The CTV boom isn't guaranteed
When Roku and YouTube struggle amidst a supposed gold rush, that should tell you something
A few weeks ago, in the face of an unofficial-but-sure-seems-like it recession, GroupM upped its forecast for connected TV advertising, predicting a 26% surge this year over last.
Back in June, eMarketer put it this way: “The CTV ad market has grown so much that this year’s upfront spending alone will mirror what was spent on CTV in its entirety three years ago.”
As many have discussed, ad-supported CTV is supposed to appeal to traditional TV brands seeking to reclaim reach, and small to mid-sized brands who want to see digital advertising’s targeting come to TV.
My point is, this is the hottest of hot ad markets- and that was before Netflix and Disney got into the mix.
And then, Roku happened, and YouTube happened. Leading me to ask - WTF happened here?
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The Roku news was perhaps the most surprising - and puzzling -since ad-supported streaming is what it does. Yes, Roku sells hardware and software, but in service of its own ad-business. It’s not a media conglomerate trying to pivot.
Yet its CEO told investors: “there was a significant slowdown in TV advertising spend due to the macro-economic environment.”
When did this slowdown happen - over the July 4th weekend? That excuse feels awfully sudden, and not reflective of the recent exuberance in the space.
YouTube’s weak growth was also stunning, considering that YouTube had long ago become the dominant web video player, and now accounts for the vast majority of ad-supported streaming, and 7% of all TV viewing, per Nielsen.
As Simulmedia’s Dave Morgan put it simply: “wow. . Revenue at the biggest ad-supported video platform in the U.S. is only growing with inflation. And yet, it sits at the center of CTV and streaming, ad markets that are both booming. How is that possible?”
In a market that is supposed to be growing at 26% a year, I’m not sure.
You know which companies seems to be doing quite well in terms of capturing streaming dollars - or at least not setting off any earnings alarms: Tubi, Pluto and Peacock - despite not even showing up on Nielsen and comScore’s streaming share charts.
Tubi and Pluto’s users bases are growing nicely (they say), while Peacock actually reported no net growth in subscribers this most recent quarter.
Yet each is surging in ad revenue - apparently. Tubi is set to reach $1 billion in revenue next year, while Pluto expects to hit that level this year. Meanwhile Peacock grabbed up $1 billion in upfront sales alone this year, double the number achieved in 2021.
Why are these small-audience, barely-cracking-the-top-ten-in-hours-views-whatever services, crushing it in ad sales, while the Rokus and YouTubes are struggling? Is it their amazing targeting, or next generation measurement? Or their shows?
More likely, it’s clout.
Even though one can argue that Roku or YouTube and others are a more important buy if you’re trying to reach large, non-linear audiences on CTV, they are out on their own. Peacock is part of NBCU, Tubi - Fox, and Pluto- Paramount.
And in TV advertising, at least for now, package size matters. Would any of these services command these dollars on their own? I doubt it. Are there some sales sweeteners and accounting acrobatics involved in getting to these big numbers? Maybe.
It also doesn’t hurt that, given the pains the ad industry is taking to stitch together measurement across platforms and services and screens, that the TV guys are building their own walled gardens - to fight the walled gardens. It’s not perfect, but NBCU or Disney or Paramount can sell advertisers big packages that include AVOD and linear and whatever else, and tell them their reach and frequency and all that is great- based on their data and IDs.
Which is a big deal, however ironic.
My question is, if this is what is happening with YouTube (which to be fair, still pulled in like $7 billion) and Roku, what happens to all the other smallish CTV players - like LG, and Vizio and Plex and Vudu? In an uncertain economy, are we sure ad spending will lift all CTV boats, especially given how confusing measurement is right now?
Brad Feinberg, Molson Coors’ NA VP of Media and Consumer Engagement, told me in this week’s episode of Next in Marketing that despite all the metrics alternative in the industry right, his company is building its own tools to make sense of their multimedia campaigns.
“I often times say inside our company and out, that we don’t want data sources colliding,” he said. “The interest isn’t necessarily in all the different external solutions. You want to minimize the sources of truth sot hat you don’t have too many data sources coming into the organization using are using different methodologies and data sets that can cause confliction.”
“Marketers get confused when they look at different tools that are maybe be designed to and different questions…become paralyzed by it.”
Instead of paralysis, big media partners offer one stop shopping and simplicity. Which makes me wonder - if Roku and YouTube are losing share- what happens to all of the smaller CTV contenders selling ads, like LG and Vizio and Plex and Vudu and even Magnite? That’s why we’re likely to see mergers and partnerships spring up (such as Comcast kicking the tires on Vizio).
In the meantime, the TV titans will likely lean into portfolios that bake in/force feed their own AVOD products.
Until CTV can address fraud, and issues connected with the highly commoditized digital video landscape ( social; programmatic; duplicative reach and egregious ad frequency) growth will be limited to the traditional players who package as expansion and make goods on upfront deals -