Q2 2019

PARTNERING FOR SUCCESS IN PREMIUM VIDEO

CONTENTS

Summary 3

Core Observations: U.S. 5

Core Observations: Europe 16

Author Bios 31

Glossary and Sources 32

PARTNERING FOR SUCCESS IN PREMIUM VIDEO

Q2 2019

Video Marketplace Report

The FreeWheel Video Marketplace Report highlights the

changing dynamics of how enterprise-class content owners and

distributors are monetizing premium digital video content.

The data set used for this report is one of the largest available on

the usage and monetization of professional, rights-managed video

content worldwide, and is based off of census-level advertising

data collected through the FreeWheel platform.

CONTENTS

2

SUMMARY

PARTNERSHIPS DRIVE DATA-ENABLED BUYING AT SCALE

“Advertisers want to use television as a full-funnel solution that marries the best of traditional television with increased data-driven capabilities for targeting and measurement” said David Kline, Executive Vice President, Charter Communications, in a quote issued during Cannes Lions 2019 as part of Comcast Advertising’s On Addressability kick off. This articulates the value proposition of premium video as its full-range of capabilities become available to advertisers. However, for premium video to realize its full-funnel potential, industry players must work to deliver against three main promises:

1. Scale: Content that reaches a broad set of viewers wherever and whenever they watch

2. Sophistication: Technology to match viewers with data, dynamically insert advertising, and measure delivery

3. Simplicity: Easy to access and execute transaction channels that reduce friction for media buyers and sellers

Scale - Building Interoperability

In the first half of 2019, players across the premium video ecosystem partnered to help advance television’s data-enabled future. These industry initiatives seek to promote interoperability and limit walled gardens and silos. As an example, the U.S.-based smart TV company VIZIO spearheaded “Project OAR” (Open Addressable Ready), a consortium dedicated to the development of new standards for addressable advertising on connected TVs (CTVs)1. At launch, participants included Disney Media Networks, Turner, Xandr, FreeWheel, NBCUniversal (NBCU), CBS, Discovery, Hearst Television, AMC Networks and Inscape. The consortium is designed to benefit audiences and marketers alike. “Through ‘Project OAR’,... [we] will combine relevance with reach to deliver a better experience to our viewers and better ROI for our advertisers,” said Mike Dean, Senior Vice President, Advanced Advertising and Automation at CBS.

Sophistication - Laying the Technical Foundation

At this year’s Cannes Lions festival, Comcast Advertising, with the support of Charter and Cox, announced On Addressability, an industry-wide initiative to bring greater addressability to the TV industry2, delivering a sound, scalable and effective solution for marketers. While achieving full addressability will involve a variety of players, the first step for On Addressability is to help content distributors with the technical “how to” of enabling addressability.

Simplicity - Unifying Audiences

NCC Media and OpenAP entered into an agreement to allow National TV advertisers to tap into the advanced audience segment definitions of OpenAP across the 85 million households available through NCC Media. In a joint statement, NCC Media and OpenAP noted3, “This initiative is the first of several new data and measurement programs the two companies are developing to support a more open ecosystem for comprehensive TV buying.”

SUMMARY

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THE POWER OF PREMIUM VIDEOInteroperability in the premium video ecosystem is accelerating and delivering scale, sophistication and simplicity for both buyers and sellers.

SOPHISTICATIONSCALE SIMPLICITY

- Total premium video ad view growth of 27% YOY

- Distributor platforms delivered 61% of all impressions with 77% of these on IP-enabled platforms

- STB DAI inventory represents 14% of premium video inventory

Industry partnerships are working to unify disparate inventory sources across platforms and sales channels so advertisers can access unprecedented scale. Much of the growth has been driven by increased capabilities enabled on distributor IP platforms.

As reach becomes unified, enhanced use of data is driving advancements in targeting, measurement and attribution. Audience targeted campaigns that deliver to unique users, households or devices are becoming increasingly prevalent.

The technology and infrastructure to use automation to facilitate TV ad-buying is in place and programmatic transaction now account for 19% of all ad views, reflecting 45% growth year-over-year.

- CTV represents 55% of premium video dynamic ad insertion (DAI) inventory and grew 48% YOY

- Audience targeted ad views grew 82% YOY and 62% of these impressions were behaviorally targeted audiences (e.g., auto intenders or sports enthusiasts)

- Programmatic transactions accounted for 19% of impressions

- Premium video completion rates remain high, ranging from 85% to 100%

Note: All data presented here is from the FreeWheel Video Marketplace Report U.S. data set and relates to Q2 2019 data

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Q2 2019

CORE OBSERVATIONS: U.S.

The Most Definitive Data Available on Premium Video

CHART 1

VIDEO AD VIEW AND AD VIEW GROWTH, U.S. Q2 2018 vs. Q2 2019

...full-episode content remains the most widely-consumed segment, constituting 55% of total ad views.

In Q2 2019, video views grew by 13% and ad views grew by 27%, compared to Q2 2018. All formats experienced growth, but full-episode content remains the most widely-consumed segment, constituting 55% of total ad views. As evidenced by a series of recent announcements, the space will only continue to grow. For example, Disney+ and HBO Max (from AT&T) plan to launch in Q4

2019 and Q2 2020 respectively, both with large catalogs of content. Apple TV+ is expected to launch this fall with a greater emphasis on original content4. NBCU is also set to offer a direct-to-consumer streaming service in 2020 and, unlike the offerings from Disney and AT&T, NBCU’s service is set to be ad-supported and free for existing cable subscribers.

