TV Advertising: The Impact of Video on Demand and Streaming on TV Ads

TV advertising is being impacted by video-on-demand and streaming services.

TV advertising is changing quickly, and huge opportunities exist. Netflix launched its first subscription-based video streaming service almost 13 years ago, laying the foundation for a massive transformation in how we watch TV. 

YouTube had already existed then, and Hulu followed suit soon after. The competition is fiercer now, with new entrants like Apple TV, Disney +, and NBC Universal entering the market and fighting to win new subscribers. And now Peacock!

Suppose you are considering starting a video-on-demand business. In that case, you also need to learn about market trends and competitors’ positions in the industry to secure your spot in the competitive industry. 

Collectively, these video on-demand and streaming services spend billions of dollars yearly on original series and shows. So, one common question is that this would be bad for the TV industry, right? Especially for TV advertisers, as less viewership implies fewer opportunities to sell. In this blog, let’s examine the impact of video streaming on TV advertising in depth. 

Viewers prefer an ad-free viewing experience.

Let’s get real. If given a choice, viewers don’t prefer watching ads in between videos. Existing video streaming services like Netflix and Amazon Prime are inherently ad-free, while other streaming services like YouTube and Hulu have ad-free options for a subscription. 

With continued ad price inflation for linear TV and viewers increasingly choosing no-advertising mode, where should an advertising brand go? Despite the increasing number of ad-free video-on-demand services, there are still many existing and new platforms on which TV advertisers can run their spots.

One exception of an advertising-free streaming service is a new VOD player Quibi, which will be launched in 2020. This mobile-only streaming service has already announced it has sold out its $150 million advertising inventory to brands, including General Mills, Walmart, Taco Bell, PepsiCo, etc.

Additionally, Roku has also announced its acquisition of Dataxu. This demand-side platform will position the connected TV platform as one of the most significant ad-selling spaces. Roku is planning to expand its services beyond its platform. Content Translation Services: A Competitive Advantage for Your Business

YouTube is a great advertising platform, and YouTube ads can boost traffic quickly.

However, despite all these ad-supported video streaming choices, businesses are still not leveraging the full benefits of connected TV ad opportunities. This situation is expected to change in the coming years. 

Let’s peek at the cost of TV advertising.

For local television stations, advertisers can expect to pay a minimum of $5 per 1,000 viewers for a 30-second commercial. Based on data provided by Adage, a 30-second spot broadcast nationally averaged around $115,000 in 2019. The average cost of placements for 30-second Super Bowl ads can go upward of $5.25 million.

Advertisers are taking their spending to digital.

TV advertisers know that subscription video streaming services are hurting their TV spots. The TV advertising scene is seeing a steep decline that is repeated across the globe. What are CMOs Top Priorities in 2023?

But TV advertisement budgets do not disappear. It is reallocated to other places. So, where is the money earned out of the TV budget going? It is going to different channels with digital advertising. For example, Facebook and Google are trying to create TV-like offerings to retain users in their ad-rich space and are ready to capture TV ad bucks.

Their plus point is the capability to target individual viewers, which is a highly attractive prospect for advertisers. Moreover, the tech giants will purchase broadcasting rights for major sports events. All this implies that the TV’s dominance of advertising bucks has paved the way for digital.

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How media owners and creators are responding?

TV media owners are focusing on transforming their strategies to survive this shift. For instance, with Disney Plus, Disney is trying to become both a content owner and a distributor and is planning two streaming services for film and one for sports. 

At the same time, NBC Universal is cutting down the number of commercials it airs during its prime time to enhance the impact of advertising. 

Indeed, TV advertisers are starting to review their digital assets as some significant KPIs are affected when ad revenue is moved to digital. Meanwhile, some European countries are used to their viewers enjoying an ad-free TV viewing experience. Therefore, subscription streaming services are less appealing in those countries. With video platforms like YouTube, viewers seldom feel an ad load of over 10% as they can skip or avoid ads differently.

Will streaming TV transform the way TV advertisers work?

