Rise In Cord-Cutting Creates Opportunities For Marketers

With the explosion of smartphones and digital tablets and the steady rise of Internet-connected televisions, gaming consoles, and more, consumers are increasingly watching online video when and where they want. New research from Experian Marketing Services on cross-device video found that as of October 2013, 48% of all U.S. adults and 67% of those under the age of 35 watched online video during a typical week, up from 45% and 64%, respectively, just six months earlier. At the same time, the share of households considered “cord-cutters” — those with high speed Internet but no cable or satellite TV — is on the rise, and that has a real impact on marketers and on the medium of television, the recipient of the largest share of advertising dollars.

While the growing trend in cord-cutting is understandably disturbing to cable and satellite companies and disruptive to the television advertising revenue model overall, the growth in online viewing creates opportunities for marketers. Online video viewers can be more easily targeted and served up advertising that is more relevant, responsive and measureable. Marketers can also be more confident that their online ad was actually seen given that viewers are typically unable to skip ads. And while CPMs for online video ads may generally be lower than those of TV, marketers can use that savings to negotiate costs based on clicks or transactions rather than impressions, giving them a better picture into audience interest and insights to inform their budget allocation.

Expect “Cutting the Cord” to continue

Today, over 7.6 million U.S. homes or 6.5% of households are cord-cutters, up from 5.1 million in 2010 or 4.5% of households. One thing enabling consumers to cut the cord is the rise in Internet-connected TVs, which allows viewing of Internet video on demand without sacrificing screen size. In fact, a third of adults (34%) now have at least one TV in the home that is connected to the Internet either directly or through a separate device like an Apple TV or Roku, up from 25% in 2012. With the launch of devices like Google’s Chromecast and the Amazon Fire TV, those numbers are sure to rise even more in the months and years ahead.

Cord-cutters like the bigger screen

Our analysis found that the act of watching streaming or downloaded video on any device is connected to higher rates of cord-cutting but the act of watching on a television is the most highly correlated. In fact, adults who watch online video on a television are 3.2 times more likely than average to be cord-cutters. Those who watch video on their phone (the device identified in the analysis as that most commonly used for watching online video) are just 50% more likely to be cord-cutters.

Millennials are more likely to be cord-cutters

We found that households with an adult under the age of 35 are almost twice as likely to be cord-cutters. Throw a Netflix or Hulu account into the mix and the rate of cord-cutting among young adult households jumps to nearly one-in-four. Given these surprising stats, many Millennials may be cord-cutters without ever having “cut” a cord.  And that’s an important trend to watch since it means a significant portion of this generation will never pay for TV.

Millennials are also the most device-agnostic, with over a third saying they don’t mind watching video on a portable device even if it means a smaller screen. That’s more than double the rate of those ages 35 and older. This decentralized viewing can create headaches for marketers who need to start a relationship with Millennials during this stage of their lives when they’re most open to trying out new brands and have yet to settle down. On the plus side, marketers who do manage to reach this audience will find them much more open to advertising than average. In fact, Millennials are more than four times more likely to say that video ads that they view on their cell phone are useful. So while the challenge is big, so is the potential reward.

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