In the good old days of early 2017, the advertising world was abuzz with the fact that digital ad spending had overtaken broadcast TV spending for the first time in the previous year. Just a year and a half later, those distinctions are quickly becoming irrelevant.
Connected TV (or CTV) is blurring the lines between digital and traditional television programming. With a growing number of televisions connected to the internet through a variety of means, including smart TVs, game systems, streaming sticks and other “over-the-top” video service devices, technology is rapidly evolving to enable advertisers to combine digital precision with traditional broadcast impact.
It's no secret that consumers are moving rapidly to adopt CTV devices and the streaming services that run over them. Recent studies have shown accelerating numbers of so-called “cable-cutters” who are abandoning traditional broadcast TV services, while subscriber numbers continue to grow for streaming services.
Advertisers are moving quickly to keep pace with this change. At Division-D we’ve seen astonishing growth in CTV advertising just over the past six months, with our clients spending 10 times the amount on CTV ads in the first quarter of 2018 than in the previous quarter. Growth like this is a clear indicator of an emerging wave of change in the advertising industry.
It’s easy to understand this growth trend when you see the potential of the combination. TV ads have always been a powerful means to share a message, with viewers watching ads on a big screen at times when they’re likely more attentive. But traditional broadcast lacks targeting, the secret sauce that has powered the rise of digital advertising over the past two decades. Broadcast advertisers are left to look at the overnight ratings and try to decipher how well they reached their audience.
CTV brings digital-like targeting into the video domain. This enables advertisers to steer ads toward their targets by geography, demographics and interests. People binge-watching the same program are seeing different ads, which are more likely to be relevant to them.
While the targeting enabled by CTV is a dramatic improvement over traditional broadcast, the format today does have some limitations when compared with other forms of digital ads. CTV targeting is limited to the household level, rather than to the user level as is the case with mobile and browser-based ads. CTV lacks the “cookies” found in internet browsers and personal devices that enable user-based targeting. So, CTV ads can be customized based on demographics and interests seen at the household level, but there is no way to determine whether the targeted user is in the room at the time an ad is displayed, or if the ad is being viewed by different family members or friends.
A similar challenge for CTV technology lies in full measurement of an ad’s reach and impact. Most CTV services enable viewing of content over multiple screens (TV, tablet or mobile). We’re able to measure video completion rates, but not necessarily how an ad was viewed.
Advertisers should keep these facts in mind as they build CTV into their ad strategies, but they should not deter exploration of the format. The fact is, these limitations will diminish in time as more people adopt CTV and technology continues to evolve.
Just as importantly, advertising departments and agencies need to evolve to take full advantage of the CTV opportunity. Most advertisers today operate with separate digital and TV teams, but CTV combines these disciplines, requiring expertise from both sides of the house. Advertisers will need to determine the right “home” for CTV strategy and execution within their current structures, and should also consider the longer-term implications of this changing environment on their organizations.
Those who are developing CTV ad strategies today will have a distinct advantage in the months and years to come as more and more viewers turn away from traditional broadcast and toward more personalized connected viewing platforms.