CONTENT

FULL-EPISODE ENTERTAINMENT OFFERS CONSUMERS MORE CHOICE THAN EVER BEFORE

+13%VIDEO VIEWS

+27%AD VIEWS

CORE OBSERVATIONS: U.S. | CONTENT

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CHART 2

CONTENT COMPOSITION BY FORMAT, U.S. Q2 2018 vs. Q2 2019

CORE OBSERVATIONS: U.S. | CONTENT

CONTENT

LIVE PREMIUM VIDEO GROWS, BUT SLOWER THAN LAST YEAR

Dynamic Ad Insertion (DAI) into live content was a defining trend in 2018, with tentpole sporting events like the PyeongChang 2018 Olympic Winter Games and Men’s FIFA World Cup serving as a showcase for live insertion technology at scale. This year, live continues to grow, albeit at a more moderate pace, at 44% in Q2 2019, compared to a growth rate of 90% in Q2 2018.

Clips constituted 7% of ad views in Q2, a 9% growth year-over-year. Although total content ad views increased by 27%, clip ad view growth was minimal. This is, in part, because content owners and distributors choose to limit clip ad exposure to help drive user engagement for their long-form content.

Q2 2019

CLIPS (0-5MIN.)FULL-EPISODES (5+ MIN.)LIVE

38% 55% 7%+44% YOY +19% YOY +9% YOY

Q2 2018

33% 56% 11%

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CHART 3

SHARE AND GROWTH OF AUDIENCE TARGETED* AD VIEWS, U.S.Q2 2019

Content Targeted +23% YOY93%

7%Audience Targeted +82% YOY

With the right technology, data management processes, and business agreements in place, demand for data-backed audience targeting has rapidly increased. FreeWheel data shows that campaigns using audience attributes to target users, devices or households grew 82% in Q2 2019, compared to the year prior -- more than three times faster than content targeted campaigns. A wide spectrum of advertisers utilize this approach, with both the Entertainment & Media and Auto industries indexing higher for audience-targeted campaigns than for content-targeted campaigns.

Industry groups also contribute to the increased demand for audience buys. For example, consortiums like OpenAP are creating standardized segments to make audience buying easier. Still, there is a continuing need for the supply side to support a “bring-your-own-data” approach so advertisers and agencies can activate bespoke lists. As addressability scales, the safe and efficient access to data between advertisers, programmers and distributors will remain a key consideration. Blockgraph, a technology currently incubated under FreeWheel can facilitate secure audience matching over a peer-to-peer platform5, and is again an industry-focused initiative, with participation from multi-video programming distributors (MVPDs), TV networks, agencies and advertisers.

TARGETING

AUDIENCE TARGETING COMES TO PREMIUM VIDEO

CORE OBSERVATIONS: U.S. | TARGETING

*Audience targeted campaigns are those that use unique identifiers to deliver ads to specific devices, households, or users.

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CHART 4

AUDIENCE SEGMENT TYPE SHARE OF TARGETED CAMPAIGNS, U.S. Q2 2019

Audience Segment Type*

All Campaigns vs. Audience Targeted

14%

20%

AUDIENCE TARGETED CAMPAIGNSALL CAMPAIGNS

Entertainment & Media Auto

CORE OBSERVATIONS: U.S. | DEVICES

Behavioral

Demo38%

62%Entertainment and Media companies index higher on audience targeted campaigns as publishers use their own inventory to trial data-enabled campaigns.

The Auto industry values targeting vehicle intender groups. Given the high purchase value of the product there is significant upside to pushing consumers through the bottom of the purchase funnel.

11%

17%

*‘Demo’ audience segment types are those that target based on age and gender

‘Behavioral’ audience segment types are those that target more advanced segments such as auto intenders, sports enthusiasts etc.

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Connected TV (CTV) drove the bulk of premium video ad view growth in the second quarter of 2019, growing 48% compared to last year and now representing 55% of the total market. When combined with ad views from DAI-enabled set-top boxes (STBs), more than two-thirds of all ad views are on “the big screen.”

In contrast, mobile-app was the most versatile video consumption device in Q2 2019, with viewers using the “TV in their pocket” to consume live (32%), full-episode (55%) and short-form (13%) content on mobile apps. Mobile web-based ad views, while a small proportion of total mobile ad views, skew heavily towards short-form viewing (clips), which also constituted 11% of total ad views on desktop devices. Desktop has a higher proportion of ad views during the working hours, which are more conducive to live and short-form content consumption for most people. This aligns with the daypart viewing data presented in the Q4 2018 Video Marketplace Report.

CHART 5

AD VIEW COMPOSITION AND GROWTH, BY DEVICE, U.S.Q2 2019

-2%

YOY

Desktop+48%

YOY

CTV+3%

YOY

Mobile+3%

YOY

STB VOD

DEVICES

CTV DRIVES THE GROWTH OF PREMIUM VIDEO

...growing 48% compared to last year and now representing 55% of the total market.

14%

55%

17%14%

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CORE OBSERVATIONS: U.S. | DEVICES

CLIPS (0-5MIN.) FULL-EPISODES (5+ MIN.) LIVE

CHART 6

FORMAT COMPOSITION BY DEVICE, AD VIEWS, U.S.Q2 2019

STB VOD

100%

Desktop

11% 45% 44%

Mobile Web

60% 21% 19%

Mobile App

13% 55% 32%

Connected TV

3% 50% 47%

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11

DISTRIBUTION

IP-ENABLED DISTRIBUTOR PLATFORMS CONTINUE TO SCALE

In the first half of the year, premium video ad views grew faster on distributor platforms than publisher-owned and operated properties, at 46% and 2%, respectively. Two-thirds of these distributed ad views were on digital/IP-based platforms, while one-third took place on MVPD STB inventory that is DAI enabled.

