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How OTT Services Are Looking to Further Capitalize on Product Placement

By January 7, 2020 No Comments

Advertising spend on product placement in the U.S. has risen from $4.75 billion in 2012 to $11.44 billion in 2019, according to Statistica. Forrester recently predicted in a study that companies will double their marketing expenditures for product placement on Netflix 2020.

TripleLift Co-Founder and Chief Strategy Officer, Ari Lewine, had the pleasure of speaking with a leading newspaper in Germany, Handelsblatt. The main topic of conversation was how OTT services such as Netflix and Hulu will increasingly be capitalizing on product placement and how we are working with them to provide this service.

The original article, in German, can be found here. A translation of the article has been provided below.

Why Netflix could soon be running more surreptitious advertising

Streaming services are looking for new sources of income. One of them is product placements — and a U.S. company wants to offer completely new technical possibilities.

The scene takes place in a typical American diner. While the actors discuss excitedly, something changes in the background: The poster that just now advertised the company’s milkshake now shows the logo of the Nordstrom department store chain. When the camera pans outside across the parking lot, the lettering of the hip salad bar “Sweetgreen” suddenly appears on the building opposite.

Welcome to the brave new world of television advertising: personalized commercials that are placed in the Netflix or Hulu series by computer program. Where one customer sees a Coca-Cola on the table, the other sees green tea. Where one customer sees a bag of chips, another sees a muesli bar. Well noticed in the exact same scene.

This is how Ari Lewine, one of the founders of the start-up TripleLift, imagines the future of advertising in streaming services. In his demo, the entrepreneur has just shown what is possible. “Product placement has been around since the 1940s,” explains the company’s Chief Strategy Officer in his office in New York’s NoHo district. “Streaming services do it too,” he says, listing well-known examples: The KFC giant cup of chicken in “Stranger Things,” the shopping trip to the West Elm furniture store in “Queer Eye,” or the Nokia smartphone in “House of Cards.”

All these products are the result of deals between the production companies and the companies. They agree in advance which phones or brands will be shown in which series. Sometimes the payment for this goes in cash. Other times the chains advertise the new series or content in return.

What distinguishes TripleLift from classic product placement: “We can incorporate the various brands after production by computer and tailor them to the individual customer,” explains Lewine. “You’ll still be seeing this in your living room in 2020,” he says.

The new technical possibilities come at a time when more and more streaming providers are competing for viewers. In addition to the pioneer Netflix and Amazon Prime, Disney+, HBO Max, AppleTV Plus and Peacock are or will be launched in the U.S. They all promise ad-free content for a monthly subscription fee.

“We don’t think it’s an exaggeration to call the current environment a ‘streaming war’,” says analyst Jeffrey Wlodarczak of Pivotal Research. He predicts that many new players will push up costs significantly over the next two years.

Subscription fees alone will hardly be able to finance the ever increasing production costs. The providers are therefore looking for other sources of income. Since classic advertising is out of the question, they might be willing to accept more and above all personalized product placement.

According to the data service Statista, spending on product placement in the US has risen from $4.75 billion in 2012 to $11.44 billion in 2019. The market research firm Forrester recently predicted in a study that companies will double their marketing expenditures for product placement on Netflix 2020.

“The industry has been very responsive to our offering so far,” says Lewine. To gain better access to broadcasters and production houses, Triplelift recently hired former Fox manager Michael Shields.

Controversial Form of Advertising

The company relies on so-called computer vision — a technology that analyzes images and videos the way people see them. The technology calculates where in the picture a table can be seen, and where a can or a smartphone can be placed.

So far, TripleLift has been doing business mainly with its technology for so-called native advertising — advertising that adapts to the website and almost comes across as its own article or video. Instead of creating them manually, TripleLift’s software automatically adjusts advertising to hundreds of formats on different devices.

Lewine knows that this form of advertising is controversial. He therefore focuses more on advertising that can be identified as such: He offers customers ads with a logo superimposed over the video, making it clearly visible who is behind it. This is done by software that finds the best location by itself.

TripleLift was only founded in 2012 and has more than 300 employees worldwide. According to Lewine, the revenue in 2019 was around $300 million — almost twice as high as the year before. Moreover, and Lewine is particularly proud of this, TripleLift was profitable last year. “This is the fourth year in a row that we have been profitable,” Lewine emphasizes, without mentioning a figure.

The income from venture capitalists is rather modest at $16.6 million in total. Lewine does not want to hear about an IPO or sale at the moment: “We do not need any new capital at the moment. We’re growing so fast too.”

Most recently, the company, which has been placed on the list of the next billion-euro companies by the magazine Forbes, also expanded in Germany. There, TripleLift was able to win Burda as a customer and currently employs five people in Berlin and Cologne.