Brands will have more options to invest in and more competition to help mitigate costs. But the lack of standardization is a challenge."
With linear viewership and spending levels dropping virtually every year, the epitaphs for TV advertising have been widely reported in the trades. What’s lost in this chicken-little hysteria, though, is video advertising is thriving ― thanks to connected TV (CTV).
Television isn’t in decline, it’s just in transition from traditional to digital distribution channels. The same way that TV elbowed its way into the radio-dominant entertainment world of the 1950s, streaming has arrived and is here to stay. Let’s not forget that when television made its debut and soon dominated, radio still had a role, albeit a backseat role. Similarly, traditional TV isn’t being replaced by CTV, just (most people agree) improved upon and augmented.
The CTV marketplace in the 2022-2023 upfront saw massive growth with a 35% increase in ad spending, which translated to more than $6.4 billion. With time-spent metrics revealing traditional viewing on linear TV networks and digital video viewing times are nearly identical, continued growth and consumer adoption of CTV is clear.
In fact, two-thirds of the digital video dollars committed this upfront were spent against streaming services. eMarketer projects that total U.S. CTV spend (upfront and scatter) will reach nearly $19 billion this year. The upfront haul this year was more than the total, full-year CTV haul from three years ago. In fact, Disney says 40% of its upfront spending went to its streaming platforms and Peacock doubled its upfront revenue to $1 billion this year.
As with anything in this business, when you peek behind the shiny veneer and Wall Street numbers, there are some challenges and shortfalls to CTV spending.
CTV benefits include:
- Audience targeting ― More accurate and strategic allocation of budgets to specific, high-value audience targets
- Original programming ― Upscale, original content
- Better measurement ― Data allows for more focused view of who each ad reaches
- More video eyeballs ― The pool of additional impressions helps offset linear TV viewing declines
But, CTV challenges include:
- Uniformity and measurement ― Too many walled gardens prevent the ease of buying across streaming vendors and the sharing of data between them
- Frequency capping – Again, the lack of shared data and the sheer number of vendors running CTV makes it difficult to set frequency caps
While streaming has been around for years, the last three have seen an explosion of providers enter the fray. They’ve been significant players, many from traditional linear TV vendors looking to stem the tide of broadcast erosion and to add revenue streams. Peacock, Discovery+ and Paramount have all established viable streaming offerings in short order. It’s clear the networks recognized the consumer shifts and had no choice but to embrace CTV or risk irrelevancy.
Over the next 12 months, there will be even more competition and more choices. Several major players will roll out CTV advertising. Disney+, Netflix and to a lesser degree, HBOMax, are three heavyweights poised to add more choices to the genre. The existing footprints of Disney and Netflix alone are enormous and will increase the pool of available impressions significantly. These two behemoths have 110 million and 180 million monthly users respectively ― incredible scale at launch. These two will both improve and complicate the CTV space. And HBOMax is set to be combined with Discovery+ to launch a more robust offering with differing tiers.
Brands will have more options to invest in and more competition to help mitigate costs. But the lack of standardization is a challenge. The nomenclature each vendor uses is unique to them. There is little-to-no coordination between CTV partners, so no uniform way for brands to track a single data set across multiple partners because none of them are speaking the same language.
What Does This Mean for Brands?
In spite of these headwinds, the positives of spending on CTV advertising outweigh the shortcomings. Streaming is here to stay and it’s a valuable complement to media plans. It allows brands to augment the losses on the linear side of the aisle with quality, targeted video impressions. My advice? Test and learn ― and then test some more. Experiment and try multiple vendors to determine which fit your marketing objectives the best. These are fertile times to add more targeted tactics to your upper-funnel media plans.
Additionally, we expect Disney+ and Netflix to offer more unique, creative messaging opportunities. They have never accepted advertising before, so with a clean slate, it would behoove them to come to market with nontraditional ad formats. In a sea of streaming sameness, the hope is they embrace the idea of truly partnering with brands to bring marketing campaigns to life in new and exciting ways.
The industry’s collective focus has swung decisively toward the challenge posed by audience fragmentation. The decline of cookies and other identifiers is one big reason for this shift. Another is a shift in consumer behavior that has fractured media impressions across a growing number of applications and mediums.
As the world rights itself after a pandemic that threw so many media consumption patterns upside down, the streaming world will begin to settle into a new normal. One where it is part of everyday life in a way it wasn’t before the pandemic. CTV has earned a seat at the table alongside more established media tactics as a quality medium that can buttress media plans beset by the loss of affordable, quality and linear TV activity.