The Current, delivered daily.
As more eyeballs move to streaming services, ad spend from brands is following.
Connected TV (CTV), which describes internet-enabled TV content delivery such as streaming, was the venue for 52% of all video ad impressions over the last year, according to a new report from advertising platform Innovid.
That was up from 44% previously, and overtook both mobile (37%) and desktop (11%), the report states.
It’s a sign of the paradigm shift in how Americans consume entertainment.
On the content side, digital platforms are making massive libraries of television shows and movies available over the internet, and streaming them through devices like smart TVs and streaming sticks. This has led to a proliferation of cord-cutting, as cable companies watch more viewers cut back or end subscriptions as they opt to watch all of their favorite shows and discover new films on streaming services.
They have many of those services to choose from. After Netflix wrung runaway business success out of a bold pivot from DVD shipments to streaming in 2007, it was joined by Amazon Prime Video and Hulu as part of a new wave of tech companies that brought on-demand into the national vocabulary, and made devices like Roku and the Amazon Fire Stick just as familiar to household electronics a cable box. These services all not only offered libraries of content from existing studios, but invested in their own productions. By 2019, more major media names ended up joining the fray by adding a plus. Disney+ and AppleTV+ launched that year, while HBO Max, NBCUniversal’s Peacock and Discovery+ switched on over the two subsequent years.
The new and existing entrants alike were in position to capitalize on massive growth of streaming during the worst of the pandemic, when many Americans were staying home with plenty of time to watch content, and directing the money that they would’ve spent on in-person entertainment toward subscriptions to multiple streaming services. Globally, streaming service subscriptions passed 1 billion for the first time in 2020, growing 26% over 2019, according to the Motion Picture Association. In 2021, US online video subscription revenue increased 24%, and surpassed satellite, while cable maintained its frontrunner position but saw revenue decrease 3%.
To be sure, the pendulum swung back after pandemic restrictions started to lift in 2022. The return of in-person options for dining and entertainment combined with the increased competition moderated growth of these services individually. Netflix lost one million subscribers in the second quarter and had to make layoffs. On the other hand, Disney added 14.4 million across its services in the same time period. In the long-term, industry leaders see streaming only continuing to grow. At the Code conference earlier this month, former Disney CEO Bob Iger said linear TV and satellite are in for a “world of hurt” as streamers rise, saying, “I can’t tell you when, but it goes away.”
While ads are an entrenched part of the viewing experience on linear TV, they didn’t arrive right away on streaming. From its perch as a leader, Netflix famously took the stance of remaining ad-free, setting the tone for a different kind of viewing experience. However, Hulu incorporated an ad-supported tier, demonstrating that there was a way to show ads while still giving consumers the choice to opt out.
In the pandemic, the CTV ad market grew right alongside streaming as a whole. According to eMarketer, upfront CTV ad spending grew 34% in 2021, and the firm forecasts it will repeat that growth in 2022 to reach $6.4 billion.
In many ways, the growth is logical. After all, more people viewing an ever-growing variety of streaming content brings many opportunities to reach people, so it’s natural that brands would want to add another advertising channel, especially one that has similar benefits to TV and isn’t as dominated by entrenched players and rate structures. Many brands and agencies are especially willing to explore new avenues at a time when tried-and-true social media advertising playbooks have been challenged by Apple’s App Tracking Transparency rollout with last year’s update to iOS 14. On the consumer side, shopping for an item that appears in an ad is much easier when a person has easy access to a mobile device while sitting on her couch.
"Consumer behavior is changing at an unprecedented speed, and the rise in ecommerce has compelled CPG brands to reimagine their digital advertising strategy," said Stephanie Geno, CMO of Innovid, in a statement. "To meet consumers' evolving shopping habits and build brand loyalty, CPG brands have turned to CTV for its ability to reach consumers with personalized, cutting-edge advertising formats in a largely unsaturated space."
Context matters, so it makes sense that CTV ads are promoting products to people who are in their home. Innovid’s report found that CPG brands that made goods that are used around the house were the most active advertisers. The top consumer categories for CTV were as follows:
- Pet supply brands: 70%
- Household cleaning: 62%
- Household goods: 60%
- Beverages: 42%
- Personal care: 40%
- Alcoholic beverages: 39%
- Over the counter: 28%
CTV also has some built-in advantages as an advertising format. It benefits both from the behavioral patterns of linear TV, and the data capabilities offered by the internet. Audiences will see ads as part of the experience of watching content, just like they always have. But with the internet connection applied, there’s the opportunity to use adtech tools to serve a message to a person that data shows is more likely to buy their product.
