Ad buyers are wary of advertising becoming a casualty of the streaming wars
This article is part of the Digiday Video Briefing, which features must-reads, confessionals and key market stats. To receive the Digiday Video Briefing, please subscribe.
The streaming wars have begun to unsettle the advertising industry. As Netflix, Disney and WarnerMedia all focus primarily on their ad-free streaming services, ad buyers are wary that their ability to reach large audiences will get caught in the crossfire — and result in higher costs.
The potential impact of the streaming wars on ad inventory availability popped up across several conversations with brand and agency execs during the recent Digiday Video Advertising Summit in Palm Springs, California. It is the latest development in a growing unease among ad buyers that, as traditional TV viewership continues to decline, they are facing a shortage of opportunities to advertise to big groups of people on the biggest screens in their homes. The concern has now turned to whether the streaming wars will accelerate the trend and to what end. This year, TV ad revenue will decline by 7% compared to last year, and while streaming offers an alternative for those ad dollars, it won’t offset the TV ad revenue decline, according to GroupM.
“What pressure is the non-ad-supported inventory putting on OTT, and how does all of that reconcile over time? The scale still sits with linear, and it moves over eventually, but how does it actually move over?” said one agency exec in summary of the question that many ad buyers are asking.
Ad-free services like Netflix and Amazon Prime Video are among the most popular streaming services already on the market, but whatever viewership they may siphon away from ad-supported options has yet to impact video ad budgets, said another agency exec. “But I still think it’s early days,” the exec added.
Ad buyers are worried audiences will shift from ad-supported TV to primarily ad-free streaming — and the cascading impact that will have on ad prices. As evidenced by Hulu’s limited commercials subscription tier remaining more popular than its ad-free tier, ad opportunities will continue to exist, but those opportunities will be limited as streamers typically carry fewer ads but at higher prices compared to TV networks. Connected TV ad prices are already generally higher than cable TV ad prices, at $20 to $40 CPMs for CTV ads versus $10 to $12 for cable TV ads. With eMarketer projecting U.S. advertisers to increase the money they spend on connected TV ads by 28% in 2020, the increased demand combined with a limited supply could lead to a further rise in ad prices.
NBCUniversal’s entry into the streaming wars, Peacock, will be primarily ad-supported. However it will carry fewer ads per program than its TV networks. Meanwhile, Hulu has been pushing non-traditional ad formats, such as its pause ads, as part of its effort to have non-interruptive ads account for half of its ad revenue within the next couple years. And Amazon has cut the ad load for Prime Video’s English Premier League livestreams while increasing the cost of those ads compared to traditional TV.
The prospect of Netflix adopting ads appears to be an advertiser fever dream. The streamer has repeatedly spelled out, as recently as July, that it has no plans to introduce an ad-supported tier. But ad buyers continue to contend that Netflix will need to change its mind to compete with the likes of Disney+ and Apple TV+, both of which set the prices for their respective streaming services at less than half of what people typically pay for Netflix. Additionally, Disney has bundled Disney+, Hulu and ESPN+ for $13, equal to the price of Netflix’s most popular subscription tier.
“Disney just came in and laid a bombshell on the market and said this is where your rates are going to have to be. Don’t have advertising? You’re not going to survive,” said a third agency exec, whose hyperbole reflects the threat ad buyers feel they are facing.
Why Facebook’s limits on teen targeting are all part of its algorithmic ad playbook
As Facebook puts new targeting restrictions on reaching teens, marketers say Facebook's ad targeting algorithm could do a better job of targeting ads to them anyway.
With the Metaverse hype cycle at full blast, experts take the long view
The newfound prominence of the Metaverse has led to heightened scrutiny, with some observers rolling their eyes at what they perceive to be the tech industry’s latest buzzword of the month.
As gaming expands, endemic and non-endemic creative agencies emphasize their strengths
Though gaming-endemic agencies have a head start, non-endemic creative agencies are looking to muscle their way into the space using their advantages as larger and more established firms.
SponsoredData-driven solutions: Charting a better way forward for brands and publishers
Travis Clinger, senior vp of addressability and ecosystem, LiveRamp Updates to mobile identifiers and browser data privacy policies have become an everyday part of life in the advertising industry. The browsers and device manufacturers have made privacy a competitive differentiator, as consumers have become increasingly concerned over how their data is being used. As an […]
‘Change without story is a mandate, change with story is purpose’: Why marketing and comms execs are being tapped for chief-of-remote roles
Chief of remote roles are gaining in popularity, and it's marketers and communications execs that have the skills to fit the bill, experts believe.
‘A few more strategic decisions’: What it’ll take for TikTok’s ad offerings to get advertiser buy in
The momentum is there, but TikTok's lagging analytics and targeting offering has advertisers playing it safe with organic strategies.