Digital TV advertising may have duopoly problem - and it could get worse as ad-supported streaming explodes

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• Comcast's Freewheel and Google are the only two options that can serve OTT ad campaigns at scale.
• That's a problem because some publishers say neither option fully suits their needs.
• The situation could get worse as ad-supported, video-on-demand options proliferate in 2019.

Digital TV advertising may have its own duopoly problem.

As OTT and connected television explodes, there are only two options for serving ad campaigns at scale: Google and Comcast's Freewheel. The industry wishes there were more.

"Nobody likes Google or Freewheel in the TV ad serving space, but there isn't a better alternative," Doug Campbell, chief strategy officer at Telaria, told Business Insider.

Telaria is a video management platform with OTT clients like Hulu, Pluto TV, and Fubo TV.

Such clients see want a video ad-serving option that's tailored to OTT. Google's ad server, for example, was originally built for display, not television, and critics say it's retrofitted to OTT. Freewheel, on the other hand, was built for digital television but is now moving into linear television ad-serving. Clients also think more alternatives will help drive down prices, Campbell said.

Google and Freewheel operate as a "jack of all trades," developing new ad-serving features in more than just OTT, said Joe Hirsch, CEO of SpringServe, a startup that's an alternative to Freewheel and Google. That slows down the pace of product development, he said.

Hulu, Pluto TV, and Fubo TV declined to comment for this story.

There are some OTT ad-serving alternatives, like SpringServe, while Tubi, an ad-supported video-on-demand service, and Hulu built their own in-house.

Read more: Industry experts think NBCU may have the winning formula when it comes to its free streaming service

But most publishers on Roku use Freewheel or Google, and their dominance makes it difficult for a new solution to enter the market, said Seth Walters, VP of demand at Roku.

Tubi sits on 18 platforms from streaming boxes like Roku and Amazon, to game consoles like PlayStation, and cable set top boxes like Comcast's X1. Each has its own ad-serving capabilities and limitations around budgeting and forecasting when to serve ads. Dissatisfied with the ad-serving options out there, the company built its own with a real-time bidding programmatic ad serving engine. It allows for easier, faster integrations with other parties in the industry, said Farhad Massoudi, CEO of Tubi, told Business Insider.

Freewheel contends publishers just want a single option

Perhaps unsurprisingly, Freewheel disagrees with the view that digital television needs more options in ad serving. Dave Clark, GM of Freewheel, said the publishers tell him they want a single option, citing an already fragmented television landscape.

And James Rooke, a GM at Freewheel, said there are other challenges that are bigger than the need for another ad server, like figuring out measurement, how programmatic works in OTT, and how data gets shared.

"Those are the challenges that the industry is talking about, not necessarily wanting another ad server out there," Rooke said.

Ad-supported OTT is growing fast and is set to explode in 2019, Massoudi said. That likely means that there will be greater demand for ad-serving alternatives in the year to come as nascent streaming services come to market.

OTT advertising spend overall grew 40% to $2 billion in 2018, according to MAGNA Global. On Roku, commonly seen as the leading aggregator of OTT content, ad-supported content - including subscription-based services with advertising - represents nearly half of total hours streamed on the platform, and it's the fastest growing segment relative to pure subscription or transaction on demand, Morgan Stanley analysts wrote in a research note.

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