Channel 4 in talks to join Sky's AdSmart

AdSmart: launched in 2014
AdSmart: launched in 2014

Advertisers are demanding greater targeting.

Channel 4 is in talks to make its channels available on Sky’s ad-targeting platform, AdSmart, in a move that would boost addressable TV advertising in the UK.

State-owned Channel 4 and Comcast's Sky are understood to be close to agreeing terms, after years of on-off discussions.

A deal would mean advertisers could target viewers of Channel 4 shows such as The Great British Bake Off more precisely and it would significantly increase the scale of AdSmart.

Channel 4’s ad sales house, 4 Sales, and Sky Media, which runs AdSmart, each manage more than a quarter of the British TV ad market or about £1.2bn a year in media billings per company. ITV handles the remainder  about 45%.

It is thought that an AdSmart deal with Channel 4 would likely include third parties such as the former UKTV portfolio and BT Sport for which 4 Sales handles sales.

Channel 4 and Sky declined to comment.

However, the two organisations spoke publicly about "the start of a new era of collaboration" in September 2018 when Alex Mahon, chief executive of Channel 4, and Stephen van Rooyen, UK chief executive of Sky, struck a content-sharing deal.

Channel 4 has sub-licensed the free-to-air rights to Formula One motor-racing from Sky since January and the pair have also shared some drama content on a reciprocal basis.

More recently, Channel 4 agreed a similar sub-licensing arrangement with Sky for the final of the men's cricket World Cup in July.

Sky Media launched AdSmart in 2014 and it is widely regarded as a pioneering TV service because it allows advertisers and agencies to target viewers by location, demographic and other personal information.

Sky published research in August to mark AdSmart’s fifth anniversary showing addressable ads reduced channel switching by 48% at the start of a commercial break and there was a 10% increase in spontaneous ad recall by viewers.

AdSmart has taken time to gain scale with other platforms and broadcasters.

Until recently, UK advertisers could target only Sky Media’s portfolio of channels in around 11 million Sky homes.

AdSmart increased its addressable audience on the platform side when Sky agreed a deal with Virgin Media to add its four million households to the service in July.

4 Sales could hypothetically double AdSmart’s market in terms of TV ad revenue that could be bought on an addressable basis.

However, ITV has resisted joining AdSmart, saying at its investor day in September 2018 that it preferred to focus on its own online platform, ITV Hub, and is developing ad-targeting technology with Amobee.

Britain's TV ad market is under pressure and Enders Analysis has warned of a risk of a 5% drop this year because of Brexit uncertainty and advertisers switching to online media.

Comcast has praised AdSmart and is bringing the technology to its US TV operation, NBCUniversal.

Brian Roberts, chief executive of Comcast, has talked about the importance of "giving you an intelligent ad" and how better targeting, as well as a lighter ad load, has the potential to generate "higher value per spot".

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