How CTV ads could take streaming profits to new highs
The C in CTV stands for connected. CTV advertising is video advertising for screens that are connected to the internet. It allows brands to promote themselves on streaming platforms and use the analytics that are more easily monitored to improve their delivery and target ever more specific types of consumers.
OTT has arrived
Many believe OTT services have hit a tipping point as the majority of consumers engage in some way with content outside traditional cable and broadcast services. Just before the pandemic, global TV ad sales fell by 4%, even as political and sporting events were on the horizon in 2020 (little did they know these would be canceled, of course). This has been driven by a drop in viewership as subscription based models like Netflix, as well as gaming and social media, are favored.
But where’s the ad money from linear TV?
In the initial streaming boom, it looked like linear TV ad money would make its way over to CTV at the same rate consumers were. However, a lack of transparency and control, dilution through fragmentation, and fears of fraud have slowed this transition somewhat: marketers want to know what they are getting for their money and be sure people are seeing their marketing.
The avenues for ad streaming have been limited up till now as Netflix, Amazon and Disney+ are all ad-free. YouTube did offer one ad platform, but it is generally consumed on smaller devices. It seemed like advertisers would lose access to the impact of the immersive living room lean-back experience as well as the reach linear TV provides.
But AVOD is coming
However, this type of advertising may be coming back as Netflix have reportedly told employees that a cheaper AVOD service could be available before the end of 2022. This comes off the back of a loss of 200,000 subscribers in the last quarter. Co-CEO Ted Sarandos spun it on Cannes Lions stage earlier this year like this: “We are adding an ad tier; we’re not adding ads to Netflix as you know it today. We’re adding an ad tier for folks who say, ‘Hey, I want a lower price and I’ll watch ads.'”
Amazon looks set to go that way too. As the head of monetization for Fire devices, Matt Hill, told us at NAB, the company wants to engage further in what he referred to as living room monetization to take advantage of a space that has been neglected by CTV advertising. This also stretches to Twitch, which Matt and Amazon include in their reach calculations of over 135 million users in the US.
How consumers will take it
Consumers have enjoyed ad-free entertainment for quite some time now, and it seems unlikely they will want to go back. Ads may be the only way, however, for their entertainment to be kept to the standard they have grown accustomed to and, furthermore, to keep improving with the technological advances of the industry.
Scott Ensign, VP of Strategy and Partnerships and Butler/Till, explains that users can be kept on side in just the way Ted Sarandos has tried to reassure people: by being totally clear about what customers are getting in return for their attention (and hopefully the money they spend through the advertisements they see): premium entertainment with no initial financial cost.
In Scott’s words “the platforms have a real opportunity to engage consumers in that conversation and say, “Hey, this is the reality of it. We would love to provide you with this content for free to do so. Let's have a conversation about how you want to be marketed to and how you want to experience the platform. From there, there's almost no ceiling on growth for something like CTV.”
Also, fundamentally, paying less or nothing to a platform for something you previously had to pay doesn’t feel so bad.
The boons of a multi-faceted ecosystem
As any video content provider knows, latency and interruption are one of the biggest drivers in profit losses. This applies just as much to the client’s action upon seeing marketing, as it does to their actions to the entertainment they are provided with.
The adjustability of the entertainment and advertising provision ecosystem is also now becoming a strength to marketers. There is no denying that the fragmentation of platforms has put advertisers off as they have had to manage various relationships with different offerings and analytics to engage and understand a more complex environment. However, Matt Hill has explained how creating a seamless multi-platform, multi-device experience means that Amazon can actually help users hop between what they want with ease, among those desires may well be taking action on an ad they have seen. This doesn’t only extend to the how many devices users are able to connect with and thus the spaces they are exposed to marketing, from their computer, to their TV, to their tablet, to their phone to wherever else their own smart ecosystem reaches. It also extends how easily they can access the marketplaces that are most relevant to them and the products they are targeted with.
For example, Amazon continues to improve on how they facilitate the purchases of their users. They have observed that voice control offers users a means of taking action without interrupting their experience to such an extent that their engagement with the entertainment provided is compromised. This could mean, for example, that they can ask their CTV to stick an item in their cart for them to revise later when their favorite show is over.
CTV advertising will thus play its role in the strengthening of relationships between devices and distributors, advertisers and consumers, products and entertainment. As these bridges grow shorter, the opportunities for profit increase and the survival and expansion of content provision and the marketing network around it is assured.