There are opportunities to make the content interactive, as well. Innovid found that over half (53%) of all CPG CTV advertisers ran some kind of advanced creative video, such as dynamic creatives and interactive content, such as an ad with a QR code. The report said that CPG brands using advanced dynamic creative optimization (DCO) formats, which is a form of advertising technology that uses data to guide and optimize creative elements and messages, saw a video completion rate of 98.6%, versus an average 93.9% completion rate for standard video.
"As the worlds of digital and linear television converge, CPG brands are realizing that CTV delivers the best of both worlds," Innovid’s Geno said. "It provides captivating sight, sound, and motion that engages audiences, along with the targetability, interactivity, and measurability that allows advertisers to increase the ROI of their campaigns. We believe that CPG brands will continue increasing their presence on CTV, as they are empowered with these experiences and tools that can reinforce brand loyalty and attract new customers–all from the comfort of their couch."
These platforms still have plenty of space to grow into. The report found that CPG campaigns reached 11.6% of Innovid's 95 million CTV households on average.
Along with growing reach, there could be more convergence between advertising, retailers and online shopping tools. CTV advertising remains in its earliest stages, as new opportunities and capabilities are being made available. Here’s a look at several recent announcements that point toward where it could be heading:
Amazon: Thursday Night Football
Amazon turned heads when it won the bidding for rights to broadcast the NFL’s Thursday Night Football to the tune of about $1 billion a year. With the first season of streaming TNF getting underway, it’s already clear that being a destination to watch America’s most popular sport brings all kinds of advantages for Prime. The Week 1 matchup drew an average of 13 million viewers to Prime Video, according to Nielsen, and Amazon reported a record number of Prime signups during a three-hour period as the broadcast was taking place, CNBC reported.
With the digitally native format, advertising opportunities during the streaming broadcast also abound. During a “PizzaPizzaPregame” sponsored by Little Caesars, viewers could scan a QR code to order pizza and earn perks. Mercedes-Benz also came aboard as an advertiser. A Business Insider report indicates Amazon is still on a “learning curve” when it comes to pricing. But as a whole, bringing TNF to streaming makes some of the most sought-after advertising space in broadcasting internet-enabled. This season, media pros won’t only be turning to the Super Bowl for the ads.
Netflix: Ad-supported subscription tier
Against the backdrop of the subscription losses noted above, Netflix has announced plans to introduce advertising as part of a lower-cost subscription that is designed to expand access to the service. It has partnered with Microsoft to implement the advertising technology, and according to Variety, the tier may launch as early as November.
Early reports indicate that Netflix is looking to attract premium advertisers. According to the Wall Street Journal, Netflix is aiming to charge $65 CPM, or cost per thousand, which is much higher than other services. The move indicates Netflix may be aiming to strike a balance: It wants to offer value with a subscription, but wants to add advertisers that maintain its reputation as a high-end product, and, of course, add to revenue while doing so. At that rate, however, it seems less likely that it will be a place to find ads for up-and-coming brands, as other streamers have become.
Walmart+: Shoppable ads
A shoppable streaming ad. (Courtesy of Roku)
A partnership between Walmart and Roku isn’t just about enabling advertising on the streaming device. They are also bringing commerce capabilities to streaming content. Under a pilot program, Roku ads purchased by brands through Walmart Connect, which is Walmart’s advertising arm, will contain merchandise that can be shopped with a Roku remote. Checkout is completed via Roku Pay, and the goods are fulfilled by Walmart. It points toward a future where CTV reduces the number of steps between seeing a product in an ad and buying it.
This week, Walmart Connect provided details on its capabilities to serve ads to platforms beyond the retailer’s own channels, such as social and video platforms. This presents intriguing prospects to potentially bring ads to other streaming services, as well. The retailer recently inked a deal with Paramount+ to offer that service for free to Walmart+ members. Will advertising tie-ins follow?
Disney+: Ads + ecommerce
Disney+ is set to launch an ad-supported plan of its own. Disney+ Basic is set to launch December 8 at the service’s lowest price-point of $7.99 per month, giving it a similar model to Disney-majority-owned Hulu. It will add to an already-strong streaming ad business for the house of Mouse. In its most recent Upfront, Variety reported that 40% of Disney’s $9 billion in advertising commitments went to streaming and digital.
