Global digital advertising spend in 2020 reached US$332 billion and was set to overtake traditional, non-digital ad spend for the first time. With this in mind, it may come as a surprise that in-flight digital advertising is far from lucrative. With fill rates currently hovering around just 30% for video adverts and 20% for static/display adverts, IFEC-driven advertising yielded airlines an estimated $266 million in 2019.
This is frustratingly low considering passengers travelling by air, a captive audience with proven disposable income, represent a desirable demographic that advertisers are keen to reach. A survey from in-flight programmatic advertising specialists Inadvia on the impact of COVID-19 saw 82% of respondents say reaching in-market travellers will be important in their marketing/media strategy following the pandemic.
So, what’s stopping advertisers from working more expansively with airlines? The reasons are many. Passenger numbers don’t always give brands the scale they want, and lengthy IFE content refresh cycles of 30-40 days preclude them from many campaigns.
In some cases, airlines themselves are the issue, with strict policies about who and what they are willing to promote. Such policies prevent some carriers from engaging meaningfully with programmatic advertising, a solution that automates the advertising workflow, from trading (the buying and selling of media), to serving (delivering the right ad to the right person) and reporting (proving the ad was served to the person). There’s a common misconception that programmatic advertising means a loss of control over the ads featured, but this isn’t the case – platforms such as Inadvia’s allow blacklisted brands or sectors to be inserted up-front and to ensure creative approval is received for every campaign. More and more advertisers are buying and running their digital campaigns in this way today.
Another barrier is the airline industry’s inability to target adverts to passengers beyond those flying on certain city pairs, for example, as well as the lack of available analytics regarding an ad’s performance – some airlines can still only provide a picture or video of an ad playing on a seatback screen. This is changing, albeit slowly, as industry bodies such as APEX’s Ad Delivery Working Group forge ahead with creating an industry standard for advertising data; and its Airline Advertising and Ancillary Revenue Committee (ARC) works to simplify related discussions between all involved parties.
Another significant development is that new in-flight entertainment (IFE) platforms are being designed with digital advertising capabilities and e-commerce in mind. Many now focus on engagement rather than traditional entertainment, such as movies and TV shows. ScootHub, developed together by AirFi and Scoot’s catering partner SATS, includes access to travel guides and an in-flight map, which provide the opportunity for geo-specific ads. Similarly, easyJet is trialling ePax, a platform created by Black Swan Data and catering company gategroup, that will use machine learning to present customers “with more of what they want, based on factors such as flight destination, flight duration and time of day, as well as insights generated by a wealth of inflight retail data.”
With Google Chrome set to follow Safari and Firefox and end its support for third-party cookies by 2022, publishers who collect and own their own data (referred to as first-party data) will be in an incredibly strong position and become far more enticing partners for advertisers searching for fully transparent and compliant ways to reach their target audiences. As well as the contextual insights mentioned above, airlines naturally have access to a range of first-party data from customers, such as their age, gender, frequent flyer status and more. If this is embraced properly, there is a huge opportunity to attract significantly more advertising investment into the sector.
We predict that while the take rate for seatback IFE will remain at 75% between now and 2030, a positive experience with increasingly sophisticated wireless IFE (W-IFE) platforms will drive their take rate from around 30% today up to 50% by 2030. Likewise, increased targeting, combined with more flexibility from airlines – like the incorporation of dynamic ad insertion, which allows advertisers to act on any analytics they receive by swapping out their creative updates more frequently – will also improve the uptake of digital in-flight ads.
None of the aforementioned solutions require IFC to function (indeed, the real-time bidding process used for some programmatic ads on the ground would be a costly and unnecessary use of an airline’s available bandwidth). However, targeting and measurement will continue to improve as a result of more widespread IFC. Connectivity will certainly make display ads more attractive, because passengers can click through to beyond a bespoke-built offline mini site, the cost- and time-intensive option for airlines without IFC. Advertisers will be willing to pay to transact with passengers more easily.
IFC will also mean there’s potential for passengers to engage with more ads. A greater adoption of freemium models will likely require passengers to interact with video and display ads before their sessions commence. In future, interstitial ads could also be introduced, much like those in use by YouTube. Between now and 2030, there’s potential for the take rate for freemium IFC to break past the 60% mark, a further attraction for advertisers.
As all these changes continue and programmatic advertising becomes more widespread, we believe the fill rates for both video and static/display adverts will top out at 80% by 2026 (it’s unlikely to hit 100% because there will always be routes or targeting criteria less desirable to advertisers than others).
Overall, we predict the in-flight digital advertising market will be worth $3.3 billion by 2030, which is representative of a 10-year CAGR between 2020 and 2030 of 42.9 per cent – quite astounding given the extent to which revenues have declined in 2020 and 2021 due to COVID-19. It’s finally time for the aviation industry to catch up with the capabilities – and the rewards – seen in digital ad space on the ground. More on this topic can be found in Valour Consultancy’s forthcoming report “The Future of In-Flight Entertainment Content”.
