With Ad-Supported Streaming on the Rise, CTV’s Future Depends on Ad Tech

Connected TV (CTV) unifies TV’s immersive experience with digital’s precise delivery and real-time insights, a powerful combination that has caught marketers’ interest. This year, ad-supported streaming will generate $19.1 billion, according to eMarketer. By 2024, marketers will spend $29.5 billion on CTV advertising. 

CTV grew faster than most expected during the COVID-19 pandemic when consumers began spending more time at home and cutting the cord in droves. As streaming providers expanded their content libraries to keep pace with viewer demand, subscription prices also grew.  

Only heightened by growing inflation, we’ve now reached an inevitable inflection point where consumers have maxed out the number of subscriptions they’re willing to pay for.  

Today, ad-supported streaming content—which includes free ad-supported streaming TV (FAST), advertising-based video-on-demand (AVOD), and owned-and-operated apps—has become a necessary and massive opportunity. We’ve seen this play out recently with the likes of Netflix and Disney+ announcing plans for ad-supported streaming options.  

Ad-supported streaming benefits the entire CTV ecosystem 

Ad-supported streaming models will fuel future growth across the CTV ecosystem. First and foremost, they make content more accessible to consumers, boosting viewership by providing affordable and flexible streaming options. The more content and thus ad inventory available in the marketplace, the more opportunities there are for marketers to reach audiences that are becoming more difficult to find.  

The personalisation possible through digital advertising means that viewers see more relevant ads, too. Relevant ads are more effective for marketers, as they can invoke a stronger emotional response and viewers are less likely to perceive ads that are of interest to them as disruptive. 

“The advertiser demand for premium CTV inventory is keeping pace with the new supply entrants as they come on board,” said Chris Flatley, VP of advertising at FuboTV, while speaking on a panel during the recent VideoNuze CTV Ad Summit

For CTV publishers and platforms, investing in ad-supported models can help ensure longevity, as it simultaneously encourages viewership growth and introduces a new revenue stream. Streaming services are responding by introducing ad-supported tiers for their AVOD and app subscriptions. And content owners are following viewership and looking to FAST services as a means of distribution. 

“FAST services are going to accelerate and give a lot of the niche content producers and distributors—at least from what we’re seeing with our Samsung TV Plus FAST service—an opportunity,” said Matt Agosto, director of sales, media and entertainment, at Samsung Ads.

Bringing the power of digital to TV is essential to scale CTV

The promise of CTV has always been about marrying the engaging TV experience with the efficiency of digital. Consumers expect media owners to deliver a consistent viewing experience whether they’re streaming or watching traditional linear TV. 

As consumers jump between CTV, linear, and other digital video, marketers want efficient and flexible media plans that provide flexibility to connect with consumers wherever they’re viewing content.

Ashley Arena, head of advanced video activation at PHD, shared that from the buying perspective, PHD isn’t discerning CTV from over-the-top (OTT) or social video or linear TV, and is instead thinking about video holistically. “The measurement and currency approach is obviously critical and I think we’re finally reaching a place where that’s real and tangible,” she said. 

This is all possible through a dynamic CTV marketplace: media owners can maximize their yield on every impression, marketers can optimize reach, frequency, and addressability across platforms, and viewers can enjoy a better experience. 

But we’re not there yet. 

This is because the programmatic ecosystem wasn’t designed for CTV. The tools and systems in place haven’t been able to support the volume of inventory from media owners nor the demand from marketers. Marketers have been frustrated by low programmatic win rates, so they have allocated less of their budgets to programmatic. And media owners have been frustrated by inventory that went unfilled, resulting in less-than-optimal yields. 

It’s time for ad tech to deliver better programmatic tools

As the battle for audience and ad share heats up among media owners, content distributors, and device makers, the CTV opportunity for ad tech is enormous. We’ve seen unprecedented growth in CTV performance over the last few years, but the reality is we still haven’t realized its full potential. 

In order to maximize the efficiency and effectiveness that programmatic affords, ad tech needs to close the gap between existing tools and the needs of TV buyers and sellers. 

We are hyper-focused on this at Index. We’re working to create smarter and more secure communications between buyers and sellers, and build a dynamic CTV marketplace that will bring much needed transparency, security, and control to this still-emerging space.

OpenRTB 2.6, released by the IAB Tech Lab earlier this year, is a huge step forward for the industry in terms of these efforts. It brings a host of capabilities to CTV and programmatic, bringing CTV much closer to parity with TV buying. We encourage everyone across the ecosystem to support OpenRTB 2.6 as soon as possible. 

Doing so will help establish standardization across the industry and set the foundation for the future of CTV advertising. We’ll soon be well on our way to delivering the programmatic tools and standards necessary for CTV to reach its full potential. 

Index Editor

Index Editor

This post was published by the Index Exchange editorial team.

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