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How Discovery is Getting 3x CPMs for Streaming

Jon Steinlauf Discovery
Discovery's Jon Steinlauf (Image credit: Discovery)

Discovery unveiled its new streaming service earlier this month, but it was quietly pitching advertisers Discovery Plus to advertisers over the summer.

When the Discovery Plus launches Jan. 4, the ad supported version will have between four minutes and five minutes of commercial per hour. That makes it so attractive to advertisers that they were willing to sign up for Discovery Plus at prices that are three times higher than Discovery’s linear cable channels, according to Jon Steinlauf, chief U.S. advertising sales officer at Discovery.

Also Read: Discovery Hires Hulu's Keller to Head Digital Ad Sales

“The ad market has been screaming. They’re saying linear has too many ads. You get a country that’s been watching Netflix for 10 years and they’ve never seen an ad,” Steinlauf said. Compared to cable, the light ads version of Discovery Plus is “going to feel like nothing.”

The lower ad load is also attractive to advertisers looking for more ownership of the content viewers are watching. “They want to have more engagement,” Steinlauf said. “They can stand out more in an environment with less ads. I get that.”

On top of that, Discovery Plus’s viewers are most likely to be among the 35 million lapsed cable subscribers that advertisers can no longer target by buying commercials on linear networks.

Also Read: Analyst Sees Discovery Plus Breaking Even in 2023

Advertisers will pay for unique incremental reach and they can get that with viewers who’ve cut the cable cord, Steinlauf said. “Discovery has these great brands and a great library and the ad sales experience to be able to step into those 35 million [cord-cutters]  and say to advertisers comes with us. You get all this extra reach that you wanted, and typically these are younger families with some affluence but they don’t really like sports.”

On top of that, Discovery’s ad tech can deliver unique audiences and unique ad experience.

Also Read: Discovery Enters the 'Plus' Wars with Jan . 4 U.S. Streaming Launch

Discovery Plus’s inaugural sponsors include Boston Beer Co., Kraft Heinz, Lowe’s and Toyota. Steinlauf said he wants a broad range of advertisers on Plus.

For example, one of Discovery Plus’s inaugural advertisers is Kraft Heinz. For Kraft, Discovery could identify the episodes of its cooking shows in which cream cheese is an ingredient in a recipe and run Kraft commercials only in those episodes.

Discovery

(Image credit: Discovery)

Discovery uses proprietary technology to search the closed-captioning data on shows for keywords that might be important to advertisers.

Like other ad supported streaming services, Discovery’s ad tech will be able to offer pause ads, binge ads, exclusive hours for a single advertising, even voice ads.

:”It’s going to be exciting,” Steinlauf said. “We are already getting the CPM bump.”

During Discovery’s presentation explaining its direct-to-consumer strategy to advertisers, the company said that while cable commercial prices have traditionally lagged broadcast on a CPM basis, ads on its authenticated streaming apps generate twice the CPMs of cable and Discovery Plus will garner three times.

In addition to the benefits of a light ad load and incremental reach, Discovery Plus benefits from coming along at a time when advertising supported streaming is in high demand but short supply.

In the upfront, the media companies wanted digital budgets for Pluto TV at ViacomCBS and Tubi at Fox, but AVOD inventory is still hard to come by, Steinlauf said.

“The supply of AVOD is extremely tight not necessarily because there isn’t viewership, but because the viewership is going to non-commercial platforms,” he said.

Netflix, Disney Plus, Amazon Prime and for now, HBO Max are not add supported. Some of the other big services are hybrids, including Hulu, CBS All Access and Peacock. (Discovery isn’t saying what proportion of Discovery Plus subscribers it expects will take the “light ads” version at $4.99 versus the $6.99 ad free version.)

Steinlauf said a large percentage of Discovery’s Go sales are made via programmatic channels and the same will be true for Discovery Plus.

“There are a lot of tech players, resellers, MVPDs and platforms [in that space] but the programmatic experience will help us a lot when it comes to Plus with the ability to talk to agencies and advertisers who want to zero in on our content” and the audiences they attract, he said.

Internally, sales for Discovery Plus will be handled by the same sales reps who sell the company’s cable channels and go apps. “The future superstar AE is like a three sport athlete. They have to be good at linear, Go and Plus, which means you’v go tot be good at streaming and ad tech and programmatic and data.”

Discovery ad sales is having a good year, Steinlauf said, noting that the company has told analysts that third quarter was better than second quarter and fourth quarter will be better still.

“We didn’t have the disruption of being in sports and out of sports. We don’t have the problem of getting content made because our talent, like the rest of us, is at home and what they do on television is what they do in real life,” he said. “So they’ve been able to create about a thousand episodes of content during the pandemic.”

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