Sitting at the convergence of digital video and linear television is the Connected TV (CTV) space, a new frontier for advertising that is growing at an exponential pace. While its rapid growth means that it is still a work-in-progress, it holds boundless potential for advertisers.
The numbers show that TV viewing habits are shifting rapidly - according to eMarketer Pro, the number of CTV users is expected to increase by 22 million in the next 5 years and will represent 204 million Americans, while the number of traditional pay TV users is expected to decrease by 17 million in that same timeframe.
This is not just a phenomenon amongst Millennials and Gen Z either; while the 50+ demographic makes up a slightly smaller portion of CTV viewership, individuals A18-49 tune in close to equally according to Nielsen Q1 2018 reporting:
A Q3 2018 survey from video ad server Extreme Reach states that CTV devices now have the largest share of digital video ad impressions served at 38%. This is a monumental increase over the 15% of impressions served in Q4 2017. Lastly, and most importantly for those in the media buying space, 94% of marketers are expected to maintain or increase their spending on CTV delivery in the next year according to eMarketer Pro.
These stats definitely show that CTV is the next big thing. So what exactly is CTV and how do we define it?
To start, CTV is the delivery of content through the internet to any device that is connected to a TV without the need for a traditional cable subscription. It falls under the umbrella of OTT, or "Over-the-Top", which encompasses content that is being streamed through the public internet onto any non-pay TV device, be it mobile, laptop/desktop, tablet, or otherwise.
Connected TV content can be both live-streamed or viewed as video-on-demand (VOD) and can be delivered on advanced set-top boxes (Roku, Amazon Fire Stick, Apple TVs, etc.), Smart TVs (LG Smart TVs, Samsung Smart TVs), and gaming consoles (PlayStation, Xbox, Nintendo).
In terms of inventory, there are countless premium platforms on which content can be viewed. These include Top National Broadcasters (CBS, ABC, FOX, Telemundo, Univision, etc.), Top National Networks (CNN, ESPN, Discovery Channel, Travel Channel, etc.), and all major cable/satellite/MVPD companies (DirecTV Now, Sling TV, Spectrum, Hulu, CBS All Access, etc.).
How did we get to CTV?
For years, traditional cable companies were able to dominate the TV market due a lack of consistent alternatives. This allowed them to become complacent and resulted in major frustrations amongst their consumers.
The mass migration from traditional TV to CTV platforms is being driven by a host of factors; among them are the inability to get competitive, reasonable rates, the addition of numerous fees and charges onto bills, and cable bundles that aren't relevant to consumer needs. As a result of these issues, cable companies like Comcast, Dish and Charter have consistently ranked as the lowest in customer satisfaction of companies across all industries.
Additionally, the concept of having a defined TV schedule that consumers must plan their day around is outdated. With the ability to view content at any time on numerous devices, there is no need for a user to tune in at primetime hours to watch a show that they could watch later at their own convenience.
As users flock to CTV services, advertisers are following; according to the same eMarketer report report referenced earlier, Hulu's ad revenues are expected to increase by $300 million in the next two years, while Roku ad revenues are expected to increase to $700 million by 2020, a 2.4x increase over that of 2018
By shifting to CTV, both users and advertisers see major benefits. For users, there are a pair of factors that allow for a greatly improved experience from a viewability and a customer service standpoint:
Price: The number-one benefit for consumers is lowered cost. According to New York consulting firm cg42 survey results, the biggest reason consumers are leaving traditional cable providers is high prices and "nickel and dime” fees. Cg42 survey responses also showed that cord cutters saved an average of $85 each month after leaving traditional pay TV, evidencing CTV's role as a remedy to price concerns.
Relevancy: It also allows users to see fewer ads, and the ones that they do see are far more relevant to their interests. With more relevancy comes more appreciation for an advertiser; according to the IAB, users are 25% more likely to have an increase in positive brand favorability through exposure to ads on CTV platforms as compared to traditional linear TV.