In Q2 2019, STB ad views remained flat, growing just 3% year-over-year. Set-top box video on-demand (STB VOD) inventory increased rapidly from 2015 to 2017, as MVPDs introduced new DAI capabilities. During that period, ad view share on STB VOD increased from 0% to 20%. As consumers have begun to view video content in additional ways, the growth of STB VOD inventory has moderated, with an increase of 3% in 2019, compared to the prior year.

CHART 7

SHARE AND GROWTH OF AD VIEWS BY SYNDICATION PLATFORM, U.S.Q2 2019

Publisher Platforms +2% YOY

Distributor Platforms +46% YOY

39%

61%

Total Volume of Ad Views, U.S.

Distributor Platform

23% 77%+3% YOY +64% YOY

STB DIGITAL / IP

CORE OBSERVATIONS: U.S. | DISTRIBUTION

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TRANSACTION TYPE

ALTHOUGH THE MARKET ACKNOWLEDGES A MORE PROGRAMMATIC FUTURE, DIRECT DEALS DOMINATE

Advertisers and agencies continue to use traditional

channels to book direct deals for premium video,

which accounted for 81% of total ad views in Q2 2019.

However, programmatic channels are growing faster,

at a rate of 45% compared to direct deal’s growth of

23% year-over-year. In today’s market, the majority

of programmatic deals are still negotiated privately,

suggesting that many buyers and sellers are not yet

ready to give up on the direct relationship even if it’s

executed through automated channels.

Both the buy and sell sides foresee premium video

buying becoming more automated, but scaling

programmatic transactions will require greater alignment

on the benefits of automation between buyers, sellers

and technology platforms.

CHART 8

SHARE AND GROWTH OF DIRECT AND INDIRECT DEALS, AD VIEWS U.S.Q2 2019

Indirect +45% YOY

Direct +23% YOY

19%

81%

Total Volume of Ad Views, U.S.

87%Programmatic Direct

13%Exchange

Ad View Share by Programmatic Transaction Model*

*Based on a smaller sample set of data

CORE OBSERVATIONS: U.S. | TRANSACTION TYPE

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AD EXPERIENCE

PREMIUM VIDEO DISTINGUISHES ITSELF WITH HIGH COMPLETION RATES

Premium video continues to deliver a positive viewing experience. In Q2 2019, the average mid-roll break contained 3.9 ads, with each break averaging a duration of 109 seconds. This experience is relatively consistent across devices. STB VOD and mobile index slightly lower than CTV and desktop, which may be due to specific ad strategies from certain publishers and distributors, particularly for mobile platforms.

The distribution of ad loads is relatively narrow around the average of 3.9 ads per midroll, with 67% of mid-rolls containing three or four ads. Ad completion rates remained above 95% for mid-rolls and above 85% for pre-rolls on non-clip content. These figures demonstrate the power of premium video and its unique value in the advertising ecosystem.

Ad completion rates remained above 95% for mid-rolls and above 85% for pre-rolls on non-clip content.

CORE OBSERVATIONS: U.S. | AD EXPERIENCEQ2 2019 / FREEWHEEL VMR / #FreeWheelVMR

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CHART 10

AD COMPLETION RATES BY AD UNIT AND CONTENT DURATION, U.S.Q2 2019

FULL-EPISODELIVE

CLIPS

Mid-RollPre-Roll

CHART 9

AVERAGE NUMBER OF ADS PER MID-ROLL BREAK, FULL EPISODES, U.S.Q2 2019

CORE OBSERVATIONS: U.S. | AD EXPERIENCE

88% 98%

97%87%

76%

Q2 2019 Q2 2019 by Device Distribution of Ads per Pre-Roll Break

Q2 2019 AVERAGE

3.9

109sBREAK

DURATION

MOBILESTB CONNECTED TV DESKTOP 1-2 ADS 3-4 ADS 5+ ADS

3.63.54.0 4.1

19%

50%

31%

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Q2 2019

CORE OBSERVATIONS: EUROPE

The Most Definitive Data Available on Premium Video

CHART 11

VIDEO AD VIEW AND AD VIEW GROWTH, EUROPE Q2 2018 vs. Q2 2019

While the traditional TV business used to opt out of the Cannes Lions Festival of Creativity to focus on the Upfronts, their presence this year was more evident than ever. From panel discussions to beachside conversations, for FreeWheel and Comcast Advertising, Cannes is an important forum to address the pressing issues facing the premium video advertising ecosystem. Among the top trends seen and heard along the Palais were Addressable and Programmatic, and the important role trust and collaboration play in television’s evolution.

Like in the U.S., industry partnerships in Europe improve scale, sophistication and simplicity across the premium video ecosystem.

Scale - Competing Against the Web Giants and Building Interoperability

Ad views grew by 24% in Q2 2019, compared to 31% the year prior. Video views also increased by 25%. All device formats experienced growth, especially STB VOD and Connected TV with a growth rate of 51% and 32%, respectively. Full-episode content remains the most widely consumed segment, constituting 85% of total ad views. Additionally, the share of live content ad views increased from 3% to 6% compared to Q2 2018.

As evidence, the Women’s World Cup brought in record-breaking viewership across various countries in Europe, which could

SUMMARY

INDUSTRY CHANGES DELIVER MORE SCALE, SOPHISTICATION AND SIMPLICITY THROUGHOUT THE PREMIUM VIDEO ECOSYSTEM

+25%VIDEO VIEWS +24%

AD VIEWS

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explain the growth in live content ad views this quarter.

