Telly: Entering the Market with an “Ads-Pay-for-Hardware” Approach

In today's fast-paced world of streaming and digital content, providing affordable and engaging content to viewers is a common challenge for advertisers and streaming companies. New entrant Telly, a startup from executives at Pluto, aims to address the needs of the advertising market while promising an interactive experience for consumers through its innovative hardware.

Telly is helping streaming companies afford the content they need through an always-on ad experience and through distribution of the “Dual Screen Smart TV” that has a “Smart Screen” showing ads all the time.

The company promises a new experience with TV – from its website:?

Integrated Second Smart Screen

Telly’s integrated Smart Screen will bring new experiences to your living room like video calling, instant news and sports updates, video games, a fitness studio and so much more. And, it only gets smarter over time with frequent meaningful updates unlocking even more of its power.

Parks Associates projects a significant increase in households using ad-supported streaming services, from 37 million in 2022 to 52 million in 2027. Additionally, the rising popularity of smart TVs as the most used in-home streaming devices, owned by approximately 60% of US internet households, presents a shift in consumer experience. Further, Parks Associates research shows that 87% of US internet households have at least one streaming service and service stacking is commonplace.

The relationship between ad-supported streaming services and smart TV manufacturers is crucial in today's market. Integrated and exclusive ad-supported content drives value for streaming platforms, leading to increased advertising and measurement revenue generation. The growth of exclusive and original programming in ad-supported streaming services is becoming a point of differentiation. Parks Associates research reveals that 23% of ad-supported OTT service users frequently engage with ads or make purchases through those ads.

Telly's business model capitalizes on this trend and also opens the door for interactive advertising experiences and TV-based commerce (T-commerce), potentially transforming the advertising landscape.

Despite the promising prospects, the Telly business model does face some challenges. Privacy concerns are one of the primary obstacles, with 49% of internet households with connected devices having experienced data security or privacy problems. Consumers are increasingly cautious about privacy issues and the presence of cameras, leading to hesitation in adopting new technologies. However, Telly can mitigate these concerns by implementing robust cybersecurity measures and privacy protection features, reassuring potential customers, and encouraging device adoption.

The streaming industry continues to expand rapidly, providing consumers with numerous choices in terms of content and interaction. Consumers now have greater control over what they watch, how they watch it, and how they engage with advertisers and other viewers.Parks Associates research indicates that consumers are generally receptive to the advertising-based video on demand (AVOD) experience. A significant percentage of AVOD viewers do not mind watching ads on free streaming services, with 41% expressing openness to this model. Furthermore, 23% of users often click on ads, while another 23% frequently make purchases from advertisements.

Although presenting ads alongside content rather than inserting them within it presents challenges, such as limitations on audio for ads, Telly's team can focus on implementing impactful and non-disruptive ad formats to maintain a positive viewing experience.

The ads-pay-for-hardware approach and the collection of data introduced by Telly is indeed a new and innovative model. While ad revenues have become increasingly important for smart TV and streaming media player manufacturers, traditional business models have typically relied on device purchasing. However, consumers are accustomed to receiving various services for free with advertising, such as broadcast TV, AVOD, FAST video services, and social media.

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