As streaming rises, CTV advertising gains CPG traction

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.

Smart TVs are driving CTV growth. (Photo by Nicolas J Leclercq on Unsplash)

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:

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?