Additionally, European broadcasters are launching new VOD platforms to compete against subscription giants such as Netflix. For example, DPG Media in Belgium recently launched VTM Go.

The enablement of DAI and addressable on STBs and CTVs can explain the growth of both those devices this quarter. Indeed, new partnerships are emerging, such as the joint venture between RTL and ProSiebenSat.1 to provide advertisers with broader reach and the ability to target audiences across TV and digital6. Seven One Media, a subsidiary of ProSiebenSat.1 Group, announced its new Addressable TV Spot offering allowing advertisers to dynamically overlay a linear TV ad with a targeted ad across 12 million addressable Hybrid broadcast broadband TVs (HbbTVs)7.

Sophistication - Laying the Measurement Foundation

New advancements in audience targeting and measurement attracted industry and buyer attention. In May 2019, Sky decided to adopt NBC Universal’s CFlight as its global measurement standard. NBC Universal and Sky are focusing on providing a total view of consumption across all screens. CFlight is the industry’s first unified advertising metric that captures all live, on-demand and time-shifted commercial impressions on every viewing platform and ensures every impression counts. CFlight brings the industry closer to a global standard in measurement, beginning to roll out to Sky Media in the UK this fall, with further expansion across Sky’s European territories in 2020.

This year, the IAB Europe launched a new Digital Advertising Effectiveness

CORE OBSERVATIONS: EUROPE | SUMMARY

Additionally, European broadcasters are launching new VOD platforms to compete against subscription giants such as Netflix.

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CORE OBSERVATIONS: EUROPE | SUMMARY

Measurement Initiative8 to identify challenges in targeted advertising measurement. The research included major global digital measurement companies and boutique agencies offering measurement services, making it the largest regional study of its kind. Results were stark, with little to no commonality between measurement providers--but it is a first step in improving standardization9. Later this year, the IAB will propose a framework for remediation.

Simplicity - Building a Simpler Ecosystem

Together, scale and sophistication make it simpler to buy and sell premium video. In Q2 2019, 17% of total ad views were brokered in programmatic private marketplaces compared to 12% the year prior.

To continue to help advertisers make sense of the complicated programmatic ecosystem, AdForm, a leading independent advertising technology platform, launched the Trusted Partners Program. The program allows advertisers to simplify programmatic advertising by choosing from a curated list of partners across specialization areas, including audience data, verification, media and marketing automation software. So far, nine companies are taking part, including FreeWheel, Integral Ad Science and SAP10.

Additionally, in June, the Conseil d’Administration EdiPub in France announced the launch of “Trust ID” tests. Trust ID is a unique identifier which is shared across the entire programmatic campaign lifecycle so that all KPIs can be tracked across all the different tech players.

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Q2 2018

14% 82% 4%

Live content remains the fastest growing segment, with growth of 32% year-over-year. The 2019 FIFA Women’s World Cup brought in record-breaking viewership across the globe, including in France, the United States, Germany and China, for a total of one billion viewers worldwide, according to FIFA estimates. More than 200 broadcasters attended, with many showing the games during prime-time slots on network television11. However, this doesn’t compare to last year’s growth of 45% year-over-year driven mainly by the Olympics and the Men’s World Cup. It is safe to say that there is a correlation between live sports events and the growth of live ad views in Europe and the U.S. alike.

DEVICE

WOMEN’S WORLD CUP HELPS PROPEL LIVE VIDEO AD GROWTH

CHART 12

FORMAT COMPOSITION BY DEVICE, AD VIEWS, EUROPE Q2 2019

CHART 13

CONTENT FORMAT COMPOSITION, EUROPE Q2 2018 vs. Q2 2019

Connected TV STB VODDesktop Mobile

1%

98%

10%

79%

10%

77%

13% 11% 1%

88%

12%

CLIPS (0-5MIN.) FULL-EPISODES (5+ MIN.) LIVE

CLIPS (0-5MIN.) FULL-EPISODES (5+ MIN.) LIVE

Q2 2019

9% 6%+21% YOY +32% YOY

85%+24% YOY

CORE OBSERVATIONS: EUROPE | DEVICE

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Live content grew the fastest, but full episode

content remains the most widely-viewed

segment, with 85% of total ad views. Hit shows

are huge draws for audiences and advertisers

alike. Canal+, a French Pay TV group, has vowed

to take on Netflix. It outspends the streaming

giant in Europe, and it recently launched Canal+

Series, an OTT SVOD channel dedicated to

scripted shows, strategically priced to be less

than a Netflix subscription12 13. In April, DPG

Media launched VTM GO, a free platform

with nearly 300 different programs from

the commercial channels VTM, Q2 and CAZ.

The media group also proposed some new

functionalities, including the ability to watch

content on the big screen via Chromecast

on iOS devices, a feature that was previously

available only on Android devices14.

DEVICE

PUBLISHERS FIGHT FOR FAN FAVORITES

CHART 14

AD VIEW COMPOSITION AND GROWTH BY DEVICE, EUROPE Q2 2015 - Q2 2019

Q2 2015

Q2 2016

Q2 2017

Q2 2018

Q2 2019

DESKTOP

CONNECTED TV

STB VOD

+23%

YOY

+51%

YOY

+32%

YOY

+28%

YOY

MOBILE

24%

17%

28%

30%

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DEVICE

AUDIENCES TURN TO THE BIG SCREEN FOR PREMIUM VIDEO VIEWING

CTV and STB account for 45% of total ad view market share, with above market growth of 32% and 51% respectively. Meanwhile, desktop and mobile growth has slowed, at 23% and 28%, respectively. Audiences appear to prefer the “big screen” for premium video content, particularly full episodes and live programming. Although, it is possible the adoption of 5G could improve the mobile user experience and encourage more users to stream long-form content.

