• by Daisy Whitney , Op-Ed Contributor, July 11, 2012

TV advertising may still command billions of dollars each year, but its growth will be largely flat over the next few years. So marketers should seek out connected TV opportunities to keep growing the video ad market, according to an IHS Screen Digest report commissioned by ad management platform VideoPlaza that is slated to release today. The report focuses on the United States and on Western Europe including France, UK, Spain, Italy and Germany.

As evidence of the evening out of the TV ad model, IHS Screen Digest notes that in Western Europe and in the U.S. TV is no longer a growth market, with compound annual growth rates continuing to slow.

Online video may pick up the slack for brand-building, especially as IP-delivery and connected TVs open up more avenues for digital video, the report suggests. At the end of 2011, there were about 124 million active connected living-room devices across North America and Western Europe, including TVs, gaming consoles and set-top boxes. That compares to 245 million PCs and 305 million TV homes in those regions. But by the end of 2014, the number of connected devices in those regions will surpass the number of PC homes as well as TV homes.

“The growth in living-room devices will be spearheaded by connected TVs, the manufacturers of which are hoping to help drive sales using a mixture of attractive hardware combined with a content offer -- a strategy which has served technology players such as Apple well in the past,” the report said. “Connecting such devices is becoming increasingly easy for consumers, with simple wireless network integration helping to improve the connection rates. Manufacturers such as Samsung are ultimately hoping to achieve connection rates of 70 percent of installed sets -- on par with devices such as game consoles.”

This growth could pose challenges for content companies because costs to migrate an online video service to a connected TV can range from $77,000 to $232,000. IHS Screen Digest says. Add in the extra cost to deliver ads to the proper devices and the proposition becomes more expensive for media companies.

But ad revenue is rising on other devices, luring programmers to new platforms. VideoPlaza says broadcaster ad delivery to connected devices other than PCs has grown from 2% to 16%, from April 2011 to March 2012, of the total ads delivered for its European clients.

As advertisers begin to run more spots on connected TVs they’ll need to pay close attention to ad loads, frequency capping, video length and click-through rates, IHS Screen Digest advises.