Why Doesn't Wall Street Like Advertising?

CTV is surging, but it doesn't seem to matter

Disney announced plans to bring ads to its Disney+ streaming service in the near future, and the market appeared generally unmoved. LightShed’s Rich Greenfield immediately questioned the timing of the move - and whether it might lead to more churn or less viewing time.

What’s interesting is how Rich - and most other analysts - talk about the possibility of such streaming ad rollouts (like HBO Max’s last year the theoretical Netflix ad tier). For the most part, the analysis centers on what ad advertising will do to subs growth and/or profitability.

Rarely do we hear them framed in terms of ‘wow, Disney is going to totally cash in on a whole bunch of new streaming ad revenue!”

Isn’t connected TV positively booming? Haven’t investors adored companies like Facebook and Google, which are built entirely around selling ads?

Don’t you like ads Wall Street?

It made me think of Lucas’s Shaw’s super interesting post a few weeks ago where Paramount CEO Bob Bakish was bemoaning investors’ seeming indifference to Pluto TV’s billion dollar run rate. I’m not a Pluto viewer, but you have to be impressed by the out of nowhere growth of a once obscure, rerun-laden property. It’s not Netflix money, but still, these guys are just getting started. Isn’t all that $70 billion in linear TV coming soon?

If you’re Wall Street, is it just that subscription revenue is seen as more reliable? Or that the economics of the Netflix’s and HBOs are just forever on a different plane?

Or - is it just that under the surface, there isn’t enough belief in CTV among bankers, despite how crazy Madison Avenue is going over it’s potential?

One reason. to not be long on CTV ads is the messy lack of infrastructure. Wall Street loves ad companies that can grow exponentially through self serve buying platforms and algorithms.

In TV, we’re “still talking about relatively fundamental things like measurement, what audience am I reaching, can I trust these numbers?,” said TripleLift co-founder and chief strategy officer Ari Lewine during a recent podcast.

As Lewine noted, typically established markets get disrupted though automation, data and technology (like say retail). Currently CTV is is messy on all those fronts.

Still, it’s just a matter of time to get the plumbing right, right? Well, a lack of time may be the problem.

“Connected television is not linear,” said Lewine. “The number of ads a viewer is willing to endure is in a streaming service is a fraction of what they are willing to endure in linear.”

A typical hour long show in linear TV has about 15 minutes of ads. An hour in streaming? Less than 5 minutes.

“Two thirds [of ad time] just goes away,” he said. That’s because Netflix, even without ads of its own, has wrecked everyone’s ad tolerance.

So even when it feels like CTV advertising in winning, I can understand why some stock pickers see a loser. How do you shove a $70 billion market into those five minutes - let alone grow the market?