Nowadays, free TV streaming services are nothing new. But what about free TVs?
On Monday, startup Telly announced it’s giving away 500,000 smart TVs for free to the first 500,000 folks who sign up on its website.
But there’s also something in this for advertisers: data.
Sign-ups for the TVs include an agreement that customer data can be used for targeted advertising. If someone decides to opt out, they have to give the TV back.
Speaking of free, Telly was launched by Pluto TV vet Ilya Pozin in 2021. (Pluto is Paramount’s free ad-supported streaming service.) The startup moved out of stealth mode and into public beta this week in the hopes that its fully ad-supported free TV business model has legs.
Pozin is optimistic that Telly TVs will eventually pay for themselves, though he declined to say how long he expects that pay-off might take or to name the manufacturer Telly is working with to build and produce its TV sets.
The cost of free
Giving away free TVs is a “natural evolution” of the streaming business model, Pozin said, because no-cost services lower the barrier of entry so more consumers can get access to a device and ultimately see more ads.
Telly currently has deals in place with large agencies and brands, including the auto brand Kia. Brands find Telly’s nontraditional ad inventory and interactive ad units compelling, Pozin said, because of the opportunity for increased engagement and closed-loop attribution.
The TVs are rigged with a second screen that displays a combination of ads and news to draw the viewer’s attention, including updates on sports game scores or a stock ticker. Other than the classic 15- and 30-second spots that come with ad-supported streaming services, Telly also serves interactive and shoppable ad units on that second screen.
For example, if someone sees an ad for a food delivery service on the second screen, they can use their remote to interact with the ad and order food while they’re watching TV. The checkout process occurs on the second screen, and doesn’t interrupt the TV streaming on the main screen. Plus, with that second screen, advertisers can also reach viewers who might be watching ad-free streaming.
To incentivize viewers to interact with shoppable ads, the TVs come with dongles that support Google TV remotes and are compatible with Roku remotes and Amazon Fire TV sticks. Engagement and purchase data are part of the information consumers agree to share for advertising purposes in exchange for a free TV.
Plus, as part of the good old value exchange, Telly gathers certain information from consumers before they receive their free TVs, such as household income and the number of people living in the household.
Telly also asks interest-based questions, such as a person’s brand preferences, including what kind of car they own. Advertisers can use this information to target a competitor’s customers. For example, Honda could choose to target ads to customers who own a Toyota, Pozin said.
In no small measure
But marketers also get access to viewing data generated by the TVs, which, together with household information, could lay the groundwork for a measurement business.
Plenty of competing measurement companies would love to get their hands on viewing data that’s tied to information about half a million homes, which is why Pozin said the company is currently in talks with multiple TV measurement providers.
Measurement isn’t the core principle of Telly’s business model, though. “Advertising is by far going to be the main driver of this business,” Pozin said.
But data is an important component of that advertising business. More customer data for targeting and measurement will both attract new advertiser clients and help those clients target better-performing ads, both of which should bring in bigger bucks.
Hard-pressed
According to Pozin, Telly’s strategy of giving away TVs for free also makes sense because hardware alone isn’t profitable anyway.
The amount of revenue and profit that TV companies make on hardware alone is diminishing, seeing as consumers don’t typically shop around for new TV sets often. Whereas advertising makes for a continuous revenue stream – and a high-margin one, at that. The difference in profitability is why most smart TV manufacturers also have an ad sales business.
At the same time, though, the hardware space is only getting more competitive. Roku just launched its own set of smart TVs this year, for example.
Even though Pozin declined to share how long it’ll take to make up initial losses from giving away so many TVs at a high production value – these sets could go for a retail price as high as $1,000 – he is confident the business model will work itself out.
After this year’s 500,000 TVs, “that number is going to scale up exponentially in 2024 and 2025,” Pozin said. Telly didn’t specify how many more units it plans to give away in the coming years.
But with the rate of cord-cutting as high as it is, Pozin said, “there’s no better time to build a sustainable business completely supported by advertising.”
