How AI is Evolving the Streaming TV Ad Pod and Driving Incremental Revenue with James Smith, GM of Monetization at Frequency

Ad Fatigue And The Big Idea

Tim Rowe, State of Streaming 0:45

Are you tired of sitting through endless ad pods and black screens on your favorite streaming apps? What if the solution to ad fatigue isn't more commercials, but smarter in-scene advertising? In today's episode of State Streaming, we're sitting down with James Smith, who leads monetization at Frequency, and we're going to explore how AI is revolutionizing free ad-supported TV channels through video introspection. We also dive into how brands can increase profitability while delivering a much better viewer experience. Wherever you're listening, be sure to subscribe to the podcast for more industry-leading conversations just like this. Let's jump into the episode. Awesome. James Smith, thank you for joining us on the State of streaming podcast. You lead all things monetization, which is obviously everyone's favorite word. How do we make money with this stuff at Frequency? Welcome to the show.

James Smith, Frequency 1:48

Thank you, Tim. Appreciate it. Glad to be here.

Tim Rowe, State of Streaming 1:50

Absolutely. Can you give us a primer? Who is Frequency? What problem do you solve and who do you solve it for?

James Smith, Frequency 1:55

Yes, absolutely. So Frequency is a company that helps mostly folks that are driving traditional linear TV channels or folks that have a ton of IP or intellectual property of shows and helps put those channels into a streaming space. So you've got a lot of things that have happened over the last five to 10 years where streaming was a big deal. The big companies came out and

What Frequency Does For Channels

James Smith, Frequency 2:18

said, like, you know, obviously tailing off Netflix and Hulu that, you know, how do we get in the streaming space? But the feeds and the channels were traditionally linear, which means, you know, these big buildings on these big, you know, studio lots with hundreds and hundreds of people that are, you know, programming a network operations center and fast forward to streaming, where you can actually take a lot of that, make it more efficient. And with you know, digital and cloud play out and other digital alternatives and solutions in the marketplace, you can actually create a much more efficient channel creation and channel feed than has ever done before. If you remember kind of what fast channels were, you know, nobody had heard of fast channels. And it was like maybe seven or eight years ago when you know Pluto came out and some of the TVs started their own fast channel, you know, EPGs or programming guides. It was really clunky and funky looking, right? When it came out, and it was like, what are these? And what are these channels? And you know, fast forward to today that you know, every one of these TVs that comes out of a box is this beautiful EPG and programming guide with tons of fast channels, free ad-supported streaming channels. And a lot of that is because a lot of those traditional channels finally made their way into the coming streaming channels, and a lot of those channels were created on Frequency. So what we focus on is channel creation, distribution, and monetization for anybody that has a channel and wants to get into streaming or wants to get onto an OAM TV.

Tim Rowe, State of Streaming 3:36

One of the themes that we've explored recently is how there is no shortage of content and how fragmented attention is. Without giving away the secret sauce, can you give us a little behind the scenes about how channels, how IP holders, how they're thinking about these challenges?

James Smith, Frequency 3:53

Yeah, I think I think it's a great question, Tim, because it's it's twofold, right? It's one, what are the challenges that they're competing for on the attention side? And then the other challenge, which you know, Frequency really pushes is you know, how do they become profitable? And how can Frequency with our tools make them profitable? Because, you know, the last two to three years was okay, let's get our content into streaming, let's find our platforms. And now we're in the situation where, you know, there are so many channels on all of these programming

Discovery Problems And Profit Pressure

James Smith, Frequency 4:21

guys and all of these platforms, discovery is an issue, right? So, you know, when you can pull up a any given platform and have three or four hundred channels, how do your channels get discovered? Who are you competing with attention for? And all of that turns into ultimately ad load and you know, advertising dollars. And if you're not being found and you don't have you know a decent number of hours of viewing in a month, then you don't have a decent ad load and you don't have a decent fill rate, and then your channel may not be making enough money. So it's happened because there's so many channels, there's such a girth of inventory in the marketplace because of it. Folks are having challenges, you know, getting high fill rate, selling at premium CPMs, and being in a position to actually monetize their channel the way they want it to on their business plans.

Tim Rowe, State of Streaming 5:03

I had an experience recently, an app that I pay for. I fell asleep. I was watching a show before bedtime, like I'm sure so many of us do, and I wasn't sure well where I fell asleep. So I wanted to just kind of turn it back on. Did I fall asleep before the end of the episode? Let me rewatch some of it. And it's an app that I pay for that has ads in it. So I selected the show, sat through my two minutes of ads, fast-forwarded to the part where I thought I fell asleep and realized I'd actually watched the entirety of the show. So I was really only on the app for, I don't know, the time it took me to watch the ads and the 30 seconds to fast forward. And then I was hit with another ad pod before I could watch something else. And I was like viscerally irritated. I was bothered by that,

When Ad Pods Break Trust

Tim Rowe, State of Streaming 5:48

even being in the business, right? Like, no, no, no, I should be advocating for that. But no, that was a terrible experience as a consumer. So when we think about making decisions, like how do we monetize the attention, right? It might be smaller amounts of people. How do we maximize each of those opportunities? Frequency has released a new offering in scene advertising. How are you approaching that?

