‘An explosion in the channel’: Why marketers are giving digital video a bigger piece of the advertising pie

This year, Merrell footwear said that more than half of its ad dollars went toward digital video efforts, up from the 5% spent last year. With the increased ad spend, the shoe brand is running three campaigns across ad-supported streaming platforms such as Roku, Pluto TV, Sling TV, DirectTV and Hulu. 

“It’s the most significant investment for us this year,” Jane Smith, senior director of digital marketing at Merrell, previously told Digiday.

It’s a similar story for insurance startup Quility, which this year doubled its brand awareness budget to dedicate more ad dollars to CTV and OTT spots across streaming platforms, including Hulu and television digital offerings, ABC local channels, A+E, BBC America, CBS and CNBC. Other brands, including Dr Teal’s, Adore Me and Shutterfly, have all taken similar measures over the last year, ramping up their media mixes to include more digital video as people continue to stream their favorite shows.

“It’s trackable, it’s all programmatic and you get results,” said David Song, CEO of Rosie Labs ad agency. “So why wouldn’t we put more money into it?”

Media buyers say the shift started last April, when Apple rolled out its App Tracking Transparency as part of iOS 14.5. As a result, advertisers faced measurement challenges within social media advertising and instead started pouring more ad dollars into CTV and OTT, per media buyers. For example, last year Rosie Lab clients spent 30% of their ad dollars on Facebook. That spend has fallen to about 10-15% of budget, per Song, who did not provide specific figures. 

Research firm eMarketer points to CTV as one of the fastest-growing channels in digital advertising as of last year. In the US, investments were expected to more reach than $13 billion and double by the end of that forecast period in 2025. On a monthly basis this year, advertisers are reportedly spending at least $1 billion on OTT efforts, according to a recent report from digital ad analytics platform Pathmatics. (It’s unclear what those figures were the year prior as Pathmatics ad intelligence data capabilities began last November.)

Per a media buyer, current CPMs for streaming services like Tubi, Pluto, Hulu and Discovery+ can run advertisers anywhere from mid-teens to 20s dollar amounts. Meanwhile, CPMs for streaming platforms like HBO Max and Peacock cost dollar amounts that are closer to the mid $40s. 

Last year, Rosie Labs’ Song estimates that clients spent about 5 to 10% of their ad budgets in the CTV and OTT space. That number has since increased to upwards of 25 to 30%, according to Song. He did not disclose specific figures. Rosie Labs works with clients such as Coca-Cola, Egglife foods and Orbitz travel brand.

From a creative standpoint, it’s a similar story, according to Phil Patriarca, director of west coast partnerships at QuickFrame by MNTN, a video creation platform. According to Patriarca, the platform has recently seen an influx of requests for audience-targeted creative built specifically for CTV/OTT channels. He declined to provide specific figures.

“We are seeing advertisers focus more of their time and creative budget on CTV/OTT to utilize this as a real performance channel,” Patriarca said in an email.

As the space grows and new players enter, Erica Sperry, svp of investments at Hill Holliday, cautions advertisers to continue testing to find what works for them as there’s no one-size-fits all approach to CTV/OTT. 

“Continue to test,” she said. “Just because something maybe didn’t work yesterday doesn’t mean it won’t work in the future.”