For marketers, the benefits are even greater. The overarching advantage of using the CTV medium is the ability to combine the precise targetability of digital video with the lean-back, big-screen viewing experience of linear pay TV. On a more micro level, a number of elements combine to make CTV an ideal platform for marketers:
High Engagement: The first positive component is the ability to show ads in a big-screen, 100% viewable environment on premium, brand-safe inventory. Advertising in this manner drives completion rates of 95% and above, far and away higher than the digital video industry benchmark of 53.20%.
This is due to the intent-based viewing habits of CTV users - across all CTV devices, 83% of viewing is done on full-episode or live content. When someone has gone out of their way to select a specific, extended-length program on a specific streaming platform, they are more willing to sit through a short advertisement than if they are casually browsing the web or flipping through traditional TV channels.
Targeting: Another benefit is granular targeting through extensive audience data that goes beyond the simple Nielsen Household. Connected TV gives brands the ability to leverage various targeting layers, including demographic, sociographic, behavioral, geographic, ad viewership, day part, and more for TV targeting purposes. This data is taken from first-party databases and is combined with third-party sources for tracking and verification, ensuring that it is far more detailed than the traditional household demographic info provided by Nielsen alone.
Cross-Device Capabilities: CTV also gives the ability to tie TV advertising to business outcomes through cross-device targeting initiatives. The process goes as follows: initial big-screen, awareness-oriented ads are shown on CTV, which initially pique customer interest in a brand.
From this point on, the consumer can be shown sequential messaging aimed at driving them down the purchase funnel. This is especially effective when paired with dayparting strategy, starting with ads on consumers' phones in the morning, smartwatches while on-the-go, laptops/desktops when they arrive at work, then back to their CTVs when they arrive at home during primetime hours.
Through a synchronized, non-repetitive brand interaction, users will have an extremely positive view of a brand's campaign, while the brand is able to gain that elusive top-of-mind position that is so difficult to acquire in today's cluttered advertising world.
Expansion of Incremental Reach: According to eMarketer Pro, the number of cord cutters in the U.S. currently sits at 33 million and is only going to increase in the next few years. Of this group, 44 percent are part of the coveted Millennial and younger-end Gen-X audiences, according to Statista data. Without CTV advertising, brands would not be able to reach these cord cutters in a big-screen, high-viewability environment conducive to higher brand favorability.
While CTV is rapidly growing, this rapid growth is a double-edged sword - it presents countless possibilities for advertisers, but it is also still a work-in-progress that leads to challenges in several areas.
Scale: Connected TV does not have the reach to be a direct challenger to pay TV - at least not yet. For now, it should be seen as an extension of video strategy that allows surgical targetability on a big screen.
Frequency Management: When marketers view CTV as the same type of platform as linear pay TV, they run into issues with frequency. To get the reach guarantees that traditional pay TV provides, ads must be shown repeatedly, often without regard to the audience who may be seeing it over and over again.
While this is becoming less of an issue as marketers learn more about the space, they still must manage their expectations and be aware that outcomes are more akin to awareness-based digital video at the present time.
Platform Fragmentation: The reason for this is the competition between numerous platforms, including streaming services, smart TV makers, set-top box manufacturers, content aggregators, and broadcast and cable networks that bundle connected TV with traditional ad buys.
This takes fragmentation even further beyond the already-fragmented traditional TV space. Media buyers face an intimidating array of selections for where to run a CTV campaign, which can discourage them if they do not yet know how to navigate the medium.
Measurement: Because CTV sits at the intersection of traditional TV and digital, measurement is inconsistent. Brands and agencies often have media buyers from both spaces working together, and there is a fundamental gap in the metrics that these two groups use to measure campaign success.
However, as mentioned in the cross-device targeting section above, third-party data providers have been working on cross-device measurement initiatives that can track conversions based on user exposure to linear ads, CTV ads, or unduplicated on both.
There is also the issue of networks refusing to release their user viewing pattern data to brands and agencies. This makes it even more difficult for media buyers to get a handle on where to purchase ad space.
Overall, the main takeaway is that CTV is an increasingly important part of the advertising world, and it has the potential to revolutionize how we view TV advertising. However, because it is so new, it is still evolving and cannot yet be considered a finished product.
In our next blog post, we'll take a look at a case study showing how GlassView's CTV capabilities give us the ability to drive exceptional performance while also addressing many of the platform's major challenges.