James Smith, Frequency 6:13

Yeah, no, that's a great example. And I think a lot of people are feeling that pain. And it's because of some of the things that I just talked about, right? That people are trying to make money. So sometimes they just increase their ad load. And then if they don't fill it, you've got what we call slate, which is you know, two or three ads in the pot or zen moments, or sometimes even just black, right? Which is, you know, a black screen, which is a horrible user experience for us and as a consumer. And then, you know, on the business side, it's you know, it pushes drop-off rate and things like that. One of the things that we're focusing on at Frequency, and I think we're ahead of the game here, which is really trying to make not just the user experience better, but as I said, the channel's profitable. And the way to do that is not about increasing the ad load, it's not about more pods. Please

AI Video Introspection For In-Scene Ads

James Smith, Frequency 6:55

the the Field Rate channel problem is is going to exist, but there's a better mousetrap. And I think that's where we're headed. And, you know, luckily the industry and the IB are finally behind this. So with our in-seen ad product, we're actually using AI to do video introspection of the content and the stream so that we can identify the ad zones, literally, a product that we have, which is looking at everything and saying, look, you know, these are the breaks that we believe could have in scene ad units, and they're contextually relevant to the content. And they're not only to the content, but also to the scenes. So we're looking at the video and saying these five ad breaks could come into the 44-minute show. They fit the content in the scene, and then you're in a situation where you are measuring and delivering and targeting on sentiment, brand safety, you know, viewability, all the things that the advertisers are looking for as well. So the goal of that is to reduce the pod and get rid of the slate and actually reinforce it with a better ad experience on the N-CNA ad side of things. And where we're going to go probably in the next quarter or so is being able to have an ad balancer that allows you to actually look at the pod, reduce the pod to the right finite measurement for the highest return on ad spend, but also have it companioned and even sequential with the in-scene ad units. So they're playing off each other.

Tim Rowe, State of Streaming 8:15

That's fascinating about the finding the optimized amount of ads to have for maximum return on ad spend. I'm remembering some research from a friend Chris Kane at Jounce Media, where they found that the fewer ads in an environment, the higher the conversion, which can seem almost at odds with trying to monetize and maximize the money that we're making.

James Smith, Frequency 8:40

Yeah, no, completely. And I think that's that's inherently the the idea behind the the ad balancer and the N-CNA ad juxtaposition with the ad pod and its relationship. Look, Chris's and his team have done a lot of really good work over the years and specifically in cleaning up what the problem has been with supply path optimization, right? It's you know, it's

Why Fewer Ads Can Convert

James Smith, Frequency 8:59

a big scary term and it's very programmatic. And, you know, a lot of folks upstream on the content platform and you know, content publisher side don't understand what that means. But ultimately what it means is that the people that are out there trying to solve this problem because there's so much surplus to sell are saying sometimes they're like, I've got to get my flow rate out over 50%. So a little bit desperate in some cases, saying that, you know, I'm gonna have anybody I can sell my ads. Well, that becomes a problem because now you've got multiple hops between, you know, the ads being sold and the publisher getting paid. So in those hops becomes things like lack of transparency, lack of ability to target, you know, in some cases fraud. You know, what Chris and team have done, I think is good for the industry to say, look, fewer ads are better, and let's not have 15 people sell your inventory and increase the fraud and the things that we finally got past in the market for a long time now.

Tim Rowe, State of Streaming 9:52

So much so the direct buy coming back programmatic, really a means of transacting that direct business. How is this being adopted? How does the in-scene advertising piece become adopted? Is it at the publisher level? Is it streaming apps specifically? Who uses this tech?

James Smith, Frequency 10:10

Yeah. Yeah. So the great news is, you know, everybody's looking for a better way and a better experience. And like I said, the point here is to drive better ROAS, whatever the unit may be, and to maximize hours of viewing and reduce drop-off, right? So the good news is on the the adoption side, the platforms are all for these new units, right? They're they're having a hard time chasing the pod and the fill rate piece. So they're like, yeah, let's try and figure

Adoption And Programmatic Readiness

James Smith, Frequency 10:36

out what the right balances. So adoption at the OEM level, adoption at the distribution level as well. And the publishers across the board are fine with it. I think the questions, Tim, that are raised are one, you know, how does it work? And are you managing Frequency caps? Are you making the problem worse? Right. And we can't just add something new and make the problem worse. And I think one of the important things that we built into our products is, you know, dials that can be turned manually on either side of the marketplace that says, look, our products or are these shows in particular perform better with this ad load, or these shows work better with that ad load? And I think the balance there of Frequency caps and things that we can do through the video introspection really help the experience. So we build those into the tool. That being said, because of all those things, it's being adopted. Now, is the downstream market ready to make it, you know, something the trade desk wants to buy? And I think that's the the gorilla in the room, which is, you know, a year or two ago, nobody had really heard of pause ads. And now pause ads are this massive, you know, thing in programmatic. And now the billboard for your living room. Yeah, for sure. Right. And and now all the the demand guys are running towards that and saying, look, we want to play and we want to be the first to deliver programmatically in the auction, and that's happening. Now the same thing is starting to occur with all these other alternative or new advanced units, which you know, NCN ads is really the next one to go. Conversations with Freewheel and Magnite and TradeDisc, all these guys are ready to go and ready to ingest it. I think part of it was it being blessed with standards and a taxonomy with by the ad, which has you you all know that that's happened recently and is only getting better. So, you know, we're ready to go on the direct ad sales side. We have a ton of demand that is is very interested in connecting to our supply. The other side of this is the programmatic piece where we're going to start sending, you know, look, we're so close at Frequency to the stream that with our upstream products for, you know, channel creation, origination, and the SSAI that we do, it's allowing us to capture those signals and send those as true values down into the auction. And everything that I just said is really important because we're the most supply path optimized option out there next to the distribution platforms because we're so close to the stream. So we're not trying to be an SSP and we're not trying to own the inventory. We're trying to connect and give our content partners and our platform partners, you know, at Frequency a layer of monetization that they can tap into that actually comes with demand without us owning anything.

Tim Rowe, State of Streaming 13:04

It would seem too that there's an opportunity for just completely subscription-supported environments to add another incremental layer. Is that something that you see as potential?

James Smith, Frequency 13:15

It is. And you know, it's interesting. Uh what I think Tim's gonna be interesting to watch is to see how Netflix, you know, rolls all of the stuff that we've talked about today out. They're talking to us about it, they're talking to the industry about different ways to do it. Very much subscription oriented, obviously introduce an ad tier, and now they're talking about free ad supported channels and new ad units. So when you start to see, you know, the big three or four uh leading this direction, you're gonna see you know a lot of demand created on the demand side. You know, I think another thing, Tim, that's important really too is creative on this whole thing, right? Because

Creative Formats And Shoppable Moments

James Smith, Frequency 13:49

the experience changes, right? And I've been lamenting for years, the last three or four years, you know, building new ad products and seeing the market, you know, change. But CTV still hasn't been what it was meant to be, you know, 15, 10, 15 years ago, right? Like it was when mobile came out. Mobile's got, you know, when it came out and it's supposed to be the next big thing. And it took years to get there, right? And I feel like great, CTV's digital and it's it's not linear and it's not, it's, you know, it doesn't have a ceiling from a data transition perspective. We can target, yeah, the targeting came out, but then the things that were supposed to come never really came. And I think they're finally organizing themselves around things like, you know, the QR code and other mid and low funnel outcomes from advertising. So I think the pod is going to get better. I think, you know, analysis of pod and you know, intelligence and AI that can be used to make the pod better, you know, using those same introspections that I talked about for him scene, you know, putting those ads at the right time in the right scenes and the pod, I think are important. But being able to go and do an L band or a double box or a pitch-win-pitch or things that, you know, sports and other things, anybody that watches the World Cup, they they they saw a ton of this stuff, right? Anything that can actually enhance or be a part of the viewing experience without reducing the content is fantastic, especially if it's endemic, right? So, you know, I don't think anybody was upset with, you know, the the hydration breaks in the World Cup, right? They were they were kind of cool. You knew you were getting some advertising, but you know, they were functional and they worked. When you can actually take and you know, fire that ad and maybe it has a QR code and it, you know, if you're looking and watching a game in Miami and that QR code takes you to, you know, Doritos, and you can have Doritos in 30 minutes while you're watching the game, and it takes you directly to Instacart, because that's the local retailer provider for delivery in Miami. If you rot watch the same ad, maybe your QR code drives you to Instacart, right? And you've got it in 30 minutes. So to dynamically be able to serve the creative in scene at a contextually relevant moment and actually drive a mid or low funnel outcome, I think is where this whole thing's headed.

Tim Rowe, State of Streaming 15:46

And does this add any operational lift on the stream? Or this is kind of magic inventory, right? There's no there's no ad ops team supporting it. I'm sure even for the advertiser, the creative's a little bit easier to execute. I don't need to schedule a production shoot. I it seems like all of that is a lot easier.

