Field Garthwaite is the CEO and Co-Founder of IRIS.TV.
The Covid-19 pandemic has brought about countless changes to our personal and professional lives, driving advances in remote work, telemedicine and new delivery services. In the case of entertainment, however, Covid-19 hasn't changed our habits as much as it has accelerated trends that were already in motion. Over the past decade, industry pundits have predicted that cord-cutters would lead to the demise of pay TV and the growth of digital video. According to eMarketer research (subscription required), spurred on by the pandemic, connected TV (CTV) audiences have eclipsed those of cable TV for the first time.
It's no surprise that linear TV is struggling in the current environment, as Covid-19 is nearly perfectly designed to hamper the development of pay TV's strongest assets. While sports leagues have worked valiantly to preserve their inventory, it is hard to foresee when the NBA, NFL or NCAA will be able to offer anything approaching a normal live sports experience. The production of prestige TV, competition shows and late-night programming is also limited due to the pandemic.
As more and more viewers are turning to streaming services to fill the lost hours of linear content, advertisers are finding that their dollar goes further in a CTV environment. Recent research conducted by Fox found that CTV generates return on ad spend (ROAS) between four and 10 times higher than linear TV — and even more so when compared with digital behemoths YouTube and Facebook. According to the Fox study, $48 billion in ad spending resulted in $2.2 trillion of consumer spending across the automotive, quick-service restaurant and consumer packaged goods spaces.
Supercharged Performance, Slow Advertiser Adoption
What enables CTV to outperform linear and digital advertising by such a wide margin? For marketers, CTV combines the best aspects of both linear and digital content. Over-the-top (OTT) CTV advertising is addressable, providing marketers with a degree of targeting and measurement that is only beginning to be achieved with linear inventory. However, unlike content on YouTube or Facebook, viewers are not prompted to skip ads after five seconds. And with the flexibility afforded by on-demand streaming services, advertisers are able to reach consumers on their own terms; premium audiences are no longer exclusive to prime-time hours.
In spite of the undeniable performance advantages, however, advertisers remain sluggish in adding CTV to their media mix. According to a recent study conducted by Bill Harvey Consulting, CTV makes up just 14% of total ad spend; an ideal media mix based on ROAS and viewing habits would allow advertisers to devote up to 70% of their ad spending to CTV.
More Uncertainty Ahead
While consumers will undoubtedly continue to flock toward CTV services, advertisers face a less certain road ahead. Recently adopted privacy regulations, including the California Consumer Privacy Act and the European Union's GDPR, are leading to uncharted territory in terms of tracking and measurement. As brands become more limited in their use of personal identifying information, advertisers will need to become more thoughtful and creative in reaching their target audiences.
The most impactful change to the advertising ecosystem will be the disappearance of third-party cookies, which will significantly hinder advertisers' ability to target digital audiences. Similarly, the death of Apple's Identifier for Advertisers (IDFA) tool means marketers will lose a useful data layer across important video apps. As the digital advertising ecosystem becomes more opaque, advertisers are trying to figure out where to turn next. As it turns out, there is a whole set of CTV data far less trodden than behavioral at the ready — contextual data. While contextual data for video has previously been somewhat unreliable (using page environments as a proxy for the videos themselves), recent technological advances have created new opportunities for advertisers to mine the data riches of the video itself.
The Importance Of Enlightened Targeting
Given the challenges in the current environment, the continued growth of CTV will be contingent on advertisers' adoption of new targeting techniques — specifically those that are privacy-first, cookieless and ensure brand safety and brand suitability. The recent announcement of The Trade Desk and LiveRamp allowing publishers to access Unified ID 2.0 and buyers to transact using LiveRamp's IdentityLink ID across numerous environments is a step in the right direction. However, in today's frenetic, partisan entertainment landscape, brands are also hypersensitive to the need to avoid associating with unsafe content; running advertisements next to content promoting violence or hate speech could be disastrous.
Often, brands "blocklist," writing off a specific politically charged phrase or piece of content, playing it ultra-safe to avoid being associated with brand-unsafe material. However, this also quickly leads to missed opportunities. A brand that aims to avoid any association with the current protest movement misses out on the opportunity to be placed next to brand-safe content promoting social justice and voter registration — or even to be in the proximity of any news at all. The key to threading this needle is a sophisticated approach to targeting that is able to parse the difference between safe and unsafe content, sometimes even using the same keyword.
In addition to brand safety, targeting must also provide benefits in terms of brand performance. As households are moving back to shared devices via their smart TV, targeting tools that are able to align advertising collateral with interest and intent are critical to identifying the best people to reach, i.e., connecting viewers of outdoor programs with brands such as Wrangler or Bass Pro Shops. With CTV inventory covering every possible niche and interest, category-based targeting can allow brands to deliver messages to viewers who are certain to share their priorities. And this means higher performance and better results.
As we move away from the individual targeting supported by IDFA and third-party cookies, marketers will need to rely on additional signals to maintain effectiveness and performance. In a recent study from Turner and Nielsen Catalina, ads based on the environment provided more than a 35% boost in performance compared with alternative media approaches. With marketers under pressure to squeeze every cent out of shrinking Covid-19-era ad budgets, these performance boosts can make the difference between success and failure.