Internet-connected TV is empowering viewers and shaking up the ad industry. These devices bring with them the full power of digital advertising in a medium delivered to the living rooms of consumers, on their terms. This method of advertising combines the targeting capability of digital ads, the persuasive power of video, and the captive audience of television advertising. It is no surprise that advertising on connected TVs is disrupting the old advertising paradigms.
In this post, we'll take a look at what connected TV is and who the key players are. Then, we'll turn our attention to some of the numbers that demonstrate how this growing ad medium is changing the world of advertising.
Introduction to Connected TV
TVs may connect to the internet with built-in technology, such as smart TVs, or they may connect via a set-top box or video game console. Familiar set-top boxes include Amazon's Fire Stick, Google's Chromecast, or the various Android TV devices on the market. All modern game consoles are capable of running software that will allow their users to watch streaming video on TV.
A connected TV links to the internet so that consumers can watch their favorite streaming services on their television instead of being restricted to a small computer monitor or mobile device. These TVs bring popular streaming providers, such as Netflix or Hulu, into the living room for the whole family to enjoy.
The Key Players
Connected TVs are powered by over-the-top (OTT) media providers. These are the providers that offer streaming video over the internet rather than through traditional cable or broadcast methods. Several key players are competing for consumer dollars and the title of “content king.”
- Netflix - It was the first company to allow people to stream content that they would otherwise have to watch live or purchase on DVD. It now focuses heavily on creating original material along with content from other studios.
- Hulu - Several media companies formed Hulu to allow consumers to stream their television shows and movies. Like Netflix, they have begun creating original content. Hulu Live enables customers to watch television channels that are normally only available with a cable plan.
- Amazon - Amazon has two ways to deliver streaming video to viewers. Their Amazon Prime service comes with their original content and a selection of content from other studios for a monthly fee. Other shows and films, not available on Prime, can be purchased or rented.
- Disney - Disney's streaming service allows consumers to access their extensive back catalog of television shows, movies, and original content.
- ATT / Time Warner - ATT's purchase of Time Warner gave them ownership of several networks, including HBO. Their streaming media arm, WarnerMedia, recently launched HBO Max. This service offers original programming, content from the Time Warner catalog, and popular shows from other studios.
- Apple - The Apple TV set-top box has long been a favorite delivery vehicle for other OTT media providers. With the launch of Apple TV+, the company has entered into direct competition with other streaming services.
- YouTube - Primarily known for user-generated content, YouTube has recently begun making original series and movies that are available via paid subscription to compete more directly with the other streaming services. Like with Hulu, a cable-like live TV service is also available.
Not all of these connected TV services deliver third-party ads between shows, movies, and other content. The streaming services that do participate are more attractive to OTT advertisers, and even those that don’t place ads help increase the popularity of the CTV trend and contribute to its move into the mainstream.
The Growth of Connected TV
The connected TV market is in its early phases but becoming more competitive. New OTT providers are entering the market and competing for market share. Modern televisions are coming pre-equipped with the software needed to watch connected TV services and making it easier for advertisers to reach a greater audience. Since CTV is relatively cheap, consumers often have more than one subscription. This means that the success of one need not be at the expense of another.
A company like Netflix that once had a near-monopoly on OTT content can certainly expect its market share to continue to drop as a relative percentage of OTT. Given the growth of the market, this will likely mean Netflix is getting a slightly smaller slice of a larger pie but will continue to be on top of the OTT wars for quite some time.
Furthermore, as CTV companies expand their services, some that worked as partners in the past, like Roku and Netflix, will actually become competitors as the market matures. As more new players enter and new customers adopt connected TV services, the advertising inventory will grow, too. Just as with other forms of digital advertising, the increased inventory will mean that we can expect OTT advertising to become more affordable as adoption rates rise as well. This drop may slow, however, if ad-free services pressure the ad-supported services to show fewer ads.
Continued growth also means increased spending on advertising with connected TV services. It is predicted that next year, spending on OTT advertisement will hit $10 billion. By 2023, that number is expected to be $14 billion. Over the next five years, connected TV will also see its percentage of total media rate grow, making it an even more important avenue for advertising in the coming years.
The Battle for Content and Viewers
CTV original content is on the rise, and companies like Hulu and Netflix are creating unique original series and movies that are drawing viewers to subscribe to their services to get access. At some point, with more and more OTT options entering the space, we expect these companies to reach a point of diminishing returns. There will be a limit to how many services people will be willing to pay for, even with attractive content available for streaming. It remains to be seen which providers will come out on top, and meanwhile, OTT continues to offer a great chance for advertisers to reach their target audiences.
The OTT Opportunity for Brands
OTT offers an exciting opportunity to get video ads in front of a captive audience while retaining the level of targeting that digital ads have made possible. Because of the number of different services available, OTT advertising makes a perfect complement to an omnichannel advertising strategy. OTT meets consumers where they are most engaged in the customer journey and drives purchases with an omnichannel approach. Additionally, unique content CTV offers for different demographics may allow for better targeting.
If you would like to learn more about trends in the advertising world, check out our post on 2020's digital marketing trends. If you want to see how we can help your brand refine your digital marketing strategy and stay ahead of industry trends, get in touch with our team of experts.