Not too long ago, streaming was an emerging technology. Today, it’s the norm. In fact, cord-cutting isn’t just growing, it’s accelerating, according to the latest eMarketer data. But that means that the larger transformation toward connected TV (CTV) is no longer being driven by technology companies, nor is it being driven by media companies, many of which are scrambling to build their own direct-to-consumer platforms. At this moment, and throughout 2019, consumers will be in the driver’s seat. Here’s what that means for CTV.
The CTV revolution will be ad-supported
A funny thing happens when you cut the cord. At first, you can buy anything, but as most consumers discover, what they’re really doing is rebuilding their old bundles, with some modifications, of course. The reason is simple: everyone wants to experience as much of the second golden age of television as they can. But unlike the first golden age, household budgets mean consumers have to make choices as they rebuild their bundles.
With the exception of Netflix, you can bet that just about every streaming service out there, including the ones that will launch sometime in 2019, will subsidize subscribership with advertising. In fact, Hulu already offers advertising subsidies, and the company’s success with its $5 student bundle (which includes Spotify!) will certainly mean that the next generation of subscribers will be looking for a subsidized deal. Likewise, it would be very strange for Amazon not to turn to ads at some point, given the $2.2 billion dent the company made in the advertising business in 2018.
Bottom line: the skinny bundle that helped companies like Sling TV grow, isn’t economically viable—not without advertising subsidies. Eventually, as competition among streamers gives way to consolidation, we’ll see a reality check on the cost of an ecosystem teaming with premium content choices. Or put another way, as consumers continue to demand nearly unlimited choice at low prices, the only thing that will keep CTV viable is advertising.
But advertising won’t look like advertising as we know it
Direct-to-consumer brands are eating away at the biggest traditional advertisers, thanks to first party data. In fact, as first-party data capabilities grow, there’s even a new mantra in marketing to fire the CMO and replace them with a chief growth officer. After all, if you have enough first party data, you’re really only trying to solve two challenges: sales and attribution. Those challenges are tailor-made for CTV.
Direct-to-consumer brands are already experimenting with CTV, but as traditional advertisers fight back, their efforts won’t look like the carpet-bombing ad blitzes of the legacy model. Instead, they’ll either buy as much third-party data as they can, or they’ll simply buy the direct-to-consumer upstarts, just as Unilever did when it acquired Dollar Shave Club. Or, if they can’t do it through acquisition, they’ll do it through imitation, just as P&G’s Gillette brand did with its on-demand razor service. But regardless of strategy, the writing is now on the wall for television. In 2019, direct-to-consumer advertising will begin to become the norm on CTV.
But will I still see the same ad over and over again?
It’s absolutely true that any consumer who has ever watched more than an hour of streaming TV has run into the annoyance of being hit over the head with the same—often totally irrelevant—ad at every single commercial break.
Initially, advertisers bought CTV as an add-on to their traditional buys. As a result, they weren’t worried about unduplicated reach because the streaming audiences were small, and the advertisers were still running the legacy playbook of carpet-bombing their audiences in the hopes that they’d hit their target. But as advertisers shift to a data-driven approach—whether they’re direct-to-consumer brands using first party data, or traditional brands using third-party data—solving the unduplicated reach problem becomes imperative. After all, the name of the game is to narrowcast your message, not broadcast it.
From both a sales and technology standpoint, the pieces are now in place to solve the unduplicated reach problem in 2019. That’s good news for advertisers and broadcasters, but it’s even better news for consumers. Because what’s at the heart of the CTV revolution isn’t a better way to deliver ads. The heart of the CTV revolution is a better consumer experience, and that’ll be the big story of 2019.
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