CTV’s growth trajectory will likely get a boost from the Hybrid broadcast broadband TV (HbbTV), a global initiative aimed at harmonizing the broadcast and broadband delivery of entertainment services to consumers through CTVs, set-top boxes and multiscreen devices. They are setting standards and improving addressable advertising capabilities by combining the benefits of broadcast TV with the personalization of digital advertising. For example, FranceTV Publicité recently partnered with HbbTV to test the addressing of personalized spots according to viewers’ interests15, and Seven One Media launched its new Addressable TV spot offering reach of 12 million addressable HbbTVs16.

CORE OBSERVATIONS: EUROPE | DEVICE

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DEVICE

MORE WORK NEEDED TO IMPROVE AND SIMPLIFY CROSS-PLATFORM MEASUREMENT

In the UK, linear TV ads seen by 16-to-34 year-old viewers has fallen by a fifth compared to 201817. To reach younger audiences, advertisers are turning to broadcaster VOD platforms, as well as other digital tactics. As such, they need cross-platform measurement solutions, specifically tools for measuring addressable or targeted campaigns across platforms and deduplicating reach and frequency on linear TV. More work is needed, as evidenced by the IAB Europe’s recent Effectiveness Measurement survey. It found measurement companies use different languages, frameworks, and even methodologies, which makes it hard for advertisers to compare and combine findings. Furthermore, 85% of the analysis is aggregated reporting and dashboards, usually post-campaign, as opposed to real-time, automated reporting18. Next, the IAB will make recommendations on how to simplify the measurement landscape for advertisers and agencies.

It’s one thing to measure that a viewer saw an ad, it’s even harder to prove that a viewer purchased the product. Sky is able to directly correlate ad exposure with sales by merging their own user data with advertiser data not only for planning and execution of addressable campaigns but also for effectiveness analysis. Addressable TV like AdSmart at Sky is being used by larger brands to more effectively reach lighter TV viewers and harder to reach audiences in combination with linear and VOD. Linear in combination with addressable can boost ad recall by up to 49%, according to Sky.

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CHART 15

AUDIENCE TARGETED AD VIEW GROWTH, EUROPEQ2 2019

Demographic40%

60%Behavioral

From Q2 2018 to Q2 2019, audience targeted campaigns grew 31%. 40% of ad views are targeting against demographic (age, gender) and 60% are targeting against behavior (shoppers, auto intenders, sports lovers etc...).

Where content providers work with targeting and measurement vendors it contribute to overall growth by enhancing audience targeting capabilities and simplifying the buying process, thereby improving the value proposition for advertisers. In February, the Swedish broadcaster TV4 announced a deal with the server-side ad-insertion company Yospace to enable it to offer addressable ads on live and VOD content delivered over OTT19. At Cannes, Canal+ announced plans to accelerate its data targeting capabilities on CanalXChange through a partnership with LiveRamp by allowing advertisers to leverage their own data, Canal+ data, and data from other 3rd party partners to reach audiences based on socio-demographic factors20. In April, ITV, the United Kingdom’s biggest commercial broadcaster, announced it is licensing Amobee technology to enable addressable ad sales and end-to-end programmatic buying and selling of premium video on the ITV Hub21.

TARGETING

AUDIENCE TARGETED CAMPAIGNS INCREASE DUE TO PARTNERSHIP AGREEMENTS AND ENHANCED CAPABILITIES

CORE OBSERVATIONS: EUROPE| TARGETING

+31%AD VIEWS

*‘Demo’ audience segment types are those that target based on age and gender

‘Behavioral’ audience segment types are those that target more advanced segments such as auto intenders, sports enthusiasts etc.

Audience Segment Type*

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TARGETING

SAFE DATA MATCHING CRITICAL TO THE EVOLUTION OF TV TARGETING

Often audience targeted campaigns are enabled by matching elements of data provided by advertisers and their third party vendors with viewing data from broadcasters and operators. This demonstrates the importance of safe and secure processes for integrating first-, second- and third-party data so organizations feel comfortable matching assets. Third-party data matching partners, such as LiveRamp used by Canal+, and Experian used by Sky, facilitate safe and simple data sharing. In both the U.S. and Europe,

the blockchain-based software Blockgraph is gaining interest. The platform was spearheaded by FreeWheel, with the collaboration of several global industry parties, and allows media companies and publishers to offer marketers advanced data capabilities without disclosing identifiable user data to third parties22.

Just as publishers race to secure robust content libraries to compete with streaming services, European broadcasters must continue to improve data sets and targeting

capabilities to compete with digital giants, namely Facebook, Amazon, Netflix and Google. In April, ISBA warned UK broadcasters they must improve their targeting capabilities on VOD services to stay competitive23. This is especially important in the wake of GDPR, and in light of recent browser privacy updates that limit the use of cookies. Google, Apple and Mozilla have all blocked third-party cookie targeting, leaving marketers hungry for effective, cookieless targeting solutions, and new ways to leverage their own data sets24.

