2024 will see the start of the ad-supported streaming war

This article is part of a series exploring trends in marketing, media and media buying for 2024. More from the series →

Four years after Disney+’s debut set off the subscription-based streaming war, the introduction of Amazon Prime Video’s ads tier in 2024 heralds the ad-supported streaming war. And ad buyers are hopeful that the heightened competition on the sell side leads to product development and lower prices, with advertisers’ intensifying budget volatility looming as an X factor.

“It is going to be the streaming war. Because money is coming in and competition is heating up, and that always equals a battle. And I think that battle is going to start [this] year,” said Shelby Saville, U.S. chief investment officer at Publicis Media.

“It’s the first year where you have multiple players at scale,” said one agency executive. “Hulu’s been at scale for a while. That’s probably the only one that has been at scale.”

Prime Video’s entry into the streaming ad market raises the stakes on its rivals because Amazon is automatically opting in Prime subscribers to the ad-supported tier, a tactic that is enabling the e-commerce giant to project a monthly ad-supported audience of 115 million people. That would put Prime Video in league with Disney’s Hulu — which has claimed more than 115 million ad-supported viewers — atop the streaming ad market.

“They instantly go to the top of the food chain with the size and scope and scale that they have, let alone the potential data offerings that they have to combine with,” said a second agency executive.

“We’re excited for Prime Video,” said Stacey Stewart, U.S. chief marketplace officer at UM Worldwide, whose parent organization IPG Mediabrands signed a three-year deal with Amazon to advertise on Prime Video. “Any ways that we can diversify the landscape is a good thing.”

The ad-supported food chain

And the streaming ad hierarchy has diversified.

Historically, there were roughly three tiers of streaming ad inventory sources: 1) Major premium ad-supported streamers, such as Hulu, NBCUniversal’s Peacock and more recently Netflix; 2) connected TV platforms like Roku and Samsung and free, ad-supported streaming TV services like Paramount’s Pluto TV and Fox’s Tubi that largely aggregate inventory across programming providers; and 3) the mid- to long-tail of streaming services. YouTube, for its part, is very much part of the streaming ad market but is sequestered by buyers — at least the buyers interviewed for this story — into its own bucket because of its user-generated content. “YouTube still remains its own thing to a large degree based largely on the content differential,” said a third agency executive.

However, heading into 2024, the streaming ad hierarchy has become more stratified — particularly that top tier that has subdivided into smaller tranches with the smallest being the uppermost echelon that agency execs reserved for Hulu (with a spot they’re leaving open for Prime Video if it proves to deliver on its scale projection).

“Hulu, they’ve been around forever. Their cornerstone is set. So them being that number one, I mean, everyone buys Hulu. They have the scale, and the price is good, and the content is great,” said a fourth agency executive.

“It remains Hulu,” said the third agency executive. “I think Peacock is that close second. And then I think it’s kind of a free-for-all after that.”

Actually, it’s kind of a free-for-all even before that. Hulu’s spot seems secure, and multiple agency executives slotted Peacock into the tier immediately after it. But not all. Some ranked Disney+ and Warner Bros. Discovery’s Max in the second premium tier because of the premium nature of their content — ex. Marvel, Lucasfilm and HBO programming — and their parent companies abilities to use their linear TV networks and other properties to make up for any ad-supported viewership shortcomings. 

Meanwhile, Netflix and Paramount’s Paramount+ are on the bubble between the second and third premium tiers, with their respective landing spots varying by buyer. Netflix checks the premium programming box, and its ad-supported audience is growing. But its ad-supported audience is still on the small end relative to its rivals, its ad prices are still prohibitively high for some advertisers, and its ad buying and targeting options are prohibitively limited. Paramount+, for its part, also has premium programming and prices its impressions at the lower end of the market, which boosts its standing, but seems to be dogged by simply not garnering the same level of attention as its rivals.

“Paramount kind of lives in that, like, two-and-a-half [premium tier] because Paramount has a huge portfolio, a very large U.S. monthly active user base. The price is just as effective, if not more effective than Hulu. But it just has a little bit of less shininess or sheen to it than, say, Hulu does, I guess,” said the fourth agency executive.

