TV needs a dramatic rethink to be able to withstand the monetization strategies of CTV services. There isn’t much time.Read More
Without a meaningfully differentiated value prop from their core app, and without particularly high quality content on their app generally (generally worse than YouTube, though I guess this is subjective), this will require a significant marketing effort. In the medium- to long-term, however, Facebook may have a significant chance to remake TV advertising.Read More
Samba TV began life creating apps for TV manufacturers. It worked with nearly every smart TV manufacturer - other than, notably, Samsung - to create the basic apps and various OS infrastructure pieces that you see when you use a Smart TV. In other words, it made all the stuff that you ignore when you open Netflix, Hulu, or Amazon Prime on your smart TV. This isn't entirely relevant to their business anymore - but it gave them technical hooks into the operating systems of, and business relationships with nearly every TV manufacturer.
TV is an increasing challenge for advertisers. Content is often viewed on DVR, and when viewed on delay the ads may be skipped. Similarly for content producers, it's often unclear when content is viewed and to what extent. Manufacturing TVs is also an increasing challenge for the manufacturers. TVs are largely fungible, there is incredible margin pressure, and there is no revenue after the initial sale.
Samba approached these challenges in a relatively unique way - leveraging its relationships with TV manufacturers. They developed technology that grabbed a fingerprint of whatever was on the TV every couple seconds. This is then sent over the internet connection you set up to watch Netflix to Samba. On their servers, they have technology that maps this fingerprint to all their known TV shows and commercials - enabling them to understand what consumers are doing, what ads they're watching, etc. - including Netflix.
Collecting this data enables Samba to act as a significantly improved version of Nielsen - actually helping brands and content producers understand what content is being viewed and when. Nielsen generally uses these in-home boxes in roughly 20,000 households to understand what's being recorded according to different demographics. Theoretically, Samba can be significantly more accurate than Nielsen on the measurement side, though maybe not with the demographic precision.
Samba can take this technology further. Apparently when you set the TV up for wireless, it can actually see the other devices connected on the wifi. This means your phone, laptop, tablet, etc can somehow be identified by their systems. They then have an offering that allows brands to target second screens when individuals are watching shows - or individuals that have watched certain shows. I personally don't understand how this technically works.
I will note that the service is opt-in, meaning you choose to enable the service when you start your TV. Samba then shares a significant portion of their revenue with the TV manufacturers, which enables TVs to be sold cheaper and with more features. And you could always opt out.
Content producers (e.g. ESPN) charge cable companies (e.g. Comcast) for their content. ESPN is the most expensive, and comes in around $6 / user / month. Some of this is passed on to consumers in their subscription fee. But the cable companies are also given the chance to offset the cost, or make additional profit, in the form of a 2 minute per hour commercial allocation. This means the cable company can sell ads itself for two minutes of commercials on ESPN every hour - to the extent that someone is watching.
Communication on the internet is (generally) one-to-one, meaning a message is sent by a sender and routed to a recipient through a web of routers. Cable looks more like a family tree, where the same content is broadcasted in one direction to all the downstream recipients. So if you're the cable company, the simple option would be selling ads against stations, groups of shows, or the like. This would mean that the flow of content that includes the content for the program would include the ad that you sold in your allocated 2 minutes - and everyone would see it. This does, of course, require a substantial sales team and a lot of effort to make sure you're selling against all the shows that could air on every station at any time. Naturally, there's a lot unsold inventory, and a lot of room for improvement. There are a lot of companies that try to help here - Simulmedia being a relative well known startup in the space.
When you buy a DVR, your hard drive space is partitioned. A portion is available to you for your TV shows, an a portion is taken by your cable company to store advertisements. Your cable company knows the shows you watch, your family demographics, your address, etc. So rather than selling against content, it can sell against audience. Your DVR is programmed to call home and download 10-12 ads that the cable company has sold against your demographic. This happens well in advance - generally 3-4 days. The advance time is required because there's limited reliability in the cable context. Satellite TV companies, for example, cannot send any customized data, so it's downloaded through the telephone line that also connects to the box. So when the time comes for the cable company's allocated 2 minutes, it can play the previously-downloaded ads, or it can play the default ads on the stream if there's nothing on the local machine. This process is called dynamic ad insertion and it's a small but growing part of the ecosystem (< 5%). Substantial challenges include the actual physical infrastructure (cable boxes, flexible cable systems). You might ask why, if the cable companies can make more from DVRs through dynamic ad insertion, do they charge more to rent DVRs than more simple cable boxes? The answer, simply, is because they can make even more money that way. You want the DVR, you don't (didn't) know that it was also being used to make the company more ads, and that might not really matter in the value prop of what a DVR brings to you.
There are a couple interesting side notes to this. The first is that there's a battle in congress about making it so any cable box can work on any cable system, instead of the one the company rents to you. It used to be the case that you had to buy your telephone from AT&T, but congress said that that was dumb, and it looks like they may use a similar rationale here. In turn, this would impact the economics of TV and broadband distribution, so it's decidedly less simply than the phone question. Google's broadband plans start from scratch and address many of the legacy questions plaguing existing carriers, meaning they have significantly improved opportunities for programmatic monetization.