With new video streaming services popping up, the world of television and how content is consumed is changing rapidly. These days, the audience’s TV consumption is free of advertisements. While that is good news for TV viewers, it is not possibly good news for traditional TV advertisers. 

With broadcast TV giving way to on-demand TV, the TV advertisement market with $80 billion in the US will have to adapt to cope with the change. With the popularity of video streaming services, the advertisement-based business model that has successfully dominated TV for decades is ready for a major transformation. 

Audiences are increasingly choosing to cut the cord and opt for video-on-demand services that are surprisingly affordable compared to what cable service providers charge. 

Once set free from the interruption of advertisements that interrupt the smooth viewing experience, viewers are reluctant to accept advertisements in other places, too. 

The growing popularity of ad blockers is an example of this trend. However, TV advertising remains highly effective and profitable despite all these threats. This is mainly because broadcast TV has still reached a growing number of users. 

Consensual advertising business model

With consumers switching to streaming TV, the old business model of TV advertisers has become obsolete. Therefore, they are trying to find news to reach consumers digitally. Search engines like Google and other platforms like Facebook are already tracking us when we browse the web and delivering personalized advertising based on search history. 

However, very few of these ads provide the scope for customized connections that TV advertisements have. TV advertisers will struggle to find a desirable alternative to the way of presentation. 

The business model of the TV advertisement industry must undergo a new change, But how? A model of consensual advertising where the customers offer an explicit approach to received ad messages is the right one. Digital Marketing for Solar Companies to Increase Sales

This is similar to the opt-in advertisement, as viewers generally cannot opt out of advertisements and must rely on other solutions like ad blockers. However, consensual advertisements might make ads not just more effective but also cheaper. 

The outcome will be to please ad producers who need the message to reach the audience and for the audience who seek information about products through advertisements without getting inundated with too many interrupting ad messages. Similar to the HubSpot inbound marketing pitch.

Broadcast advertising is crude as it reaches interested and uninterested audiences. It affects almost everyone who watches broadcast TV regardless of buying preference, interest, or consent. 

In the past, advertisers only wanted to reach the target audience, so they picked the right prime-time slots for their advertisements. However, with the worldwide audience shrinking, TV advertisers must focus on targeting the right audience. 

Talking about the right targeting starts with understanding more about your target audience. This is a great lesson TV advertisers can learn from Facebook and Google. They know their users well in all aspects. 

They understand users’ preferences, behaviors, and much more. Google can leverage users’ search history to advise advertisers on what products users are looking for. A video-on-demand platform like YouTube is already relying heavily on in-stream advertising. 

Before anyone can watch the main video, they probably have to watch an advertisement for at least a few seconds. So, a smart way to keep TV ads and TV advertisers’ games on point is to follow consensual advertising.

With broadcast TV, the financial benefit to advertisers might not be straightforward. It works this way: TV advertisers pay the network, which, in turn, delivers TV programming to the audience for free. 

With video streaming, the streaming service has control over deciding how and where to insert ads in their videos and then deliver their services at a lower price to users. However, with plenty of video streaming platforms, at least a few offer ad-free streaming, which segments the market. 

This results in TV advertisers being unable to reach their target audience efficiently.

To alleviate this, VOD platforms like Netflix can offer a deal to the audience, such as crediting the user’s monthly bill for each ad watched, and TV advertisers pay for that. 

In this way, advertisers can bid for the user’s time, and for high attention, they have to bid a higher price, whereas advertisers target a niche audience that can have a lower price tag. This works as people still prefer watching best-quality commercials that are entertaining and informative, and of course, there is an undeniable offer clubbed along with this. 

Video-on-demand services can impose search filters for ads by aspects like niche, bid, most viewed, or others.

In an era of technological advancements, technology will play a significant role in bringing in adjustments for TV advertisers in the industry. This will induce a substantial change in the attitude of TV advertisers that treat users’ attention as free and disposable. 

Technology will also guide an era of consensual advertisement where the viewer’s attention is no longer free. The business model is pretty simple. To influence users’ buying decisions, TV advertisers have to pay them directly for their time rather than indirectly reaching out through some free services.