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Distributor Platforms +25% YOY83%

DISTRIBUTION

DESPITE REGIONAL VARIANCES, O&O STILL DOMINATES

Publisher owned and operated properties (O&O) still account for only 17% of ad views, up from 6% last year, as the majority of ad views is still goes through the distributor pipes. Additionally, there are significant regional differences in Europe in terms of infrastructure. For example, more than 55% of France’s market reach is IPTV-enabled25, which makes it an outlier in Europe. On the other hand, Germany is almost exclusively HbbTV-enabled with a 76% market reach26. Content distribution via aggregators and long-tail sites is also down -5% year-over-year.

It is possible syndication will pick up in coming quarters due to publisher partnerships that aim to protect ad dollars from SVOD services like Netflix, such as Britbox, a collaboration between UK public sector broadcasters. The Nordics keep pace with new streaming services, as evidenced by ViaFree, MTG’s video streaming service available across the Nordics region with hit content from Sweden, Denmark, Norway and Finland. As of May 2019, streaming services subscriptions are up 16% year-over-year27, yet Netflix’s penetration is lower in the Nordics than the rest of Western Europe28.

CHART 16

SHARE AND GROWTH OF AD VIEWS BY SYNDICATION PLATFORM, EUROPEQ2 2019

Publisher Platforms +6% YOY17%

Total Volume of Ad Views, Europe

Breakdown by Channel

CORE OBSERVATIONS: EUROPE | DISTRIBUTION

Q2 2018

Q2 2019

6% 94%

5% 95%

-5% YOY +7% YOY

OPERATORAGGREGATOR / PORTAL

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TRANSACTION TYPE

PROGRAMMATIC PICKS UP SPEED, BUT THE INDUSTRY STILL FAVORS DIRECT DEALS

In Q2 2019, direct transactions accounted

for 83% of total market share. That

said, programmatic’s 17% market share

represents 35% year-over-year growth.

Programmatic’s adoption is impeded by the

lack of sophisticated infrastructure in some

regions. Market regulations can also make

programmatic transactions challenging. In the

UK, broadcasters have to adhere to Clearcast

compliance regulations, even when buying

programmatically, which is challenging to

guarantee and oversee.

While the automated buying and selling

of premium video is nascent, the industry

continues to take steps to simplify processes.

In June, the Conseil d’Administration EdiPub

in France announced the launch of “Trust ID”

tests. Trust ID is a unique identifier which is

shared across an entire programmatic campaign

lifecycle so that all KPIs can be tracked across all

the different tech players.

CHART 17

SHARE AND GROWTH OF DIRECT AND INDIRECT DEALS, AD VIEWS EUROPEQ2 2019

Indirect +35% YOY

Direct +28% YOY

17%

83%

Total Volume of Ad Views, Europe

98%Programmatic Direct

2%Exchange

CORE OBSERVATIONS: EUROPE | TRANSACTION TYPE

Ad View Share by Programmatic Transaction Model*

*Based on a smaller sample set of data

CLICK TO TWEET

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AD EXPERIENCE

PREMIUM VIDEO OFFERS A FAVORABLE ATMOSPHERE FOR VIEWERS AND MARKETERS ALIKE

Ads attached to full-episode video content outperformed those attached to clips video content. Clips registered completion rates of 80% for pre-rolls while full-episode delivered 84% completion rates for pre-rolls and 92% for mid-rolls.

Live video delivered an even higher completion rate on pre-rolls and mid-rolls at 96% and 94%, respectively. This suggests that viewers are far more likely to watch ads if they are served alongside higher-quality content (e.g. live sports events).

Pre-roll ad completion on clips is lower than on full-episode-- 80% and 84%, respectively. A plausible reason is that viewers are more willing to complete an ad if they perceive a greater “benefit” in return for watching the associated video content.

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CHART 19

AD COMPLETION RATES BY PRE-ROLL AD UNIT AND CONTENT DURATION, EUROPEQ2 2019

FULL-EPISODELIVE

CLIPS

Pre-Roll

CHART 18

AVERAGE NUMBER OF ADS PER PRE-ROLL BREAK, FULL EPISODES, EUROPEQ2 2019

Q2 2019 Q2 2019 by Device Distribution of Ads per Pre-Roll Break

CORE OBSERVATIONS: EUROPE | AD EXPERIENCE

Q2 2019 AVERAGE

2.2

46sBREAK

DURATION

MOBILESTB CONNECTED TV DESKTOP 1-2 ADS 3-4 ADS 5+ ADS

2.42.0

2.52.2

40%

29%

8%

84%

96%

80%

CLICK TO TWEET

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CHART 21

AD COMPLETION RATES BY MID-ROLL AD UNIT AND CONTENT DURATION, EUROPEQ2 2019

FULL-EPISODELIVE

Mid-Roll

CHART 20

AVERAGE NUMBER OF ADS PER MID-ROLL BREAK, FULL EPISODES, EUROPEQ2 2019

Q2 2018 vs. Q2 2019 Q2 2019 by Device Distribution of Ads per Mid-Roll Break

CORE OBSERVATIONS: EUROPE | AD EXPERIENCE

Q2 2018 AVERAGE

Q2 2019 AVERAGE

4.7 4.6

87sBREAK

DURATION

103sBREAK

DURATION

MOBILESTB CONNECTED TV DESKTOP 1-2 ADS 3-4 ADS 5+ ADS

4.5

2.8

5.6 5.4 63%

20%

37%

92%

94%

CLICK TO TWEET

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AUTHOR BIOS

Special thanks to: Xu Yao, Haley Glazer and Anthony Ward

HASAN IQBAL

Senior Manager in FreeWheel’s Advisory practice and helps clients generate insights through data-backed analyses. His areas of expertise include market benchmarking and analysis, revenue strategy, and scaling of organizational capabilities. Prior to FreeWheel, Hasan was a strategy consultant with PwC Strategy& where he advised media and technology companies.

