Commentary
Biggest Threat To CTV Is 'CTV-like'
- by Dave Morgan , Featured Contributor, November 21, 2024
Connected TV is the growth engine of the advertising world. Nothing marries together the brand-building power of lean-back sight, sound and motion advertising with the granular addressability, measureability and commerce integration of digital advertising. But that future is under threat -- like CTV.
When Willie Sutton was asked why he robbed banks, he reportedly said, “Because that’s where the money is.” So, no need to speculate why the CTV ecosystem seems to be filling up with purveyors of oodles of new “CTV inventory” that is flooding the programmatic buying platforms, depressing the pricing of premium inventory from the likes of Disney/Hulu, NBCU/Peacock and other top names that have long dominated what was always a supply-constrained market.
CTV ad budgets are growing because TV viewership is declining while streaming viewing is growing. However, rock star Wall Street analyst Brian Wieser of Madison and Wall tells us that total TV ad inventory is declining because “the reduction in the penetration rate of traditional pay TV, with its relatively higher ad loads, and the offset of viewing on streaming services, with significantly lower ad loads (for those taking ad-supported tiers) contributes to a range of challenges for advertisers…[aiming to use] the medium to satisfy reach and frequency-based objectives, and renders alternatives (i.e. digital platforms) as relatively more appealing, despite the various downsides associated with those providers of advertising inventory.”
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Yes, streaming TV ad supply is smaller than most think. Nielsen’s “Gauge” tells us that 41% of content viewing on televisions in the U.S. today is streamed. However, when you look specifically at ad viewing, which is much lower since so much of what is streamed is ad-free or ad-light, Comscore’s “The Score” reveals that only 14.7% of advertising viewed on televisions in the U.S. is streamed. And eMarketer tells us that $29 billion of the $88 billion of ad spend on linear and CTV combined goes to CTV. Thus, the average cost allocated to CTV is close to 2.5X linear.
So how, then, is it possible that in the two weeks leading up to this past election, the programmatic platforms were flooded with $10 CPM CTV ad inventory? How is it possible that some CTV ad platforms are selling $15-$17 CPM CTV campaigns with 50% agency rebates?
If, in fact, that inventory is truly CTV inventory?
So if it's not real CTV inventory, what is it?
Here are some possibilities:
“Definitionally challenged” CTV. Maybe someone labeled some instream ads on PC and mobile as CTV? We know that very few major DSPs & SSPs actually adhere to the Interactive Advertising Bureau Tech Lab definition that CTV ads actually show up on TVs.
Fraud. Several years ago, we saw billions of mobile ad dollars captured by mobile phone bot farms. It’s super-easy to spoof the device IDs on those farm-managed devices to now look like connected TVs.
Automated torrents in TV app SDKs. This is always a longtime tried-and-tested technique (think the billions of ad calls on DSPs every day from mobile ad-supported flashlight apps). The same play is being made on TVs, just for a lot more money, which is why many TVs with their screens turned off at night are still registered as delivering ads.
Non-U.S. traffic. Similar to above, it’s very easy to spoof U.S. IPs and append them to non-U.S. traffic.
Why does this matter? Because it’s wrong. It pollutes our industry. It feeds the wrong companies. And, critically, it steals ad dollars and premium pricing from those programmers that are paying real journalists and real premium content creators.
Every time “CTV-like” (fell off the back of the truck) inventory shows up in the market at heavily discounted prices, money is being stolen from people who make TV content special and worth watching.
What do you think?
We’ve played this game of whack-a-troll before, though the pain felt by the sell-side then due to downstream display inventory qualification felt manageable because, well, the infection had already set in. There was no choice but to manage the pain because there was no preventative care. Ditching the metaphor, there was also significantly more overall inventory then, and premium content providers ceded their premium.
The challenges and the risks this time are real, for all of the reasons that you mentioned. We’ve been here before and we’re smarter now. The key is quickly getting to transparency and solutioning, with all of the constituents at the table (except the bad guys).
Leadership wins often aren’t as sexy as technology wins, though it’s the first step here.
Tim, 100% ... stopping the gaming of inventory before it totally distorts the CTV ad market (and its not far away) is going to take real leadership; the technology certainly exists to handle it, just made hard because too many folks who want the "easy" button or are just bad guys and don't care.
Dave, I agree with you about some CTV GRP inventory being suspect and the problem this poses for those advertisers who buy CTV the digital way---programmatic, and walled gardens re transparency. Where we part company is on the scale of this problem. For example, at present, about half of CTV ad dollars are being placed by traditional TV advertisers and, for the most part, they are not caught in the trap you describe. Most of their CTV buys are based on Nielsen---not the claims of the sellers---and the time buyers who monitor the buys are probably getting what they thought they purchased---though some of the commercial placements---or frequency pile ups--- may be questionable. My point is that it's the other buys where the problem mostly arises and as the percentage of ad dollars spent by traditional TV advertisers rises and Nielsen's new big data service comes into full play, that much of CTV ad activity will be transacted just like traditional TV.
Ed, the large advertiser placements are absolutely impacted by the dodgy inventory, even if it is on 15-20% of total spend. Every major premium streaming seller I know is currently being pressed to adjust their CTV ad pricing down to better match what is showing up in the exchanges currently, lots of sub $10 CPM "premium" CTV ...
True, Dave, there is a strong push by TV advertisers to lower CTV's once high CPMs so they are more in line with cable CPMs in "linear TV". This is part of what I would term the "invasion" of CTV by traditional TV advertisers and time sellers. In traditional TV, "premium" content has always been identified---wrongly in my opinion---as programs that attain the largest audiences--aka prime time and sports. And cable has always been penalized for its lower average minute ratings by earning only half as much ad revenue per "viewer". Now, the same standards are being applied to CTV. You mention $10 CPMs as being an example of unfairly low CPMs. But in cable, if you drill down to the lower CPM level---based on average minute audience----$10 CPMs are not at all unusual.
I agree that this is a problem for AVOD and especially FAST time sellers. Many of these might be described as "long tail" sellers where average minute ratings are concerned--and I don't see how they are going to survive with lower ad clutter levels than cable while relying exclusively on ad revenues for their support. Something has to give and, most likely, we will soon see a major shakeout among the many CTV services trying to rely on ad revenues when there is not enough viewing to support them.
Ed, you miss my point. It is not legitimate FAST channels and cable TV that is causing agencies to push for lower CPMs from premium streamers. It is the fact that dodgy "instream" video is showing up on digital exchanges, much of it improperly or disingenuously labeled as CTV and being sold at sub $10 CPMs that is causing it. Fraud and inventory that should be presented as web video, not CTV, is forcing them to pull down their rates.
Dave, do you have any data to indicate what percentage of CTV GRPs---or ad impressions---are involved with such isues? Just curious.
Ed, when you look at the analyst numbers on the CTV ad market, there seems to me a $2-5B gap between spend and the sell-side/buy-side revenue numbershttps://www.mediapost.com/publications/article/395204/what-i-learned-searching-for-25b-in-2023-us-ctv.html
I've noted a similar gap, Dave. Some of it may be due to local buys but I wouldn't be surprised if the rest is, questionable as you are suggesting. To answer my own question, that would mean that about 15 % of CTV ad dollars are currently affected. What the corrseponding percentage for national buys by traditional TV advertisrers may be is open to question. I suspect its a good deal lower.