How to secure the relevance of TV advertising in the streaming industry?

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As we have already discussed, users these days have access to subscription-based video-on-demand content for a lower price. With an increasing customers choosing subscription-based streaming services, they are signing up for an ad-free viewing experience. In such a scenario, what TV advertisers can do to secure their position in the industry?

With such a significant change, TV advertisers must stay on top of the changing environment and understand the different types of streaming services and their benefits. While the subscription business model is not a positive plot for advertisers, other options exist. 

Hybrid business models that combine ad-based and subscription models offer a great alternative option for the audience, who can choose between ad-based and ad-free versions. The main benefit for TV advertisers here is that the audience prefers watching ads, and the number of ads is less. Unlike traditional TV, viewers aren’t going to switch channels, and therefore, the attention is more.

TV advertisers will adapt and innovate

As always, the only way for TV advertisers to survive rapidly changing times is to adapt and innovate. With their trusted brand identity and high-quality content, they can pave the path to success if they are prepared to adapt and take advantage of what viewers like about commercial TV. 

Yes, TV advertisers will need to adapt and innovate in to stay relevant in the face of changing viewer habits. Here are some of the trends that TV advertisers are likely to adopt in the future:

  • Addressable TV: This technology allows advertisers to target their ads to specific households or individuals based on their demographics, interests, and viewing habits. This is a more effective way to reach consumers and can help advertisers improve their ROI.
  • Programmatic TV: This is a way to buy and sell TV advertising programmatically, using real-time data and analytics. This can help advertisers save time and money, and it can also help them reach their target audience more effectively.
  • OTT advertising: This is advertising on over-the-top (OTT) platforms, such as Netflix, Hulu, and Amazon Prime Video. OTT platforms are growing in popularity, so advertisers need to find ways to reach viewers on these platforms.
  • In-stream video advertising: This is advertising placed within a video stream. This is a popular form of advertising on YouTube and other video-sharing platforms.
  • Native advertising: This type is designed to blend with the surrounding content. It can be a more effective way to reach consumers than traditional advertising.

These are just a few trends that TV advertisers are likely to adopt in the future. As TV advertising evolves, advertisers must be creative and innovative to reach their target audience.

In addition to the trends mentioned above, TV advertisers are also likely to focus on:

  • Personalization: Advertisers will use data to create more personalized ads relevant to the individual viewer.
  • Engagement: Advertisers will focus on creating more engaging and interactive ads to keep viewers’ attention.
  • Measurability: Advertisers will want to be able to measure the effectiveness of their ads to track their ROI.

By adapting and innovating, TV advertisers can ensure that they remain a relevant and effective way to reach consumers.

So, what do your viewers like about TV ads? There is no cost and reliable entertainment that appeals to the whole family and is informative and creative at the same time. Customers try to avoid ads that are intrusive, boring, and take up over 30% of the prime time shows. 

One way to tackle these issues is to make advertisements more relevant and less intrusive. Using video-on-demand software to create your VOD platform, you can customize where and when to place the advertisements in your videos. 

The impact of video on demand on TV advertising will be gradual

The new streaming platforms’ hit programming is causing viewers to hit off from traditional TV massively, but the pace is not that fast. If the new players move on the same path as Netflix, we will likely see a massive viewing shift from traditional TV. 

On the other hand, other factors increase customer inclination towards traditional TV. One of them is that some top-tier sports, like the NBA and NFL, choose to remain on traditional TV, forcing most customers to stick to their existing services in some of the other forms. 

When the same customer access to traditional service is maintained similarly, substantial opportunities exist for TV networks to create and distribute programs that are in demand. This implies that new services will complement the industry, and the change will continue to be incremental. TV advertisers will also gain as customers start embracing new streaming services. 

Considering the on-demand nature of new video streaming services and the quality offered, viewers will be more highly engaged when watching ads through this medium than in traditional TVs. The advertising space will also be less cluttered and have more opportunities for advertisers to break through. Targeting opportunities will also be superior to traditional TV and universally available.

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