Introduction
In a recent blog, Croud’s programmatic experts shared their thoughts on the industry shaking news that Netflix will be an ad-supported platform by the end of 2023. With investment in connected TV (CTV) rapidly growing and its buying infrastructure expanding, let’s take a step back and examine how CTV advertising got its start and evolved into a channel expected to capture $25 billion in US ad spend by 2024. Where did the CTV space develop from and where is it headed next?
What is CTV (vs OTT)?
CTV refers to a TV viewing device paired to the internet via SmartTV capabilities or an internet-connected streaming device, such as Roku, Amazon Firestick, Apple TV, or a gaming console.
Over-the-top (OTT) is a larger umbrella term that describes content that is viewed through the internet without the use of cable. “Cord cutters” represent those who have fully removed themselves from traditional linear TV cable viewing and solely rely on OTT services.
The start of CTV
While CTV and CTV advertising has grown rapidly in recent years, we must keep in mind that this was only made possible following the establishment of OTT. This first became available in the form of Internet Protocol TV (IPTV) during the mid-1990s. It wasn’t for another decade, however, before the first few major online content streaming services began to appear.
YouTube made its start in 2005, with Netflix streaming following in their footsteps with its launch in 2007. While it took some time for these services to grow in popularity, viewer preferences began to shift in mass by the early 2010s towards online viewing. As more and more OTT devices and technology were developed for mass audiences, the number of those who were “cord-cutting” Linear TV grew. Over the past decade, these trends have only accelerated, ultimately leading to the explosion of the CTV advertising space over the last five years to match.
Netflix and Disney+ entering later this year
According to Hulu’s reports, over 70% of its viewers are on ad-supported plans. Following in their footsteps, Disney+ will be launching a lower-cost, ad-supported subscription plan later this year. They anticipate that over the long-term, the majority of Disney+ customers will opt for this lower-cost route.
Netflix is also expected to launch its own set of ad-supported subscription plans by the end of 2022. Despite their reported loss of 200,000+ subscribers in Q1 2022, Netflix remains the top streaming platform with over 220 million paid subscribers globally, and the addition of advertising on this platform will undoubtedly cause a massive shift within the streaming space. The sudden opening of these additional premium environments will release the floodgates for advertisers.
What do these CTV-shifting trends mean for you as an advertiser?
The expansion of advertising across all of the top Subscription Video on Demand (SVOD) platforms presents the strongest opportunity in recent times to reach cord-cutting, ad-blocking audiences – essentially, we are talking about the incrementality potential. We already know how long individuals, especially younger demographics, are spending each day on their screens, but the question is, what is the best way to reach these elusive audiences in this new world of viewing habits? Roku reported in Q1 2021 that roughly 25% of US households are true cord cutters, whereas upwards of 80% of US households use streaming video services. They also estimate that 33% of ad-supported video on demand (AVOD) viewers are cord cutters.
Additionally, the opening up of these formerly “walled garden” environments will allow for the further growth of data and measurement availability. This will offer advertisers a more holistic understanding of an individual’s daily media consumption behaviors.
Summary
From its humble beginnings on YouTube and Hulu, to becoming the dominant platform globally for video ad impressions (over mobile) in 2022, CTV has evolved immensely. While it has taken a journey slightly lagging behind desktop/mobile digital, it is now poised to become a more essential part of viewing experiences, advertising spend and media plans. As additional large streaming platforms enter the ad-supported ecosystem, CTV inventory choices and partner selection will become more essential to any marketer.
In upcoming Croud blogs, we will explore the topic of data and measurement in the CTV space and how new entrants to the field are shaking up the traditional, somewhat outdated, world of measurement that is deeply rooted in the traditional world of TV.
To learn more on CTV advertising and how to implement it into your digital strategy, get in touch with our team.
