Connected TV may have had marketers chomping at the bit, with data-driven targeting at its core, but it is simply cannibalising existing TV budgets, triggering calls for media owners to do more to turn what is currently a niche market into one with mass appeal and reach.
That is the stark conclusion of a WARC Media’s latest Global Advertising Trends report, “Connected TV’s next episode”, which examines advertising investment and consumption patterns of CTV, defined as streamed video viewed on a smart TV or a TV connected to the Internet.
It reveals that while CTV adspend is increasing as viewers and advertisers migrate from linear broadcast television, it is simply keeping overall TV spend stable. In comparison, retail media is growing three times as fast as CTV while YouTube’s ad revenue alone is set to be 17.4% greater.
Additionally, the ‘sell side’ of the market is fragmenting into smaller operators as linear TV spend declines, transforming the economics of the TV market.
WARC Media head of content Alex Brownsell, who is co-author of the report, said: “CTV ad spend is growing, but not as fast as one might expect. Whilst eyeballs are rapidly shifting from broadcast to streaming, this is evolution, not revolution.
“The market is fragmented, and CTV ad investment is mainly being drawn from existing budgets. More work must be done to help CTV to realise its full potential and ensure that media owners are able to attract adspend from beyond the current confines of the TV market.”
The market is certainly ripe for growth, with more than four-fifths (83%) of US households CTV-enabled. And, as younger generations favour streaming and smart TV adoption proliferates, there are growing opportunities for media owners to diversify ad revenue streams and for brands to engage hard-to-reach audiences, the report states.
In 2023, Gen Z is forecast to spend 90 minutes on average on streaming versus 86 minutes on linear TV, according to GWI.
Smart TV adoption is also playing a key role. Samsung TV’s latest research shows that the ability to access video streaming apps is “by far the most important feature” when it comes to smart TV capabilities.
But there is still plenty of room for growth. CTV ad investment is expected to reach $25.9bn globally in 2023, up 13.2% compared to last year, and is forecast to continue to grow at a compound CAGR of 10.4% over the next five years, according to GroupM.
However, CTV media owners are mostly competing for existing TV budgets rather than winning share of spend from digital channels like social, or accessing new budgets such as retail media (it only took retail media 10 years to grow tenfold, and in the same time the size of the CTV ad market only grew three-fold).
And CTV ad investment forecasts this year mean the medium will remain decidedly niche when compared to the $526.8bn global pureplay Internet ad market. Facebook and Instagram owner Meta is expected to attract a more than a fifth of that ($115.2bn) on its own.
The fragmentation of the CTV market is also an issue, not least in the ability of brands to measure incremental reach as well as scale. CTV’s unique selling point is its ability to help brands to target audiences and avoid wastage but this risks contradicting the key attribute of TV, its ability to run large scale campaigns with the same creative execution.
Advertisers must also be aware of the limitations of CTV ad inventory. Research suggests audiences are reaching the point of subscription fatigue, while smart TV owners remain in the minority worldwide, although levels vary across markets: 45.8% of all respondents globally have access to a smart TV compared with 61.4% in the US, according to GWI.
EssenceMediacom media activation director Charlotte King concluded: “It’s vital both marketers and agencies take an adaptive and reactive approach to tailoring their current TV strategy. This will ensure brands keep abreast of the curve, maximise their brand exposure and, ultimately, exceed their short- and long-term business goals.”
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