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2021 was another year for the books. A perfect combination of events has CTV poised for even more long-term growth than expected. As audiences continue to cut their cable cords, 91% of advertisers will either maintain or grow their CTV spend in the next year. In this post, we’ll break down the top trends in digital TV this year.
As a note, we use the terms streaming, OTT, CTV, and digital TV interchangeably to avoid undue repetition. Like much of the industry, we have adopted a broad definition of TV advertising, encompassing linear broadcasting, data-driven linear, linear addressable TV, VOD, and streaming inventory
CTV is outpacing predictions.
CTV raked in $14.3 billion in 2021 — two billion more than experts predicted back in June. In the next two years, CTV ad spend will double, reaching $29.5 billion. But if history has taught us anything, it will likely exceed that.
Viewers are cutting their cable cords in droves, and ad-supported video services, like Hulu and Roku, are filling a real market need. In 2020, several new services entered the market, including Peacock and Discovery+. This year, established services like Crackle focused on enhancing their user experience to rival that of SVODs’, like Netflix. eMarketer expects AVOD viewers will rise 28% by 2025, reaching 194 million. Half of all streamers currently report using at least one ad-supported platform, and this trend will continue to accelerate as more services enter the market.
Digital advertising is booming.
According to Wall Street Journal, the advertising industry will hit $763 billion this year, and digital advertising will account for an impressive 64% of that growth. This share will consistently increase in the coming years. Even as pandemic restrictions ease, digital habits, like shopping online and binging TV shows, will endure.
Advertisers are investing heavily to reach online audiences — and CTV campaigns fit the bill. Direct-to-consumer (DTC) brands are flocking to digital TV because they want both the audio-visual impact of a commercial and the metrics of a digital campaign. Next year, an entirely new generation of DTC brands that have maxed out performance through Facebook and Instagram will start to funnel ad dollars to CTV campaigns. Digitally delivered TV has lowered the barrier to entry for social-first brands looking to reach new audiences, while maintaining the precision and ROI they expect.
Campaigns can be as national — or as local — as you want.
Hyper-targeting isn’t new in digital advertising, but it’s really difficult to scale across the traditional TV ecosystem. With OTT, national brands can now target neighborhoods and viewers with personalized advertising. Fine-tuned campaigns can drill down to a very specific audience — for example, a millennial mom in Cleveland who’s been searching online for a new mattress.
Purely local OTT ad spending will total $1.1 billion this year. Next year, it will jump 57% due to the growth of digital advertising and the upcoming political season. CTV empowers local brands to reach a very targeted audience while collecting valuable data on them. This adds to the granular results they are already seeing in their email, search, and social campaigns. More small businesses (and politicians) are jumping on the bandwagon, especially as broadcasters make it easier for them to buy OTT.
Linear and CTV are the new power couple.
Ad spending on linear and CTV platforms will exceed $93 billion by 2025, compared to $80 billion this year. All of this growth will stem from CTV. Why? One of the main reasons is that CTV allows advertisers to reach new audiences. One in four people in the 25–54 demo are no longer reachable on linear TV.
Streaming audiences are diverse and growing. In the past, studies found that viewers who use more ad-supported services were older and less affluent, while viewers who subscribed to paid services like Netflix were younger. However, that’s quickly changing as ad-supported services become more mainstream due to the cost savings and availability of better content.
With that said, although streaming audiences are growing, linear audiences are far larger, accounting for 101 million homes. Traditional TV audiences tend to be older and more loyal. While they are increasingly gravitating towards free streaming services, they aren’t fully cable-free.
If you could target both of these sectors, why wouldn’t you? The tools are all here, and they’re better than ever. CTV gives traditional TV advertisers a deeper look into campaign performance. By running campaigns on both, advertisers can tap into modern tools — like ACR data — to extrapolate cross-platform performance.
Identity is still a challenge, but the industry is unifying.
Apple and Google disrupted adtech this year with their privacy changes, while Facebook admitted that their conversions were off by as much as 15%. This convinced advertisers to connect directly with consumers through personalized marketing — which is why so many are re-investing dollars they would normally allocate to digital, to CTV. Retailers and publishers are creating their own media networks and monetizing their first-party data.
As the walled gardens change their identity solutions even more, the CTV industry is taking steps to unify identity. At MadHive, we’ve made progress in the last year. In July, the MRC called on the industry to accept the technical standards set by the IAB. Consortiums like the TV Data Initiative and AdLedger are committed to standardizing technical definitions across the ecosystem.
Measurement is complex, but full of opportunity.
Advertising on digital TV is significantly more complex than advertising on digital channels like Facebook or Google. CTV campaigns leverage many different data sources. The average US household has 25 connected devices, including laptops, smartphones, streaming devices, smart TVs, headphones and gaming consoles. With multiple streaming services on top of that, each with different levels of addressability, there’s an astounding array of data to use.
Optimization and reporting really depend on the strength of data sets — and that’s why tech-forward companies will come to the forefront in 2022. OTT-first device graphs, real-time updates, modern programming languages, data clean rooms, and hot storage are vital to guarding advertisers from wasted ad spend and fraud.
Fraud is still here.
One of the year’s most infamous fraud schemes, Methbot, had adtech calling for significant reforms. However, fraud hasn’t slowed down. A recently discovered scam, called RapidFire, is estimated to be siphoning $20 million a month from advertisers.
One fraud solution is to collapse the supply chain as much as possible, working directly with SSPs and validating the identities of enterprises using cryptography. Sophisticated technology and fraud protection go hand-in-hand — the sharper the tech, the less likely a fraud scheme will pass security precautions. To learn more about how we’re tackling fraud at MadHive, see our blog post.
We have a lot to look forward to in 2022.
While CTV has its complexities and the category is still maturing, there is great opportunity ahead. Standardizing identity and measurement will be crucial to evolving how the TV ad industry collects, processes, and uses data. With local business and political campaigns ramping up, we expect to see a surge in ad dollars next year, and a lot more industry innovation as a result.
As advertisers continue to increase ad spend, CTV will evolve to leverage the best of what traditional TV and digital advertising have to offer. Linear broadcasters hold priceless content — and the world is ready to stream it. From DSPs to publishers to Smart TV manufacturers, we all have a role to play in pushing our industry forward. We’re excited to see what’s in store for 2022.
