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Part 1: CTV market deep dive
The frothy connected television market has drawn the attention of marketers, investors, and content producers alike. This series breaks down the current state of CTV for newbies and experts alike.
This week at AdLingo, we begin a 2-part series on CTV. Today, we will focus on the background, terminology, and market dynamics.
st ~45 days into the year, there has already been a ton of movement in the Connected Television (CTV) market, specifically for advertising. There is constant chatter about CTV in the market in general as streaming rockets its way to becoming the primary method of video consumption around the world.
However, only a portion of that activity is ad-supported, meaning it contains ads. This week's AdLingo focuses on the advertising end of CTV. Let's make sure we are all on the same page and start with CTV Lingo.
CTV: Connected television
OTT: Over the top. Refers to video content that is delivered over the internet to the viewer. The video content rides "over the top" of another platform (i.e. the internet service provider).
VOD: Video on demand. May or may not contain ads.
SVOD: Subscription video on demand. A viewer must pay a fee to access the content. Often (but not always) the content is provided without ads in exchange for the subscription fee.
AVOD: Ad-supported video on demand. Contains ads.
TVOD: Transactional video on demand. Renting or buying a streaming movie or episodic program.
SSAI: Server-side ad insertion. The ad is injected into the video stream in the cloud, and streamed down to the consumer's streaming device. The consumer's device (aka the client) is not responsible for fetching ads and triggering their playback. The ads are seamlessly stitched into the playback experience.
CSAI: Client-side ad insertion. The content video stream is separate from the ads. Ads are often downloaded to the playback device in advance or in near-realtime (as needed). When it is time to play an ad, the playback device calls in the creative asset, plays it out, and returns the viewer to the streaming content. Think of it as a temporary switch to another video source during the commercial breaks.
VAST: Video ad serving template. A standardized industry framework for the delivery of video ads and trackers into streaming video playback environments.
CTV specific ecosystem players
Broadcasters & Networks: This group is comprised CBS, ABC, NBC, FOX, TBS, FX, CNN, MSNBC, Bravo, etc. Most of the traditional TV outlets now have streaming apps offering AVOD or SVOD.
Streaming Aggregators: This group is comprised of streaming platforms like Nextflix, Amazon Prime Video, Hulu, Pluto, Tubi, Xumo, etc. These platforms aggregate streaming content from stations, networks, and studios. The content is brought together under one platform name.
O&O Aggregators: This group is comprised of content owned by a single holding company, aggregated and packaged into one offering. These include Peacock, HBO Max, Disney+, etc. For example, Comcast aggregated content from NBC, MSNBC, Bravo, et al. under Peacock's master umbrella service.
Streaming Originals: Some of the above also dabble in creating original programming made exclusively for their CTV offering. Netflix and Amazon are two of the most notable that both aggregate content from other sources and produce their own original programming.
SSP: Sell-side platform. Focuses on the management of a publisher's inventory to maximize revenue yield. Primarily focuses on taking the publisher's inventory to market programmatically.
DSP: Demand-side platform. The primary platform that advertisers use to buy media programmatically. In this case, programmatic buying of AVOD inventory.
Streaming Platform: Streaming platforms are the systems that viewers use to navigate, discover, and stream video content. This includes external devices plugged into a TV such as a Roku, Amazon Fire Stick, Chromecast, Xbox, Playstation, etc.
Smart TV's: Televisions that have the "built-in" capability to stream CTV programming. Typically consists of a television that utilizes a "smart" operating system that contains streaming apps natively. Similar to a Roku, Chromecast, etc. However, in this case, there is no external hardware. The streaming capability is baked into the TV set itself.
Whew. Glad that is out of the way
Now that we have some of the basic terminology and definitions of the players locked down, let's get into CTV's current state.
Wow, it is frothy.
CTV gets a ton of press inside and outside of our industry. However, only a portion of the buzz directly impacts us in the advertising business. A lot of the press coverage includes facts and figures that include providers like Netflix and Amazon. These SVOD subscriptions do not include any advertising. However, they account for a massive amount of total streaming viewership.
According to Netflix's Q4 2020 Shareholder Letter, the service currently has 74 million subscribers in the US & Canada. (200+ million worldwide.) That is approaching 40% of adults in the United States.
Consequently, any time you discuss CTV, make sure you are focusing on the AVOD portion of the market. Otherwise, the size of the market, and its viewership composition may seem skewed.
Watching the growth of the total streaming market is directionally informative. After all, a rising tide lifts all boats. However, make sure you also keep an eye on the subsector for AVOD. That’s where the majority of the marketing opportunity lives.
Demand outstrips supply
Advertiser demand for CTV far outpaces the available supply, causing significant pricing inflation. Demand is driven by the popularity of the media channel and decreased linear television viewership.
The second half of 2020 placed even greater pressure on CTV inventory as many traditional linear programs lost significant viewership. Broadcasters and networks leveraged CTV inventory to make up for linear rating shortfalls. Consequently, there were even fewer CTV impressions available for purchase by outside buyers.
Simultaneously, demand for CTV inventory swelled as advertisers realized that the channel was increasingly powerful due to viewers stuck at home during quarantines.
Lastly, marquee television events like sports or the Olympics were canceled, postponed, or otherwise altered. Advertisers that wanted to continue advertising in this period were forced to find alternatives.
CTV buyers are fundamentally different than digital buyers
It is important to understand the difference between CTV marketers and traditional digital marketers. They are fundamentally different advertiser sets. CTV advertisers are typically television advertisers. In other words, it is easier to transition from being a traditional TV marketer to a CTV marketer than it is for digital marketers to make the leap to CTV.
Why? The creative and inventory cost.
Becoming a CTV advertiser essentially requires television-quality creative. Even though production costs are coming down every day, small and medium businesses do not have the budget to produce TV-quality ads. However, SMB advertisers can efficiently execute search and display campaigns. TV-style video is an entirely different animal.
You can observe this for yourself. Next time you watch an AVOD service, pay attention to the brands you see. They're very likely to be the exact same advertisers you see on TV. Heck, they're probably using the same creative.
You will not see many local advertisers running on the marquee AVOD platforms.
Even in programmatic, AVOD campaigns command big-time media budgets and rates. It is not uncommon to pay $50 to $80 CPM's for high-end AVOD ads. Those rates are simply out of reach for all but Fortune 100 marketers. Sure, you can find cheaper inventory. However, content quality tends to slide dramatically.
🌊 Wavemaker is the agency of the year according to AdWeek.
☠️ In researching today’s topic, we sure did find a lot of “linear is not dead” articles
📻 A completely interactive map of the world’s radio stations, and their streams.
💵 OMG Facebook and Google are going to pay for news content?
🚨 Zuck is out for blood against Apple.
🚡And lastly, nothing advertising-related. Just pure creativity.