Why are the IAB and eMarketer forecasting 21% growth in connected TV ad spending in 2023? Here are three big reasons they are so bullish on the CTV market.
With the NewFronts dominating the headlines this week, I want to dig into some of the announcements to help us understand why the IAB, eMarketer, and ad buyers are so bullish on connected TV. But first…
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IAB forecasts strong CTV ad spend growth (1:40)
Just in time for the NewFronts, the IAB released its 2022 ad spend and 2023 outlook report this week. It made for very interesting reading, giving insight into not only where the market is but also into the industry sentiments that will drive it in 2023 and beyond. It all adds up to a strong year for connected TV advertising.
The IAB says that 2022 CTV ad spending was $18.6 billion and that it will increase by 21% in 2023 to $22.5 billion. eMarketer says the market is even bigger and will grow faster. It pegs 2022 CTV spending at $20.7 billion, growing to $25.1 billion in 2023, though the growth rate is the same as IAB: 21%.
The IAB is bullish on CTV advertising because the buyers it speaks to are bullish. The organization says two-thirds consider CTV a “must-buy,” just ahead of Social Video, and both are far ahead of National or local broadcasts and cable TV.
#1: Decline in traditional TV (4:10)
Cable, satellite, and telco TV providers in the US lost 6.9 million subscribers in 2022, up from 5.9 million in 2021. And if the first quarter is any guide, the industry will lose at least that many again in 2023. That means at least that many again.
vMVPDs are making up for some of the losses, but not nearly enough to offset them. In 2021, YouTube TV, Hulu Live, and Sling TV gained about two million subscribers, and 1.5 million in 2022. So, over the last two years, over nine million US households walked away from the big TV channel bundle entirely.
Much of that viewing has transferred to the connected TV. Now, I will quote Nielsen’s The Gauge data on the growth in streaming’s share in viewing because there really isn’t an alternative. But you should treat this data carefully as odd things are happening with how Nielsen calculates The Gauge. If you want to know more, visit the nScreenMedia site and search for my piece, Big Problems with Nielsen’s The Gauge.
Between September 2022 and February 2023, streaming’s share of total TV time in the US increased from 31.6% to 34.3%. All the gains came from traditional TV. Watch for the growth in streaming TV time to accelerate this year as cord-cutting grows.
#2: CTV ad innovation (7:40)
The simple fact is that connected TV is a better platform for advertisers. It allows CTV platform providers to bring a ton of innovation to the space, which just can’t be matched by traditional TV. Here are just a couple of examples from the NewFront presentations this week.
Roku is using AI to help it offer brands the holy grail of contextual advertising. It has used AI to process much of the video available through The Roku Channel to enhance the metadata of the content. This process allows it to mark all the places that could pair well with a brand. For example, a wireless provider could place an ad right after ET phones home or Tom Cruise’s mobile call with Cuba Goodings Jr. in Jerry Maguire when Rod tells Jerry, “Show me the money.”
Amazon will let national advertisers in Thursday Night Football this season run a national ad during the game where the creative can change based on who is watching. For example, in the same 30-second slot, GM could run an ad for a Camaro to a young adult, a Cadillac CT5 for older viewers, and a Chevy Trailblazer to everyone else. Oh, and if the viewer is watching the game on a Fire TV device, the ad can also be interactive. If the viewer wants more information about the car, one click of the remote pushes a landing page link to a phone or email address.
Reason #3: Premium ad-supported streaming is everywhere (11:30)
A couple of years ago, advertisers struggled to reach streaming TV viewers. Hulu was the only major SVOD that supported ads, and Tubi and Pluto TV had relatively small audiences and less than premium content. Today, all of the top SVOD services have an ad-supported tier, and two-thirds of viewers say they use free ad-supported streaming TV services.
And platforms are still arriving. Amazon announced the launch of Fire TV Channels this week. The content is available on the “Free” tab from the Fire TV menu bar. Amazon has eschewed the usual grid guide and provided access via channel groups instead. For example, viewers can find Tastemade, America’s Test Kitchen, and Hungry channels under the Food & Cooking group. Other groups include Sports Highlights, Trending Trailers, Gaming Videos, Viral Videos, Travel Inspiration, and Celebrity News.
WB Discovery will launch a FAST later this year. But it isn’t waiting for the platform before jumping into the market. In 2023, the company has launched 14 FAST channels with Tubi and channels featuring “Westworld,” “The Bachelor,” “Cake Boss,” “Say Yes to the Dress,” and more with The Roku Channel.
The picture is clear for viewers. Every TV they buy has a built-in FAST service, and they can get plenty of other free services. They can catch a break from the cost of SVOD services if they are willing to watch ads. And many are perfectly comfortable with ad-supported viewing. According to TiVo, three-quarters of people are ad-tolerant or ad-favorable.
So, let’s review:
- The collapsing traditional TV market
- Streaming TV ad innovation
- And the ubiquity of streaming services supported by ads
These are three big reasons why the IAB, eMarketer, and buyers are all so bullish on the growth of CTV ads.
Wrap-up (15:10)
If you’d like a rough transcript of today’s podcast, head over to the nScreenMedia website. There are diagrams that should help you understand the CTV ad market. Post a comment about the podcast while you’re there too. And why not sign up for the free newsletter?
