Exclusive: How UKTV wants to breathe new life into TV ad market

Brendan Kilcawley (Source: UKTV)

As UKTV Ventures strikes its latest airtime-for-equity deal with a funeral company, Mark Layton talks to director Brendan Kilcawley about how the business wants to grow the TV advertising market by planting seeds that will pay off in the long term.

Launching in late 2018, UKTV Ventures is a multi-million-pound investment fund operated by BBC Studios-owned broadcast network UKTV that takes equity stakes in startup businesses in return for advertising airtime on its portfolio of channels.

The latest deal, announced today, sees UKTV Ventures selling £1m ($1.28m) of TV advertising to funeral planning service Legacy of Lives in return for a minority stake in the company.

Under the agreement, the BBCS-backed firm foregoes that cash ad income while the funeral firm gets access to seven channels across UKTV, with a potential audience of 25 million monthly viewers, according to the broadcaster. There’s also a mutual option to extend the deal by a further £2m down the line to grow its business and brand awareness more swiftly.

UKTV Ventures director Brendan Kilcawley tells TBI that this deal, and others like it, are part of the Dave, Alibi and Drama operator’s efforts to diversify its revenue streams, even if that means planting seeds in unusual gardens – like those of a funeral planning service – and waiting for them to grow.

“Another reason why we launched the fund was to really grow the TV advertising market, to break those start-ups into the market a lot earlier in their business lifecycle,” says Kilcawley, who believes this approach could help to strengthen the sector at a time of significant downturn.

“By doing so, that allows them to grow and to have longevity, to possibly be around in a few years’ time with the idea that they’ll come back to UKTV network to buy advertising in the cash market.”

Planting seeds

“We’re really sector agnostic,” explains Kilcawley, with previous airtime-for-equity deals also having been struck with kids TV app Hopster and biography-writing service StoryTerrace.

“We can look at any direct-to-consumer brand where we think TV will make a real difference. We place a few bets on various companies, helping them to grow, but also then really hoping for that exit.”

Kilcawley says that foregoing £1m in cash now is “potentially worth something that’s a lot bigger” with UKTV Ventures taking a “longer term view” of six-to-seven years for a return on its initial investment – and the company still yet to make its first exit. “But again,” he notes, “it’s not just about that exit and the profit that we’ll make, it’s also on the bet that they will come back to our network in future years to buy TV advertising in the cash market.”

UKTV Ventures doesn’t take more than a 20% stake in a business, with the exec telling TBI that the size of the investment will “piggyback off of that pre-money valuation,” for start-ups raising financing in the cash market.

“We generally do about three to four investments per year; we’ve got capacity to do a few more, so we’d love to be doing around about five investments per year, I’d say. Our target investment sizes then are really between £1m and £1.5m; we can do bigger investments at £3m and even smaller investments at £500,000,” he explains.

“But it really depends on a number of different things, including what the campaign objectives are? What are they really trying to achieve? What’s the valuation? And how much of the company are they willing to part with?

Kilcawley adds that one of the main challenges of his job is that “not a lot of people know about this proposition” and “what TV can do for their business.”

“Start-ups [tend to] operate in the digital world. They know how Facebook works, they know how Google works, and they expect – often one of the challenges – that TV will be a direct response play just like Google and Facebook, whereas TV is really at the top of the funnel in terms of, you know, awareness and consideration.

He explains that, much like UKTV’s long-term view on ROI, start-ups should expect for it to take from one-to-five for that impact to pay off. But by that point, the broad reach of network TV will put those brands “front of mind” and viewers will have “already created emotional connections with it” – paying off the long game for both companies.