Commentary
The (False?) Lure Of CTV
- by Maarten Albarda , Featured Contributor, August 30, 2024
There is no doubt CTV is having a moment. It is also true that this “moment” offers both opportunity and threat all neatly bundled into one.
CTV is now available in over 87% of all U.S. households and takes up about a third of all viewing time, according to public data. And surprisingly, ad-free, premium CTV has a share of about 60% of all CTV viewing, meaning that only 40% of CTV audiences is exposed to ads within the CTV environment. However, this may start to shift as monthly cost for premium services keep on rising (ad-supported CTV is also getting more expensive, but is obviously cheaper versus premium offerings).
In a post earlier this year, I shared that reaching viewers on “television screens” (regardless of how the program is accessed) is getting harder, because networks and cable are losing audiences, while non-ad supported CTV grows faster than ad-supported CTV. And on top of that, ad-supported CTV self-imposes more strict limits on ad inventory vs traditional TV.
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However, running ads on CTV is financially attractive, especially if you compare its cost vs network or cable TV. Wait, wait, wait, before you start admonishing me that the two are bought in a different way, and their performance can’t really be compared because one is independently measured (TV) and one is not (CTV).
You are right. CTV is measured by its proprietors through a fragmented, walled, non-transparent mess of metrics, or the metrics come from the programmatic platform deployed to buy CTV. The reported impressions are nothing but a gross (and grossly dumb) number of potential viewers, unduplicated, not reported or verified independently, and probably not meaningful in any way, shape or form. Good luck stitching performance together.
On top of that, the ad fraud industrial complex has certainly discovered how to siphon off large sums of money. fFaud runs the gamut of scammers deploying bot farms, fake devices, impression stacking, viewability fraud, ad injection, pixel stuffing and IP spoofing. Catching this is super hard and requires a constant game of whack-a-mole, aided by investments in tracking and reporting software and smart analysts. So that adds to the cost, obviously. With these challenges, it becomes easier to understand why CTV may not be the cost-effective opportunity it appears to be on casual inspection.
At the same time, though, it’s true that in order to buy a more or less comparable number of impressions for a similar target audience, the cost of CTV is about half or less vs a traditional TV campaign.
Why is this important? Because marketing budgets are under pressure (when were they ever not?).
According to Gartner’s CMO survey, marketing budgets are down 15% from 2023 to 2024, representing an average of 7.7% of total company revenue in 2024, down from an average of 9.1% in 2023. And because CMO’s are only human, they start looking for options to have their cake (“to be on TV”) and eat it too (“at a lower cost than network TV”). CTV ad revenue grew from around $17 billion in 2021 to an estimated $25 billion in 2023, driven in large part by marketers looking for an affordable video impression served on a TV device. It might not be TV advertising as we once understood it, but “on TV” it is, and that lure seems to still have a magic pull for marketers.
Interesting post, Maarten.
A few points, however.
When a traditional TV advertiser buys time on most of the larger ad-supported CTV services--which control about 90% of the available GRPs----- the time buyers have Nielsen's current people meter panel data to guide them---not whatever the seller thinks he/she can get away with. While it's true that Nielsen's 40,000 home panel is too small to provide reliable ratings for each individual show it is large enough to provide overall GRP estimates for an entire schedule with reasonable reliability--across all commercial exposures, for all of the major sellers. And this is what the buyers use when audience delivery is guaranteed by the sellers. When Nielsen's new 'big data" service comes fully into play---with 45 million sets monitored, even the low rated shows can be reported---if this is needed.
Another point concerns CPMs. CTV CPMs were considertably higher than linear TV at the outset, however the traditional TV time buyers have pressured the CTV sellers to be more competitive with linear---or face the loss of business and this, plus the emergence of lower priced eyeballs via Amazon and many FASTs has accomplished the buyes' goal. Currently, the average CTV CPM is somewhat lower than broadcast TV but higher than cable---meaning that it's very close to the linear TV average. If you go only to the low reach, ball CPM CTV sellers for your GRPs you can probably compete with cable--- but most TV time buyers split their buys on broadcast and cable, just as they often do on CTV--using a mix of high and low CPM services. Net, net: CTV ---in aggregate----does not come in at half the linear TV CPM for most buys.
Finally, it looks as if roughly half of CTV ad revenues are now coming from tradfitional TV time buyers with more on the way. But CTV is not seen as a bargain basement venue by most buyers. Rather, it is used to cover audiences not reached by linear---especially young adult audiences---and is now unfolding as simply an extension of linear TV, in terms of adding frequency as well as reach at affordable cost. In other words---it's all "TV".
I would like to echo Ed's comments. CTV still has higher CPMs than linear TV - especialy broadcast.