Tech

Why CTV advertising will look different in 2023

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The era of connected TV expansion and fragmentation is coming to a close, and evolution — and maybe even consolidation — are what media companies and advertisers are preparing to address in 2023. In whatever direction the channel takes, CTV and the streaming landscape are poised to look very different in the coming months.

Ad-supported streaming is an increasingly prominent approach for the media companies, with both Netflix and Disney+ expected to soon debut ad-supported tiers for subscribers and mergers on the horizon. And as the options for CTV advertising grow, diversification will be essential for marketers.

With Disney+ and Netflix the latest streamers to embrace ads, the CTV landscape is becoming more advertiser-friendly. As more services offer ad-supported options, advertisers will have more opportunities to engage with audiences with ads relevant to their tastes and lives.

The state of ad-supported streaming

A changing of the guard marks the new era of streaming. While stalwarts such as Netflix and Hulu have long dominated the industry, newer services like Disney+ have seen substantial subscriber growth.

Meanwhile, after years of differentiating itself as a subscription service with no commercials, Netflix is slated to introduce an ad-supported tier in early 2023. Details are still scarce about Netflix’s ad strategy — including ad load and subscriber costs — but the decision is a defining moment. Netflix had historically prided itself on being commercial-free, so this new strategy, especially in light of subscriber losses, signifies a new ad-friendly future for streaming platforms.

At the same time, Hulu, one of Netflix’s earliest streaming competitors, is facing an unclear future. Disney acquired a majority stake in Hulu in early 2019, just months before introducing its own streaming platform. Disney+ now touts more than 152 million subscribers worldwide, while Hulu, which is not an international product, has 46 million subscribers. Hulu is also losing some programming to other streaming services, such as NBC’s Peacock. And, in a bid for broader and more adult audiences, Disney+ is adding non-Disney content and introducing a more affordable ad-supported tier — similar to Hulu’s current offerings. More changes are likely, and there is speculation that Hulu may be merged with Disney+.

Warner Bros. Discovery has already confirmed it will merge its HBO Max and Discovery+ streaming platforms and relaunch as a single service next summer, with both ad-supported and ad-free versions. Since the merger was announced, there have been significant programming cuts on HBO Max to reorient the service; the new platform will have both scripted and unscripted content.

With more services and more content to choose from, audiences have already experienced the streaming industry’s effect on their wallets — but ad-supported offerings at a discounted rate are ways streamers can combat that consumer sensitivity. According to research from healthcare ad tech firm DeepIntent, 64% of CTV viewers prefer to watch ads rather than pay more for content.

For CTV, as more platforms pivot toward ad-supported streaming, it signals a new chapter. Expanding options means that advertisers need to know where they can find their target audiences and what various platforms can offer regarding ad offerings.

For instance, while Netflix’s ad strategy remains under wraps, the streamer has a wealth of first-party data from subscribers, millions of whom have been streaming on Netflix for more than a decade. Consumer insights contribute to more effective advertising. According to Hub Entertainment research, 60% of viewers said they prefer shows with ads customized to them.

How advertisers are preparing for CTV’s next chapter

Content is essential for streamers to earn loyalty and retain subscribers, but diversifying strategies and approaches from one streamer to the next is critical for advertisers. This is especially true as streaming platforms either deepen their niches or expand the range of their content.

Audience churn is likely a perennial challenge, as viewers cycle through services by subscribing and unsubscribing until the next must-see content arrives on a platform. 

Diversification is the foundation of an effective advertising strategy for the next era of CTV. Dedicating resources entirely to one streaming platform is a step backward. Instead, by following target audiences — wherever they’re watching, regardless of the show — advertisers ensure that they are being associated with the hottest new shows and movies, irrespective of who’s on top or has the surprise hit show tomorrow. The emphasis is less on creating different creative and more on leveraging certain streamers or opting out of others based on brand or campaign.

To remain effective in a fragmented environment, advertisers are turning to solutions and partners to unify inventory and streamline ad buying and campaign measurement across CTV options. To that end, partners that offer premium inventory across multiple services help brands appear on the biggest streamers with the highest quality content and diversify ad placements across those platforms. The availability of real-time feedback metrics, A/B testing and comprehensive audience testing is also crucial for advertisers to follow audiences and track ad performance.

While the streaming industry undergoes rapid change as services shift, CTV advertisers must find agile partners that help them navigate a dynamic and fast-moving industry.

Sponsored by: MNTN

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