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Are you a cord cutter? Well, you are not alone. New research from eMarketer projects cable, satellite and telecom TV industry is on track to lose the most subscribers ever. This year, over 6 million U.S. households will cut the cord with pay TV, bringing the total number of cord-cutter households to 31.2 million.
I was an early Netflix adopter and loved it. It was convenient versus the alternative – a trek to the local Blockbuster. Boring. Getting a disc delivered in the mail encased boldly and unmistakably in a red envelope was a marquee moment now forever stamped in entertainment history. Movie entertainment suddenly had became affordable and convenient. Soon, streaming movies became possible with bandwidth infrastructure advances. Today, challenged with an abundance of viewing options, how the average person consumes TV content has changed immensely, and is expected to maintain its trajectory.
COVID Related Outcomes
The pandemic has revealed some brand new realities, accelerating adoption in unexpected ways in its wake. Technologies which have benefited from this unexpected boon are multi-platform gaming, Streaming services and gaming have done well. The leading Multi-player gaming communications facilitator ‘Discord’ has done brilliantly. Its revenues were up to $120M in 2020 from $70 in 2019 at a 188% clip. Streaming is an outright winner.
Zoom has become the new generic for conference calling. Memory recall – Remember Xerox. It used to be the generic for Copiers, couple of decades ago. The term ‘Streaming’ has become synonymous with watching movies and shows on Smart TVs, Roku, Apple TV, Chromecast and others.
Brands have noticed these changes and have begun to tweak their marketing mix & budget allocations with a focus on OTT/CTV to maximize ROAS (Return on Ad Spend). Linear TV continues to fragment as OTT/CTV advertising surges with near uninterrupted audience attention. Globally, new user penetration is moving at the +7% yoy clip with the United States in the lead
Linear TV is being challenged as a result of a ∆ in content consumption, abundance of supply, choice of streaming devices, global demography ∆’s and GenY and Z viewing habits. It is a global phenomenon.
Adtech Terminology
So what does this all mean to CMOs? First, an Adtech TV terminology clarity and recall in this fragmenting TV landscape –
What is Linear TV?
Linear TV is a traditional system in which a viewer watches a scheduled TV program at the time it’s broadcast and on its original channel. It also can be recorded via DVR and watched later.
What is OTT? (Over the Top)
OTT is the delivery of TV content via the internet over the standard, closed TV system. Users are not required to subscribe to traditional cable or a satellite provider to watch TV content. Typically, video is delivered in a streaming or video on demand (VOD) format.
Popular OTT services include Netflix, Hulu, and Amazon Prime. Mass media and entertainment conglomerates are also launching their own OTT services such as Disney+, HBO Max and NBC’s Peacock.
What is a CTV? (Connected TV)
A CTV is a device that can connect to a TV or a smart TV that facilitates the delivery of streaming video content.
Say hello to Roku, Apple TV, Xbox, PlayStation, Amazon Fire TV, Chromecast, and more.
Programmatic AdTech OTT/CTV Supply Side realities Brand Marketers need to know
- CMOs/marketers are well aware that Cross-screen measurement supported by Martech identity platforms, digital, linear, OTT, and CTV can all be efficiently attributed.
- Programmatic TV spend ROAS (Return on Ad Spend), my trusted KPI performs better on OTT/CTV versus linear TV
- There is a shift from Linear TV (Networks like NBC, CBS, etc) viewing to OTT/CTV devices. Roku has been a pioneer.
- Apple TV is the device to watch for marketers in 2021. Apple TV+ has quietly built a solid programming lineup with more in the pipeline. With $1 billion invested, reasonably priced at $4.99/month it has a captive audience on its devices
- OLV (Online Video Impressions) – Users view pre-roll OLV creatives with a high rate of tolerance. In fact, only 17% of users feel that pre-roll ads are interruptive. In the OLV setting, pre-roll offers a locked-in experience for the users where there is a universally accepted transaction of watching an impression per piece of video, allowing brands to get more closely associated with the content.
Making the Global AdSpend Case to the Board / CMO / CFO
Hello Brands, especially Global brands check out the Global OTT segment numbers to support your marketing mix, budget allocations and forecasts.
- OTT Video Global users stand at 2,280 million with a +7% yoy growth
- Revenue in the OTT Video segment is projected to reach US$171,772m in 2021
- Revenue is expected to show an annual growth rate (CAGR 2021-2025) of 10.0%, resulting in a projected market volume of US$251,879m by 2025.
- User penetration will be 30.3% in 2021 and is expected to hit 34.8% by 2025
- The largest segment is OTT Video Advertising with a market volume of US$89,459m in 2021
- In global comparison, most revenue will be generated in the United States (US$60,734m in 2021)
#SSP (Supply Side Platform) History
Back in the day, publishers sold space to advertisers via direct sales by finding advertisers willing to display their ads on their websites. However, as the display-ad industry grew, a completely new problem emerged. Direct sales brought about the problem of ‘fill risk‘ – Oops, unsold inventory. To optimize and fill the gap a technological platform was born that would efficiently sell remnant inventory and automate the process. Welcome the ad network to the batting lineup. This pinch hitter served as a broker between publishers and advertisers. As more ad networks emerged, the space got crowded and the decisioning process got complicated. Next up on the plate to even the score – ‘Network optimizers‘ emerged as super Adtech platforms
Recall the ‘fill risk‘ and the unsold inventory issue. Now these super AdTech platforms were making decisions about which ad network would likely deliver the best performance – i.e. sell the publisher’s inventory at the best price.
In the late 2000s real-time bidding (RTB) emerged. As a result of RTB the ‘Network optimizers‘ shape shifted in to a brand new type of AdTech platform – the supply-side platform (SSP). This evolutionary technology could now allow publishers to optimize yield by simultaneously connecting their inventory to multiple ad exchanges and demand-side platforms (DSPs).
The following image recaps the players in the #Adtech space and the machinery that churns the wheels –
Looking for a SSP for your OTT/CTV spend? Think before you leap. Evaluate these 4 possible traps.
- Ad fraud (invalid traffic): Ad fraud, or invalid traffic (IVT), in programmatic OTT/CTV advertising remained around 20% throughout 2020
- Pricing – Some SSPs employ mandatory traffic validation procedures, where they scan all of the publisher’s traffic along with IVT (Invalid Traffic) at an additional cost (~ 0.1$/CPM value).
- Middlemen – There are situations when a publisher has an agreement with one SSP that is connected via some kind of provider (let’s call it X platform). The agreed-upon is CPM $18, but via X platform they see only $12, meaning the platform is pocketing ~33% (!). This doesn’t even include the fees that a tech vendor takes taking from the DSP.
- Negotiating Contracts for Impressions – For example, for 1,000 impressions, the initial rate is $21 (at the demand-side platform [DSP] stage). Then an SSP cuts a 17% fee, so the rate value becomes $18, then the X-platform charges a direct connection fee of 33% and so the rate becomes $12, and the IVT tool fee (Invalid Tool Fee) – a bot traffic detector adds an extra $0.3, so the final value is a paltry $11.7; The actual net CPM they’re getting is $11.7 from the initial $21 that the DSP is bidding, so overall, the middlemen are taking fees of 50% of the total.
These are some reputable SSPs identified by the folks at #Pixelate.
2023 Marketing Mix
The space is truly dynamic and fluid waiting for the next disruptor to step in just when you thought you there was stability. It is near end of COVID and the 2023 Marketing mix is going to look a lot different for the budget planning cycle. Do your research and work with trusted partners.
