May 17, 2021
What is Worth a Look?
As part of our research process we are continuously reading, watching and listening to a wide range of content related to business trends affecting our portfolio companies. We often come across underfollowed material that might be of interest to our investors from the perspective of:
- To highlight an important transition in a sector where there might be opportunity generally,
- To help explain changes affecting the way you do business or consume life,
- Just piquing your curiosity
JDP’s interview with Tal Chalozin, CTO and Co-Founder at Innovid Inc.
Innovid is an important ad-tech company that provides infrastructure for Ad Supported Video on Demand or “AVOD” streaming TV. Advancements in video ad insertion technology has driven tremendous growth in ad supported streaming TV.
Currently, in the United States, 3 out of 4 consumers with smart TVs watch ad-supported TV programs on major platforms like Roku. Yet, incredibly, connected TV ad spend represented less than 5% of total advertising in the US last year and much less globally.
According to Tal, 60% of the AVOD ad inventory in the United States is handled by Innovid’s ad servers. Tal’s unique perch within the technological revolution unlocking ad-supported streaming TV makes him an excellent resource to help us better understand what is happening on the frontlines of the industry and how Roku (a JDP portfolio company) is positioned.
Why the topic is important for positions in our portfolio:
1. Introduction to Innovid [0:00 – 6:25]
Takeaway: A company at the nexus of TV innovation that handles >60% of Ads in Connected TV
2. How does Innovid work with aggregators like Roku? [6:25 – 9:30]
Takeaway: Innovid and Roku created a software solution that provides data on audience reach and measurement – two top measurements for CTV marketers
3. How has CTV advertising changed the value proposition for the consumer? [9:30 – 14:55]
Takeaway: CTV advertising has unlocked a larger amount of content, improved user experience by significantly cutting ad loads, and provides more targeted and relevant ads that mitigate viewer fatigue
4. How are consumers balancing CTV subscriptions (cost) and advertising supported TV (time, user experience)? [14:55 – 21:40]
Takeaway: Cord cutting is not about saving money; it is about access to better content. The Emmy’s and Oscar’s are now dominated by streaming programs. Further, certain international markets cannot support monthly paid subscriptions and AVOD is the only option.
5. How will the AVOD addressable market grow, will it simply convert linear or is there a larger opportunity? [21:40 – 26:15]
Takeaway: AVOD TV is a platform with strong optionality because it can support a broader advertising community. Linear TV serves on a few hundred advertisers, but AVOD could tap into the Direct-to-Consumer brands and unlock millions of advertisers.
6. What are the technological hurdles holding back growth CTV ad spend today? [26:15 – 33:02]
Takeaway: Conversion of linear content to streaming is not “push-button”. For instance, streaming of Live events is capped at around 4M users per event for the moment.
7. What are the differences between the big CTV aggregators like Roku, Android TV and Amazon Fire from an advertiser’s perspective? [33:02 – 40:20]
Takeaway: Unlike other modes of advertising, CTV will not be a Winner Take All and it may not even be a Winner Take Most market. Owning the customer relationship is critical such as providing the OS hardware (TV remote), holding credit card numbers on file, and knowing household data, will all be points of competitive differentiation and parallels certain aspects of Apple’s iPhone and App Store business model.
8. How do you see the positioning of the Roku Channel and Roku getting into owned-content? [40:20 – 47:39]
Takeaway: The Roku Channel is a bet on a new AVOD CTV business model for the future. It has rapidly evolved from an AVOD channel, to hosting live events such as news, and it now offers owned content. The Roku Channel is a misunderstood asset that offers a growing point of competitive advantage versus other TV OEMs
9. Where are we in the evolution of “transaction commerce” or T-commerce and the convergence of CTV ads and e-commerce/ buy now? [47:39 – End]
Takeaway: We are in the early stages. Future AVOD offerings will likely have a “call to action” such as Add-to-Cart or even a full checkout in certain cases. T-Commerce would be a step change in value as it transforms TV advertising from ‘reach/brand’ oriented, into ‘action-based’ performance marketing.
About JDP: JDP is a private investment partnership that makes long-term investments in public companies with significant unrealized potential. www.jdpcap.com
This content is for informational purposes only and should not be considered legal, tax, investment, financial, or other advice. Nothing contained in this document constitutes a solicitation, recommendation, endorsement, or offer by JDP or any third-party service provider to buy or sell any securities or other financial instruments in any jurisdiction. This document is intended only for investors in JDPI, LP and its affiliated entities, and prospective investors who have attested to qualifying as an “accredited investor”, also referred to as a “professional” or “qualified” investor based on the country of domicile. Funds managed by JDP might maintain positions in companies discussed in this document.