REBECCA RANGELEY

Head of Business Insight for our International Business. Through interrogation of our datasets, Rebecca ensures that the insights we generate for the International Business generate return on investment for clients. Prior to FreeWheel, Rebecca managed the Digital Insight Team at Sky Media in the U.K., delivering insights to drive Sky U.K.’s advertising revenue for VOD, online and mobile applications.

KELLY BLASCO

Senior Consultant in FreeWheel’s Advisory practice. Her areas of expertise are digital and linear ad sales, addressable TV, and operating model redesigns. Prior to FreeWheel, Kelly was a consultant for EY’s Media & Entertainment practice where she advised media conglomerates on how to define new operating models and implemented them through new processes and technologies.

DAVID DWORIN

Leads FreeWheel’s Advisory Services team, where he helps clients navigate the ever evolving premium video ecosystem. Prior to joining FreeWheel, David spent a decade leading growth strategy initiatives at leading agencies, consultancies, and professional services firms.

AUTHOR BIOS

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GLOSSARY

GLOSSARY

Ad Completion Rate Measures the percentage of ads that were completed once started

Ad View An impression that is accrued after the first frame of an ad is displayed

Aggregator A high-traffic content aggregator, for example AOL or MSN

AVOD Advertising video on demand business model

Connected TV (CTV) A television set that is connected to the Internet via OTT devices, Blu-ray players, streaming box or stick, and gaming consoles, or has built-in internet capabilities (i.e., a Smart TV) and is able to access a variety of long-form and short-form web-based content

Content Vertical Content genre, e.g. news, entertainment, sports

Deal ID Unique deal identifier of a programmatic transaction that can be used to match advertisers and publishers directly

Direct-sold Advertising deals made directly between a publisher and an advertiser

Distributor A party other than the content rights owner that manages the platform upon which content and advertisements are delivered

Dynamic Ad Insertion (DAI) Process of dynamically inserting ads into a content stream, such that different ads can be inserted into the same ad break

FreeWheel Council for Premium Video (FWC) Serves the interests of those in the premium video industry through leadership positions, research, and advocacy to promote the premium video economy

Hybrid broadcast broadband TV (HbbTV) Global initiative aimed at harmonizing the broadcast and broadband delivery of entertainment services to consumers through connected TVs, set-top boxes and multiscreen devices

Impression Occurs each time an ad is displayed. Synonymous with “ad view”

Inventory An ad opportunity. A piece of inventory is filled by an ad impression

Linear Traditional broadcast, cable, or satellite television

Long-tail Small scale/niche content aggregators

Mid-roll An ad break that occurs in the middle of content

Multichannel Video Programming Distributor (MVPD) Provides pay TV services delivered either through broadcast satellite or cable TV. Examples include Comcast and Verizon

New Living Room The same high-quality TV content that was traditionally consumed in the living room is experienced today by the same audience through a multitude of screens and locations

Operator Provides pay TV services in the EU, functioning similarly to MVPDs in the U.S. Examples include Sky UK, Sky Germany and SFR

Over-the-top (OTT) Viewing content delivered over an internet connection. Typically seen as OTT Device, which includes devices like Roku, Apple TV, Connected TVs, etc.

Over-the-top Device (OTT Device) Viewing content delivered over an internet connection on a TV streaming device, including devices like Roku, Apple TV, Connected TVs, etc.

Pre-roll An ad break that occurs before content starts

Premium Video Video content that is professionally produced, rights managed, and limited in supply

Programmatic The use of automation software or managed services to execute an advertising deal

Programmer U.S. publishers that generate the majority of their advertising revenue from linear TV services and offer a diverse content mix in digital environments as well

Publisher Producers or syndicators of content. This can be programmers or digital pure- plays

Server Side Ad Insertion (SSAI) Technology that enables the stitching together of video and ad content prior to delivery to the player.

Set-top Box Video On Demand (STB VOD) Accompanies a cable/broadcast/satellite setup. Contains a cable input and outputs to a TV. Integrations via FourFronts STB VOD and Canoe Phase III

Simulcast A digital stream of a live event that is simultaneously broadcast on linear TV

Syndication Viewing that occurs outside of a publisher’s Owned and Operated properties or primary platforms

TV Everywhere (TVE) Apps that allow viewers to access content over the internet by logging in with their MVPD subscription credentials

Video Start Accrued after the first frame of video content is displayed. Formerly referred to as video view

Virtual MVPD (vMVPD) Digital-only cable alternatives that offer access to both live and on demand premium video content for a subscription fee

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THE FREEWHEEL VIDEO MARKETPLACE REPORT highlights the ways in which advertisers, publishers and distributors are using premium video content to drive advertising outcomes.

The data set used for this report is one of the largest available on the usage of professional, rights-managed video content worldwide, and is based off of census-level advertising data collected through the FreeWheel platform.

