apart from traditional TV advertising by letting ad buyers target very specific audiences — an emerging model known as “addressable advertising.”

Brands usually buy TV ads based on broad demographic groups, like advertising on shows that are popular among young adults 18-to-34.

Addressable ads are meant to target very specific groups of viewers based on data about them, like where they are located, what they like and what they are doing. For example, households with new parents might see more ads for baby products. In some cases, it can even target individual households. Advertisers are willing to pay more for such ads because they won’t be wasted on viewers who aren’t likely to buy their products.

“[Ad] personalization is going to be more of a trend as artificial intelligence gets better and new ways to communicate starts emerging,” Kodige said. “We’re going to expect more personal messaging overall.”

AT&T currently runs an addressable ad business called AdWorks, but it’s focused on DirecTV and U-verse customers, as well as AT&T mobile customers. The new ad tech platform would vastly expand the offering by allowing AT&T to sell ads on content running on other types of devices, as well as letting it add partner media companies.

The service would be similar to Comcast’s Freewheel, which is used by TV networks and major video distributors to serve ads on their streaming content. Freewheel places addressable ads on NBCUniversal content (owned by Comcast), as well as partner networks like Viacom and Disney. Ads can appear on traditional (linear) television programming, on video-on-demand content accessed through cable set-top boxes, and on streaming OTT services that use a device to connect to the internet.

According to marketing agency Merkle chief analytics officer Andy Fisher, brands spend only about $1 billion a year on addressable TV, $7 billion on OTT devices and services and $13 billion on online video, although he said figures could be “a bit mushy” because certain companies categorize their spend in different ways. But because AT&T would focus on selling ads on the same programming seen on TV and other premium content, marketers may be more willing to allocate some of the $70 billion television ad budget towards its platform.

“Advertisers are absolutely willing to dip into traditional TV budgets [to advertise on connected TVs and devices],” Fisher said. “Given that the content is the same as traditional TV — long form professionally produced video where people expect advertising and are willing to pay for and seek out content — with the addition of being targetable. In many ways it’s the best of both the traditional TV and digital worlds. It’s also where all of the viewership growth is.”

Disclosure: CNBC parent company NBCUniversal is an investor in Hulu. NBCUniversal is owned by Comcast.

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