Honestly, though, parsing out the middle tiers of the premium streaming ad supplier pecking order can get a little nitpicky. “Outside of Netflix and Hulu and YouTube, they’re all kind of bunched into the same [audience] numbers,” said a fifth agency executive.

‘Competition will breed innovation’

The premium streaming ad market primarily separating at the top and low ends — and again with YouTube in the outlier position — reinforces agency executives’ expectation of heightened competition among the streaming ad sellers in 2024. And it raises their hopes that the rivalries will raise the quality of the streamers’ respective ad products.

“All of that competition will breed innovation,” said Dave Sederbaum, evp and head of video investment at Dentsu.

Among the innovations high on agency executives’ wishlists are improved targeting capabilities, such as being able to target audiences based on shopping behaviors rather than being limited to demographic-based targeting options. In some respects, these aren’t so much wishlists as demands.

“We’ve got a client in CPG that basically took all of their upfront money and said, ‘Instead of demos, we want to activate against retail media data,’ said a sixth agency executive. “I see more of that coming.”

Ad buying decisions are “no longer going to just be about content, just about scale and just about price. [The streaming ad sellers] are going to have to come in and say, ‘This is the data that I have to offer, and this is how I know the consumers. It marries with following your audience but also with your great premium content,’” said the second agency executive.

Measurement is another area that agency executives would like to see benefit from the increased competition with streamers feeling pressure to provide more insights into where ads ran and who saw them. 

“The biggest issue is there are some black boxes,” said the first agency executive. “In [traditional] TV measurement, Nielsen — good, bad or indifferent — is a single standard and measures everything big enough to be measured. There is a lot of data out there that is consistent across all networks. That’s very much not true on the streaming side.”

“We’ve run into a lot of points of frustration around co-viewing [measurement],” said Stewart. “It’s counted in some cases and not counted in other. If you buy it programmatically, it’s not; if you buy it direct, it can be. Those inconsistencies make people frustrated with streaming in general, as well as the lack of transparency that we’re still seeing.”

Frequency management remains another point of frustration — and one that influences how streaming ad dollars are doled out. “It’s affecting where you’re spending,” said an eighth agency executive. “That’s to the point of what is the top tier, and the top tier is really who people go to first, and that’s because [frequency management] tends to be less of an issue or it’s just that there’s more control and understanding in place how to manage for that.”

The wild card

Where there is much less control and understanding, however, is the state of advertisers’ budgets heading into 2024. Every agency executive interviewed for this article cited an extreme level of budget volatility at the moment that could affect how much money is spent on streaming, for better or worse. 

“Things have been more volatile than ever before in the history of my career,” said the second agency executive.

“Everything’s more volatile than I’ve ever seen it,” said the first agency executive.

“I’ve been watching at least my clients have some serious budget volatility in 2024 from a reduction perspective,” said the fourth agency executive.

“The thing that makes me a little reticent [to claim how significant 2024 will be for the streaming ad market] is the continued budget volatility,” said the eighth agency executive. “It might be the biggest year, but it all really depends on whether the budget volatility we continue to see continues because it is not that we’re predicting all of these ad dollars are just going to flood the market. It’s really going to be partially dependent on what that volatility looks like.”

To be clear, that volatility could very much benefit streaming ad sellers. Streaming typically doesn’t require the firm, long-term commitments of advertisers that traditional TV demands. And the ability to buy streaming ad inventory programmatically further gives streaming a path toward picking off more ad dollars from traditional TV, as advertisers have already been moving some of their upfront dollars from Q4 2023 to Q1 2024 and then from Q1 2024 to Q2 2024.

However, streaming’s relatively high ad prices could offset some of that opportunity, especially if the budget volatility leads advertisers to nickel-and-dime their allocations. “The price differential is still pretty high versus linear [TV]. Particularly when you factor in for a lot of packaged-goods [advertisers], with the [15-second ad slots] the price differential can be pretty dramatic,” said the third agency executive.

As a result, while the ad-supported streaming war will kick off in early 2024 with Prime Video’s entry, the victors and the spoils may not emerge until later in the year as economic conditions (hopefully) improve and ad budgets open up.

“I honest think [the ad-supported streaming war] is going to be more like the second half of ’24 and bleed into ’25,” said the fourth agency executive.

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