Ads for Disney’s own products may be coming soon, too. According to the Wall Street Journal, Disney is also planning to integrate commerce for its own merchandise by the end of 2022. Under one plan reported by the media outlet, viewers will be able to click on a QR code and purchase a toy that is associated with the content that is being viewed. Disney is also reportedly exploring a membership program, which could help it gain more data about its customers – the very first-party data that could help to make advertising more effective.
Kroger: Retail media + programmatic
Offering brands an avenue to stand out on ecommerce platforms, retailers are standing up their own in-house advertising capabilities, called retail media networks. One example is Kroger Precision Marketing (KPM), the retail media arm of the grocer Kroger. These networks harness first-party data from customer purchases to power advertising – a powerful tool anytime, but particularly now that many are questioning the effectiveness of third-party tools following iOS 14. In Kroger’s case, that first party data draws from the 60 million households that the grocer reaches annually.
As of this month, KPM is now making its sales data available for use in programmatic advertising, which describes digital ad space that is automatically bought and optimized. Advertisers will be able to use the data to reach people through inventory suppliers like Magnite, OpenX, PubMatic, and Xandr.
“Streaming is the number-one way people consume TV today,” said Cara Pratt, Senior Vice President, Kroger Precision Marketing, in a statement. “That means the majority of TV viewing hours can now be optimized in the programmatic environment. Our retail data precisely reaches households – such as lapsed or infrequent brand buyers – and then matches advertising exposure to store sales to measure brand impact.”
It builds on the Kroger Private Marketplace, a self-service platform where advertising agencies and brands reach households by applying the sales data to programmatic campaigns within a preferred ad-buying platform. Now, advertisers will have self-service access to audience intelligence, customizable CTV and video inventory and campaign measurement against attributable retail sales and household penetration, KPM said.
It’s a sign of how ads that end up on streaming platforms can start with a retailer, get enhanced by the data it offers and be served by automated systems.
Trending in Marketing
New advertising opportunities are being beta tested for in-store audio and product demos.
Retail media’s fast growth isn’t only limited to increasing spend. The advertising itself is also poised to appear in more places beyond ecommerce marketplaces, and even beyond the web.
The latest example comes from Walmart Connect, which is the retail media arm of the world’s largest retailer.
Walmart shared details on testing that it is completing for in-store retail media. To this point, Walmart Connect has been considered the advertising platform for Walmart’s ecommerce site. But these tests indicate that’s poised to expand.
Stores present a potent opportunity for Walmart. It has 4,700 big box locations around the U.S., and customers returned to them in droves last year. In 2022, 88% of the retailer’s customers visited Walmart stores.
Walmart Connect already has already dipped a toe into in-store advertising, with a TV wall, self-checkout ads and integrated marketing. The new pilots aim to take a step further.
“The next frontier of retail media is in-store experiences, and it’s one we’re excited to chart,” Whitney Cooper, head of omnichannel transformation at Walmart Connect, wrote in a blog post on the new tests. “But it’s still an emerging opportunity for us, as we continue to test what serves customers best and which solutions are scalable to Walmart’s size.”
Here’s a look at the two new offerings currently under beta test:
Walmart suppliers will be able to integrate product demos into campaigns across in-store and digital environments.
Product demos aren’t new to store floors, but Walmart Connect is seeking to give them an update that blends digital and physical experiences.
“Part of our test is how to enhance the omnichannel experience by bridging the physical back to digital: For example, by pairing a demo cart with QR codes that link back to a curated Walmart.com landing page so customers can find inspiration and shop their list all in one spot,” Cooper wrote.
Walmart is currently offering 120 demos at stores each weekend, and plans to scale to 1,000 by the end of 2023.
Walmart Connect will now offer advertising placements on Walmart’s in-store radio network. Suppliers will have the option to purchase ads by region or store, enabling targeting of key markets.
“This is the first time brands will be able to speak directly to Walmart customers through this medium,” Cooper writes. “These ads also create a new upper-funnel touchpoint for brand marketers and out-of-home (OOH) buyers to create awareness, because in-store audio is about connecting with customers wherever they are in the store — they don’t have to pass the brand in the aisle.”
With the tests, we’ll be watching for how this advertising is measured, and whether Walmart Connect is tracking impact across different types of formats, and not just a single campaign.