SOURCES

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greater-addressability-to-the-tv-industry[3] “Advertising collaboration just got bigger, with OpenAP and NCC Media deal” (2019), Retrieved at: https://www.v-net.TV/2019/06/21/advertising-collaboration-just-got-bigger-with-openap-and-ncc-media-deal/[4] “New Streaming Services for 2019 and 2020: The 6 Biggest Launches” (2019), Retrieved at: https://flixed.io/new-streaming-services-2019/[5] “Comcast Collaborates with Industry Partners on Blockgraph Software to Jumpstart the Use of Secure Data Sharing for Advanced TV Advertising” (2018). Retrieved at: https://www.businesswire.com/news/home/20181221005530/en/Comcast-Collaborates-

Industry-Partners-Blockgraph-Software-Jumpstart[6] “ProSiebenSat.1 and RTL partner on addressable TV and online video ads” (2019), Retrieved at: https://www.v-net.TV/2019/06/07/prosiebensat-1-and-rtl-partner-on-addressable-tv-and-online-video-ads/[7] “Sevenone Media And Pilot Hamburg Implement First Addressable TV Spot Campaign For Hochland, Schwartau, And Vamos Schuhe” (2018), Retrieved at: https://www.prosiebensat1.com/en/press/sevenone-media-and-pilot-hamburg-implement-first-

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simplify-measurement-landscape-for-clients/[9] “IAB Europe’s Effectiveness Measurement Survey Paints a Picture of an Incoherent Measurement Ecosystem”, Retrieved at: https://iabeurope.eu/blog/iab-europes-effectiveness-measurement-survey-paints-a-picture-of-an-incoherent-measurement-

ecosystem/[10] “Adform makes bid for industry consolidation with launch of Trusted Partner Program” (2019), Retrieved at: https://www.marketingdive.com/press-release/20190614-adform-makes-bid-for-industry-consolidation-with-launch-of-trusted-partner/[11] “Women’s World Cup: Record-breaking numbers” (2019), Retrieved at: https://www.bbc.com/news/world-48882465[12] “MIPTV: How CanalPlus CEO Maxime Saada Is Taking on Netflix” (2019), Retrieved at: https://www.hollywoodreporter.com/news/miptv-how-canalplus-ceo-maxime-saada-is-taking-netflix-1200891[13] “France’s Canal Plus Launches New OTT Service Dedicated to Series” (2019), Retrieved at: https://variety.com/2019/TV/news/frances-canal-plus-launches-series-dedicated-ott-service-1203160022/[14] “Ontdek Nu Ook De App Van Vtm Go” (2019), Retrieved at: https://nieuws.vtm.be/cultuur-media/ontdek-nu-ook-de-app-van-vtm-go[15] “New test with personalised HbbTV advertising from FranceTV Publicité” (2019), Retrieved at: https://www.broadbandtvnews.com/2019/07/24/new-test-with-personalised-hbbtv-advertising-from-francetv-publicite/[16] “Sevenone Media And Pilot Hamburg Implement First Addressable TV Spot Campaign For Hochland, Schwartau, And Vamos Schuhe” (2018), Retrieved at: https://www.prosiebensat1.com/en/press/sevenone-media-and-pilot-hamburg-implement-

first-addressable-tv-spot-campaign-for-hochland-schwartau-and-vamos-schuhe[17] “Is the decline in young TV audiences accelerating?” (2019), Retrieved at: https://www.campaignlive.co.uk/article/decline-young-tv-audiences-accelerating/1578795[18] “IAB Europe’s Effectiveness Measurement Survey Paints a Picture of an Incoherent Measurement Ecosystem”, Retrieved at: https://iabeurope.eu/blog/iab-europes-effectiveness-measurement-survey-paints-a-picture-of-an-incoherent-

measurement-ecosystem/[19] “TV4 agrees new ad-insertion deal with Yospace” (2019), Retrieved at: https://www.digitaltveurope.com/2019/02/28/tv4-agrees-new-ad-insertion-deal-with-yospace/[20] “CANAL+ BRAND SOLUTIONS accélère son offre de Data-Planning TV CanalXChange et signe un partenariat avec LIVERAMP” (2019), Retrieved at: http://www.ratecard.fr/canal-brand-solutions-accelere-son-offre-de-data-planning-tv-

canalxchange-et-signe-un-partenariat-avec-liveramp/?utm_source=sendinblue&utm_campaign=NL_Ratecard_20_06_19&utm_medium=email[21] “Amobee and ITV Announce Exclusive Technology Licensing and Innovation Partnership” (2019), Retrieved at: https://www.amobee.com/newsroom/amobee-and-itv-announce-exclusive-technology-licensing-and-innovation-partnership/[22] “Comcast Collaborates with Industry Partners on Blockgraph Software to Jumpstart the Use of Secure Data Sharing for Advanced TV Advertising” (2018), Retrieved at: https://www.businesswire.com/news/home/20181221005530/en/Comcast-

Collaborates-Industry-Partners-Blockgraph-Software-Jumpstart[23] “ISBA: UK broadcasters must improve online ad targeting to compete with tech giants” (2019), Retrieved at: https://www.campaignlive.com/article/isba-uk-broadcasters-improve-online-ad-targeting-compete-tech-giants/1582746[24] “Hands off the cookie jar: the future of targeting as restrictions on data tighten” (2019), Retrieved at: https://www.thedrum.com/news/2019/06/19/hands-the-cookie-jar-the-future-targeting-restrictions-data-tighten[25] CSA report “Observatoire de l’équipement audiovisuel des foyers de France métropolitaine Résultats des 3 et 4 trimestres”, 2018[26] https://www.hbbtv.org/deployments/[27] “10 million streaming subscriptions in the Nordics” (2019), Retrieved at: https://www.digitaltveurope.com/2019/05/28/10-million-streaming-subscriptions-in-the-nordics/[28] “Ampere: local players beat Netflix in Nordics” (2019), Retrieved at: https://www.broadbandtvnews.com/2019/05/20/ampere-local-players-beat-netflix-in-nordics/

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MEDIA INQUIRIESDan FriedmanVP, Communications

daniel_friedman@comcast.com

MORE INFORMATIONDavid DworinVP, Advisory Services

ddworin@freewheel.com

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