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. We look at TV advertising effectiveness and TV advertising companies.
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 must also learn about market trends and competitors’ positions to secure your competitive position.
Collectively, these on-demand video 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 ads in depth.
Viewers prefer an ad-free viewing experience.
Let’s get real. Viewers don’t prefer watching ads in between videos if given a choice. Existing video streaming services like Netflix and Amazon Prime are inherently ad-free, while other streaming services like YouTube and Hulu have ad-free subscription options.
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. They are reallocated to other places. So, where is the money earned out of the TV budget going? It is going to different digital advertising channels. 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.
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 reducing the number of commercials it airs during 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 growing users.
Consensual advertising business model
With consumers switching to streaming TV, TV advertisers’ old business model 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 our 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 more effective and cheaper.
The outcome will be to please ad producers who need the message to reach the audience and the audience who seek information about products through advertisements without getting inundated with too many interrupting ad messages. This is 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.
Advertisers only wanted to reach the target audience in the past, 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