Once considered an add-on to TV, streaming services have now become the most dynamic component of television, with surging viewership and much of the hottest new programming.
As of last August, a Nielsen report found that streaming services account for a quarter of all TV viewing–an increase of 6% year-over-year.
“Streaming is clearly the newest center of television,” said Gartner industry analyst Eric Schmitt.
How does this boom in internet-delivered, on-demand television affect the strategy of advertisers who want to reach a TV audience, however they watch?
The six environments of the current TV landscape
Determining how to reach today’s TV audiences first requires an understanding of how those audiences are watching TV.
Once upon a time, advertisers only purchased placement in broadcast TV programming to reach viewers based on demographics that corresponded to types of content. If you wanted to reach people who bought trucks, for instance, you might only advertise during football games. When cable emerged, that strategy remained the same—advertisers only bought on demographic impressions and Nielsen rating guarantees.
Now, in today’s radical redefinition of what constitutes television, there are six main environments for advertisers looking to reach viewers watching TV content on screens, according to Lars Hyman, Head of Communications Design at marketing and ad firm Initiative:
- Traditional linear broadcast/cable
- Smart TVs
- Connected devices like a Roku box
- Over-the-top (OTT) apps like Hulu and YouTube on TV sets or mobile devices
- Game consoles
- Location-based screens like those at gas stations and doctors’ offices
Building a cross-screen TV media and measurement strategy
According to Lars, building a media strategy across these environments requires understanding the media consumption behavior of high-value audiences and how that behavior is best matched with reach and frequency of ads. Then, the context and creative angle of each environment needs to be assessed, such as long form/short form, mindset, receptivity to advertising, if content is being used as social currency, and so on. Once that understanding is reached, the right market approach can be determined.
“For more cross-platform, multi-screen partnerships, we look to our sell-side partners, like Disney, to help us find content from their platforms that matches the strategies and level of audience understanding we have built.” Hyman said. “For more audience-focused, bid-based buying, such as programmatic buying, we provide a clear view of our audiences to partners, who then look to match or locate pools of people across their platforms.”
Hyman prefers to work directly with media companies so his teams can better manage the fragmented TV landscape and execute successful TV campaigns.
“All the major media companies are launching streaming products,” Hyman said, many of which are ad-supported. This means that a major content provider like Disney or a major TV maker like Samsung—both of which also have their own streaming services—manages an ecosystem of advertising opportunities and measurement tools across their own properties in many, if not all, of these environments.
For advertisers with smaller ad budgets, however, this direct approach may not be feasible.
To this challenge, Gartner’s Schmitt suggests that eventually, pooled inventory may become more widely available through intermediaries like demand-side platforms (DSPs), where “you pay a bit more, but can buy ads on a more agile basis.”
Another vital consideration, no matter how much you spend on TV advertising, is cross-screen measurement. “Even if you have direct relationships with media companies, each can only represent a portion of your overall TV budget. It’s critical to understand how your campaigns perform holistically across all platforms, including CTV, OTT, linear, and digital, which requires a cross-screen measurement partner that offers different types of reporting on viewership, access to diverse datasets, and an identity spine built on household and people-based identity,” said Jay Prasad, Chief Strategy Officer for TV at LiveRamp.
Reaching audiences instead of demographics
The biggest shift many advertisers are making when creating holistic TV ad plans inclusive of streaming channels is the shift toward buying audiences versus demographics. In other words, they’re less interested in reaching truck buyers by placing ads on live sports broadcasts than in reaching viewers who buy trucks across multiple TV environments.
The move toward buying audiences across screens is just one way that advertising for TV viewers is beginning to resemble online advertising. After more than two decades of online and TV ads going their separate ways—online ads touting their precision, TV its reach and scale—Schmitt noted that “digital and TV will look more and more alike.”
Online ads, disrupted by the pending death of third-party cookies and increasing privacy regulations, are now shifting to an emphasis on first-party data and targeting based on interests and context. TV, which was previously built around interest-based and contextual ads, is now sitting on a treasure trove of first-party data that goes across its channels—especially for TV set manufacturers that have created a content ecosystem, and for major media companies with streaming or cable services.
“Don’t be surprised if media companies become walled gardens,” Schmitt said.
Hyman agrees: “It’s all on the table for major video media companies to create their own version of walled gardens” and “build scale around identifying pools of high-value audiences.”
Walled gardens are a dream environment for advertisers looking to target audiences. But TV ecosystems have not yet fully reckoned with the emerging consumer privacy requirements, as web publishers are now doing. Despite requirements from privacy laws in Europe and California, consent to employ user data for ad targeting is still often buried in initial TV setup blocks of texts, and is blanket instead of granular.
“The privacy bill is yet to come due [for television advertisers],” Schmitt said. “The score is not settled.”
Fragmentation and user consent are not the only factors that have yet to settle down in the new landscape of television advertising. There’s also the unknown of what the television configuration will look like once the growth spurt of streaming TV services settles down. What proportion of TV viewership will be streaming services, and what portion of those streaming services will be ad-supported? The answer to those questions will help determine the kind of targeting advertisers can expect and the best ways to reach those audiences.
The eventual shape of TV
In one of those dimensions—breadth of offerings—Prasad sees a relatively low ceiling for the number of viable subscriber-based services.
“The average number of streaming services [that subscribers] are willing to support is four,” he said, but there’s no apparent limit yet to the number of ad-supported streaming services. Nielsen said last August that streaming services other than Netflix, Hulu, YouTube, Amazon, or Disney—such as Sony’s Crackle, Vudu, Tubi TV, and Xumo—now account for about a quarter of streaming. YouTube is ad-based and Hulu has ad-supported tiers.
Viewership of these other services, which are mostly ad-based, is up 50% year-over-year. This means that time spent on ad-based offerings like Sony’s Crackle is growing faster than time spent on the big five. At some point, this new generation of TV advertising will complete its growth spurt, but Initiative’s Hyman says that, for now, “we’re still in freshman year.”
“The future state is to be able to transact media deals on aligning the most strategically important content to the highest value customer. We sit at a point in time now that, with the rapid viewer adoption of streaming options, we are reaching scale across platforms. [But] there remains still disparate methodologies for how addressable audiences are developed.”
By taking steps now in partnership with sellers, Hyman said, we can “minimize complexity and confusion so that, in the future, we can use data smartly to unlock new ways to use all forms of video for brand growth.”