James Smith, Frequency 16:06

Yeah, I think what it's going to do, and that's super it's a really, really intuitive look at it. The that side of, you know, do you need to do the two three million dollar 30 second spot anymore? Or can you do a very simple static six second or 15 second overlay or have that done for you through AI, right? Which, you know, Meta and Google have been doing now and proven is very, very successful. I think that's part of it. I think the other part is,

Measurement Signals Without Overreach

James Smith, Frequency 16:30

you know, just from a standpoint of understanding who the customer is and combining the customer attributes with the content attributes is something that's just has never been done before. And I think that's what we're trying to pull off, which is look, targeting on you know, demos and targeting from a metadata perspective has been done before. Combining the AI to bring content contextualization to audience contextualization and bring those two together, I think, is where the ROS comes from.

Tim Rowe, State of Streaming 16:59

It might be taking us into the weeds with this one, James. But is there a signal that you're able to pass back to advertisers that maybe shows a relationship between exposure, gives gives me some sense if I don't have a QR code that's gonna drive that conversion? Is there another way for me to take a signal back and understand what's happening?

James Smith, Frequency 17:21

Yeah, you've got to be, and you know this, right? You've had a ton of great folks on your show that have talked a lot about this stuff. And you've got to be very careful, depending on what region you're talking about, signal, right around the world. You know, the the the cleanest way and the way Frequency approach is approaching it is you know, we've got the upstream metadata, we have the signals, we're sending the signals down and true value pairs that turn into deal IDs or PMPs, private marketplaces, so that you can find your audiences. You know, if you're looking for a golf audience, then we'll take all of the golf content, even if it's not a golf or a PGA show, which is you know, PGA is a customer of ours, you know. If if it's one of their shows, then you know, it could be something that could go downstream and into a marketplace, but it could just be a golf scene and add the other show, or even on a news break. Like it's basically tagged, the signal goes downstream. So, you know, when you can start to build these these deal IDs for the programmatic demand side that are really on, you know, your core demographic and and customer profile, it starts to be one really strong from a not just a lift, but a purchase intent perspective. And those are both things that we'll we're measuring, but also from uh an efficiency perspective, you're not having to spend as much money trying to get, you're not throwing that broad net out to try to get your your focused, your focused customer.

Tim Rowe, State of Streaming 18:35

James, what are you most excited about? Looking forward, we're a little bit over halfway through 2026 here. What are you most excited about for the rest of this year and then looking into 2027 beyond?

James Smith, Frequency 18:45

You know, it's a it's a great question. Look, I'm I'm really excited about where the industry is moving globally and the fact that it's actually moving together, which to me wasn't a thing until probably about 18 months ago. So that's fantastic. The industry has to solve the first problem, and the first problem is too many channels to the wrong people. So I mean, you can basically have personalized EPG or electronic programming guide. So when I can go in and turn on, you know, whatever my TV is in my living room, go to the guide and have that guy programmed with the top 50 channels that make sense to me, if those are mountain biking or skiing or the things that I'm into, then

Personalized TV Guides And The Future

James Smith, Frequency 19:20

I'm going to consume more content. And oh, by the way, then the ads are going to be targeted to that content in the right scenes to me. I'm going to react. I mean, think about your Instagram, right? I'm looking, I look at my Instagram and it's programmed. The algorithm is feeding me the stuff that I like, and then it's feeding me those ads at the right time that I like. And I'll be honest, I probably at least 80% of my shopping because I'm getting the stuff I want in my feed based on the content I'm consuming. So the television experience needs to be personalized. And when that comes, I think the advertising experience is going to be much, much better as well.

Tim Rowe, State of Streaming 19:52

Looking forward to that. A question before we let you go here. What are you streaming right now? Any any great recommendations for a show, movie? Anything you've seen recently that we should check out?

James Smith, Frequency 20:02

My my wife and I are heavy streamers, and we're really into lucky right now. Ooh, tell us about it. What's lucky? That's the new show on Apple. It's um Anna Taylor Joy, I believe, the gal. She's been in a ton of movies, but she was in the escaping right now, but she was in the chest movie that came, the chess movie that came out.

Tim Rowe, State of Streaming 20:20

Oh, Queen's Gambit? Queen's Gambit. Yes. Which is awesome.

James Smith, Frequency 20:25

So good. And she's yeah. And this is a total different role for her, but it's it's done really well. Great actors, great story art. Uh, I highly recommend.

Tim Rowe, State of Streaming 20:33

All right, we're gonna check that out. Lucky. James, thank you so much. We're lucky

What We Are Streaming And Farewell

Tim Rowe, State of Streaming 20:36

to have had you here today and learn all about Frequency and how you're helping everyone solve monetization. Thank you for doing it.

James Smith, Frequency 20:43

Awesome, Tim. Thanks so much, everybody.

Tim Rowe, State of Streaming 20:45

We'll see you next time. If you found this conversation to be helpful, please share it with a colleague or client. Start a conversation yourself today, and we'll see y'all next time.