The year 2018 ended with connected TV (CTV) advertising established as a vibrant sector in its own right intersecting both the digital and traditional linear markets. This is having some possibly unintended consequences, notably a boost to the traditional 30 second spot ad which had been sagging slightly on the back of rampant cord cutting, especially in the US which accounts for about 35% of global TV advertising.
The year had begun with CTV advertising still in the blocks despite rapid growth in access through such devices, which include conventional TVs connected via dongles, gaming consoles or various boxes, as well as smart TVs. In the US advertisers were spending about $70 billion on TV but under $2 billion on the targeted, addressable TV ads enabled by CTVs. We had just passed the year when digital ad spending globally had overtaken TV for the first time and done so comfortable at $209 billion against $178 billion.
Then as recently as August 2018 the World Advertising Research Center (WARC) reported that rapid growth in CTV viewing around the world had not been matched by a proportionate increase in addressable advertising. In the US nearly two-thirds of households had access to a connected TV device by then, according to Nielsen.
Other sources though were reporting escalating growth in CTV advertising, again particularly in the US. The video ad workflow platform Extreme Reach reported that advertisers were being attracted by the high completion rates associated with CTV, averaging about 95%, which is 32% higher than for mobile and 27% greater than desktop. This trend had been established back in 2016 or even before but was coming to the attention of advertisers, which led to a massive uptick in CTV advertising during 2018, according to supply-side ad platform Beachfront Media. It suggests CTV ad requests in the US shot up from 1.7 billion per month for November 2017 to 29.9 billion a year later, a rise of over 16-fold.
This study also highlighted how we are not just talking about dedicated smart TVs. In fact, Roku was the leader with TVs connected by its box dominating CTV advertising and accounting for more than 87% of requests in November 2018. This was followed by Amazon’s Fire TV with smart TVs from LG and Samsung only in third and fourth place respectively.
The key point though is that the ads are being consumed on a big screen and that seems to be stoking demand for the 30 second linear spot. It is worth pointing out that despite having fallen behind digital as a whole linear TV advertising is holding up well, attracting over $140 billion globally in 2018 according to WARC. This is 41.9% of display spending in WARC’s key 12 markets, more than double the mobile internet in second place on $58 billion. It is true that dominant position is being slowly whittled away but it looks like the surge in CTV advertising has underpinned a temporary point of inflection in that decline.
This reflects how the big screen is better suited to the traditional spot, irrespective of whether it comes over the Internet or from a broadcast channel. In fact, this leads to one of the potential advantages of CTV advertising by virtue of the two-way connectivity, the ability to target ads not just on known preferences of a given household but even the size of the screen they are watching on. At least one vendor of programmatic advertising platforms, Simpli.fi, has harnessed this in the latest enhancements for its advanced TV platform announced in October 2018, supporting targeting of inventory by screen size.
Availability of such tools is helping entice operators and broadcasters to addressable advertising, which as the WARC notes in its latest trends snapshot published at the end of 2018 have been slow to invest in the necessary technology. The WARC itself speculates that recent consolidation in pay TV will help advance the case of addressable advertising and that may well be the case. It was referring especially to the three big deals that consumed the field in 2018, AT&T’s merger with Time Warner, Comcast’s bid for Sky and Disney’s proposed acquisition of 21st Century Fox which received qualified approval from the EU in November 2018 conditional on offloading A&E (Arts & Entertainment) Television Networks channels in Europe. By converging distribution, content and technology such mega deals will make more inventory available for CTV and at the same time stimulate collection of the data that will enhance targeting.
CTV is also moving towards digital media standards which will help boost programmatic buying against the associated inventory, with a trend towards trading on a CPM (cost per 1000 impressions) basis. To this extent CTV advertising is edging towards digital and away from the traditional linear TV model which focused more on audiences with limited scope for targeting even at a neighborhood or broader demographic basis. This however brings it within the realm of some of the risks associated with digital, such as ad fraud and brand contamination.
That is why brand safety came rapidly onto the radar of advertisers during 2017 to be ranked the number two concern behind transparency, ahead of viewability and fraud. This position has been held during 2018 but being over obsessed with safety curtails reach by blacklisting websites that may just have one link that is deemed dubious but otherwise be all right.
Naturally big brands do not want their ads appearing against web sites promulgating offensive content, but a safety-first approach can rule out huge numbers of acceptable sites that consumers access regularly.
CTV now must negotiate brand safety, which tends to be enforced by cookies not supported on many connected TV sets. This in turn makes it harder to target advertising to individuals within a household via CTV. One solution might be to make use of the personal connected devices such as speakers, tablets and smartphones accessed via the same sign-in credentials.
This again points to CTVs as a unique category overlapping traditional TV and dedicated devices, with scope for both household and one-to-one targeting. Addressability can then be seen to have an additional benefit beyond being able to target individuals or households more effectively which increases engagement and revenue per view. It also offers scope for aggregating audiences across niches, exploiting the fact that people watching content that does not at first sight appear related might have similar preferences for particular products or services. Such people can be grouped into bundles that can be offered to the highest bidder.
This raises another point, which is that such audiences will be accessing the ads on a range of connected devices, from CTVs to smart phones, so the content needs to cater for both. The CTV then could be the catalyst that mixes digital and TV ad strategies more effectively, which many marketers have not yet done. The ultimate goal is to unite the three categories, linear TV, digital and OTT, in a symbiotic relationship underpinned by common measurements and KPIs, but that may take some time to achieve. The immediate objective is to adopt a common strategy for these three channels to the consumer, with CTV serving to redress the balance back towards the big screen, having been tilting towards mobile over the last few years.