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How Pay-TV Advertising will Shift to New Formats

Increasing consumer adoption of new video entertainment formats -- including video-on-demand (VOD) and viewing on media tablets and smartphones -- will cause up to $22 billion (30 percent) of the U.S. pay-TV advertising market to shift to new formats by 2016.

Western Europe will see similar shifts in advertising revenue, while the rest of world will lag in its transition of advertising to these new formats. Regardless, the eventual realignment of all marketer's advertising budgets will have a dramatic impact on the legacy ecosystem.

"A shift is already underway in the television advertising marketplace from linear ads inserted by a 24-hour schedule to advanced technologies that will increase the effectiveness of advertisers' spending," says Sam Rosen, senior analyst, digital home, at ABI Research.

New technologies are achieving scale within broadcasters' advertising systems, notably audience measurement and tracking, targeted advertising, interactive advertising, VOD and multiscreen advertising, and other techniques -- including companion devices.

Many of the companies leading the charge in the advanced advertising ecosystem are yet to become mainstream industry players. Therefore, they're likely to disrupt the current status quo.

They're the specialists that will drive the shift, as new advertising formats develop. They including: Canoe Ventures (interactive ads), BlackArrow (VOD ads), This Technology (dynamic ad platform), INVIDI and Visible World (targeted or addressable ads).

Numerous technology components are required to deliver these new advertising formats. According to the latest market study by ABI Research, the vendor ecosystem will rapidly expand to addresses these market opportunities.

The market study explored advertising technology used in television, Internet and over-the-top (OTT) video platforms, traditional linear TV, catch-up TV, DVR/PVR storage, and VOD platforms.

Vendor opportunities identified by the study include:
  • Advertising-specific hardware and software systems -- such as ad servers, ad splicers, ad decision systems, and traffic and billing systems.
  • Advertising-specific components of set-top box middleware -- such as measurement and reporting tools, interactive stacks, and interactive applications.
  • Advertising-specific VOD software.

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