The COVID-19 pandemic has quickened the consumer adoption of several media channels including connected TV. CTV allows for viewers to stream video content onto their televisions. CTV includes web-enhanced Smart TVs, Blu-ray, a connected video game console (i.e., Xbox,) or a stand-alone streaming device such as Roku, Amazon Fire TV, Google’s Android TV and Apple TV, all of which connect any TV set to the internet.
A recent study from the Leichtman Research Group estimates 80% of TV homes in the U.S. have at least one connected TV device. This is an increase from 57% in 2015 and 24% in 2010. The study also reported that there are 400 million connected TV devices in the U.S. and 64% of TV households have three or more connected TV devices.
Nielsen recently released a report that says connected TV viewing has remained above pre-pandemic levels. The report says, collectively, CTV viewing has grown from 2.7 billion hours during the pre-pandemic week of March 2 to 3.9 billion hours during the weeks of March 23, March 30 and April 6. This also represents a year-over-year increase of 81%. For the week of May 4, with stay-at-home laws being relaxed in some states, CTV viewing was 3.5 billion hours.
Among stand-alone streaming devices, the category leaders are Roku and Amazon’s Fire TV. Roku has about 40 million accounts, including 2.9 million added in first quarter 2020. Most of Roku’s accounts are in the U.S. Roku has a 39% market share of CTV devices in the U.S, including an estimated one-third of the Smart TVs sold in the US and Canada that use Roku’s interface.
In September 2017, Roku launched the Roku Channel, a streaming video app that provides free, ad-supported (sold by Roku) content including entertainment programs, movies, news and sports for account holders. The Roku channel also has subscription-based premium pay channels such as HBO and Showtime. Content can be accessed on a number of screens including phone, tablet and desktop. In June, the Roku Channel expanded to over 100 linear channels and over 100,000 titles. During first quarter 2020, Roku said it earned $233 million from advertising and licensing fees. Last April, the Roku Channel was launched in the United Kingdom, an indication of Roku’s plans to expand to Europe, a market where Amazon leads.
In January, Amazon announced it had surpassed 40 million accounts with users dispersed more globally. In the U.S., Amazon has a 30% market share of CTV devices, including Smart TV manufacturers. Fire TV also sells ads for their own group channels (including the Amazon owned IMDb TV and Twitch) that are free to users. There is also free content from other programming sources. In total, Amazon Fire TV users have access to over 20,000 titles. Fire TV content can be found using Alexa. Additionally, original content from Amazon’s Prime Video is easiest to locate on the interface.
With the price of TV sets continuing to drop, Smart TV manufacturers, to help offset declining revenue, have entered the advertising business. Samsung, with 33 million opt-in Smart TV sets sold, and Vizio, with 15 million opt-in sets, are among the largest Smart TV manufacturers in the U.S. Both have an in-house sales team selling CTV video ad inventory. For example, Samsung’s TV Plus has a 120 free, ad-supported channels from various sources. Vizio’s subsidiary, Inscape, announced it was developing a National Representative Panel of 3.5 million homes.
CTV’s targeting capabilities are the “holy grail” for advertisers. Many CTV companies use Automated Content Recognition (ACR), which collects tuning data used to help with programming recommendations and for better targeted ads which can be integrated with other data points.
With “cord cutters” and younger age groups who have all but abandoned linear TV, CTV is a reach extension to a traditional TV ad campaign. Other CTV enhancements include non-skippable ads, a lighter ad load, frequency capping, strong video completion rates (the percentage of ads that were played all the way through), more granular geolocation capabilities and a better business outcome measurement.
Most advertisers buy CTV programmatically using a Demand Side Platform (DSP). In October 2019, Roku acquired DataXu, a DSP company and renamed it OneView. Roku announced their plans to keep OneView as an open platform using first-party data from Roku. Nonetheless, a few months later, Amazon dropped OneView from its Fire TV platform, not willing to sell ad inventory on a rival owned DSP. Amazon will rely on its own DSP, which uses Amazon’s shopping data for targeting purposes as well as the independent The Trade Desk, for programmatic buying.
One of the issues facing agency buyers and CTV is whether it should be treated as traditional linear television, digital video or something new. Some advertisers even have their digital and traditional buyers competing with each other for a CTV buy. Another issue is whether such legacy TV metrics as ratings should continue to be used as the negotiating currency, or should they be replaced by audience-based buying used in digital media? In any event, there has been a greater amount of collaboration between groups within ad agencies. According to a survey from eMarketer, the number of U.S. ad agencies that buy digital video and traditional TV with a “single team” has increased from 40% in 2017 to 61% in 2019.
Many agencies are also using their data analytics department when making CTV decisions. In recent years, several agency holding companies have acquired data companies. For example, Publicis acquired Epsilon, IPG acquired Acxiom’s Marketing Solutions and Dentsu Aegis acquired Merkle.
As CTV adoption increases, ad volume is also forecast for significant growth. In 2019, eMarketer estimated CTV ad spending in the United States was nearly $7 billion. That figure is expected to more than double in 2023 to $14.1 billion, accounting for 4.7% of all media ad spending. The key to CTV advertising is its data infused addressable targeting capabilities, which traditional television lacks. As a result, the cost-per-thousand (CPM) for a CTV buy can be more than double the cost of a traditional TV buy.
CTV’s geotargeting and addressable capabilities also give it local market capabilities. As local markets are opening up for business at various times, national advertisers have been using CTV strategically, using different messages for different markets. Also, 2020 is a big election year and with political parties containing a treasure trove of voting data, CTV is expected to reap the financial benefits. CTV geotargeting capabilities can align with Congressional districts and other sub TV market areas, such as zip codes, with a different campaign message.
While the coronavirus pandemic has driven up CTV viewing, it’s also impacted advertising. Even so, BIA’s latest forecast is that CTV ad spending targeting local viewers will come to $1 billion in 2020, down from a pre-COVID-19 forecast of $1.1 billion. “CTV inventory has grown dramatically with the large increase in available audience impressions. That’s one factor in pricing dynamics, another of course is reduced, paused or cancelled ad spending. But as the country reopens on a local and regional basis, I suspect more national ad dollars will be directed to CTV and geotargeted and we may have to revise our forecast again for CTV,” noted Rick Ducey, managing director, BIA Advisory Services.
With the TV upfront ad marketplace in a state of uncertainty, this could represent an opportunity for CTV with buyers looking toward the ad buying flexibility that digital media provides. In a report, Pivotal Research Group’s Michael Levine noted, “Based on our work around the TV upfronts, we are incrementally more bullish around CTV being a real breakthrough next year.”
“Addressable CTV and OTT U.S. ad spend increased 9.7% in March-April while total media went down 35%, according to Standard Media Index, and Jack Myers projects CTV/OTT will be up 12% in 2020 while total media will be down double digits,” reports Bill Harvey, who first mentioned addressable commercials in his newsletter in 1979. “And MVPD-based addressable TV, which has been hampered by complexity in buying, is in a watershed moment with leading MVPDs and networks working together to make that part of addressable TV as easy to buy as CTV and OTT, so this could also be a breakout year for that species of addressable TV.”
This article and cited credit goes to: