Hot Takes: Why Is Ad-Supported TV Hot Again?
Remember when the conventional wisdom was that the future of television was ad-free, that subscription alone would suffice and that The People just wanted to binge.
That was so 2021.
The last two years have seen a rapid rise in ad-supported TV. Everything from the FASTs to ad-supported versions of all nine major SVOD services.
Consumers don’t seem to mind it either, which is the real surprise. In fact, many seem to prefer it.
We turned to our Thought Leaders Circle members to get their thoughts as to why this is happening, why ad supported TV is having a moment right now.
Ramsey McGrory, Chief Development Officer, Mediaocean (correctly) notes that it is not an either/or dynamic, that the popularity of ad-free TV does not mean that ad-supported TV is going to be unpopular, and that the digital elements of CTV make for a better ad experience overall.
In some circles, it’s been fashionable to predict the demise of ad supported TV with the rise of Netflix and other subscription services. Just like many also said streaming would be the death of linear TV.
But it’s never been an either/or equation. It’s a yes/and. I like to say that if linear and programmatic had a baby, it would be CTV. It’s about blending the best aspects of both formats together. Taking the sight, sound, and motion of TV with the targeting and automation of digital programmatic. That’s what the FASTs bring to the table.
There’s a tremendous amount of great content out there and consumers are discerning about what they’ll pay for directly. Premium ad supported video will always be an important part of the equation for marketers, publishers, and consumers alike.
Catherine Oh, Vice President, Global Head of Marketing, Samsung Ads notes that ad-supported viewing is due to surpass ad-free viewing this year as even Disney and Netflix get on the ad-supported train, and that viewers actually really like what the FASTs have on offer.
In 2023, there will be a drastic change in the CTV landscape: for the first time, ad-supported platforms (AVODs) and free, ad-supported services (FASTs) will be more popular than subscription-based platforms (SVODs). Former SVOD behemoths like Netflix and Disney+ are adapting their strategies to offer ad-supported tiers, encouraging more advertisers to invest in AVOD channels as a whole.
It is apparent that platforms and consumers are embracing the value exchange between audiences and advertisers, which represents a substantial shift in audience priorities. In fact, a recent Samsung Ads consumer survey revealed that nearly 75% of users would choose a streaming service's free or less expensive tier if given the choice.
We anticipate a quick rollout of new AVOD and FAST tiers on premium SVOD platforms in 2023 to meet customer demand, as FASTs are advantageous for all stakeholders. As the streaming ecosystem expands, channels that can offer useful insights, campaign measurement, and audience data will stand out.
In fact, Samsung's proprietary viewing data from 4Q 2022 found that AVOD continues to steadily exceed SVOD in both viewing time and growth in the US. We predict this trend will gain momentum as even more consumers fall in love with FAST as the platforms themselves become more sophisticated, expansive, and a source of both premium and live content. This is why we continue to invest in our own popular free streaming service, Samsung TV Plus, which has seen over 64% growth in consumer viewing over the last 12 months alone.
Rohan Castelino, VP of Marketing, IRIS.TV, points out that consumers are down with the notion of watching ads in exchange for free content. What makes that experience all the more enjoyable is when the context of the show is relevant to the ad itself.
Consumers have made it clear that streaming is here to stay. In fact, they’ve made it well known to the industry that they are receptive to ads in exchange for free premium content. However, now it’s time for the industry to deliver on that enjoyable viewing experience honing in on opportunities to bring relevant ads to viewers and in turn supply brands with quality brand-suitable inventory.
When it comes to streaming video and CTV, we are what we watch. Research has shown that in video, content-based audience signals are more effective in reaching people in-market as well as increasing unaided brand recall, driving search and recommendation intent. In order to deliver on this unique viewing experience at scale, content owners and advertisers need a secure and scalable way to share content signals at the video level. Content identifiers and video-level data will lead us to better experiences for all stakeholders. With so much fresh content being produced every day the industry needs a content identifier for streaming that is supported by major data and ad platforms to address issues with targeting and measurement.
Content identifiers make it simpler to comprehend what has been or will be shown to a consumer. They help ensure a relevant ad is delivered to the right viewer and enables accurate measurement and tracking of which creatives were displayed where and to whom.
As we head into the next chapter of ad-supported and free ad-supported content, leveraging a persistent content identifier, like IRIS_ID for every video on any screen, allows the ecosystem to plan, target, and measure based on video-level data.
Sean Buckley, Chief Revenue Officer, Magnite observes that the ads don’t seem to impact viewership rates or engagement and that ad-supported TV provides media owners with an alternative revenue stream, something that’s always good to have in potentially recessionary times.
Facing economic uncertainty, consumers are reigning in expenses and adding more ad-supported streaming services to their subscription stack. Magnite's latest research study "Streaming Continues To Surge" found that 87% of streamers will add a new ad-supported streaming service in 2023. A really interesting point is that the presence of ads doesn't impact viewership rates and engagement. Our research found that ad-supported viewership and ad-free viewership behavior are almost identical. Both groups watch the same amount of content (approximately 17 hours per week) and both groups binge-watch shows at the same levels, for the same session lengths. The future of ad-supported TV is bright - it gives media owners another revenue stream, consumers more choice and access to content, and brands a premium environment to advertise on.
Tony Marlow, CMO, LG Ad Solutions keys in on the fact that people often enjoy TV commercials—there is an emotional connection that well done ads can create that causes people to remember them many years down the road. Throw in the benefits of relevance and the right context, and you’ve got an experience consumers will be happy to engage with.
2023 promises to be a landmark year for connected TV, as the adoption of ad-supported streaming content continues to surge. Consumers have fully embraced free ad-supported TV as a preferred method of accessing the content they enjoy. A key, yet often overlooked, aspect of this trend is the emotional impact of television ads, which is fueled by the enhanced advertising canvas within streaming environments
Ad-supported streaming TV offers a rich creative canvas for advertisers to showcase their message in a captivating and memorable way. The large screen 'sight, sound, and motion' of television, combined with the addressability of streaming technology and enhanced advertising formats, create a relevant, immersive, and emotional experience for viewers. This emotional resonance can establish a lasting impression and foster a stronger connection between brands and people.
Brands now have a unique opportunity to connect with their target audience on the largest screen in the home through highly relevant and targeted advertisements. Given this, CTV has become a crucial part of the media mix for advertisers looking to maximize the impact of their campaigns and establish meaningful connections with their audiences.
Viewers are also reaping the benefits of a personalized viewing experience, supported by ads that align with their interests and preferences. With the use of privacy-friendly data, the right creative executions are being delivered to the right people on the largest screen in the home, creating a more seamless and enjoyable viewing experience.
Tal Chalozin, CTO/Co-Founder, Innovid focuses on the appealing value prop of low-cost, high-quality viewing options, especially when the ad experience feels more personalized and relevant. His only caveat is that streaming advertisers need independent and transparent insight into how their campaigns are performing.
The growth and popularity of AVOD services is not slowing down. As more content is available on those platforms, advertising dollars will follow. Consumers want high-quality content, personalization, and more low-cost, subsidized viewing options.
While this audience fragmentation brings challenges for advertisers, it also opens the door to more ways of reaching and engaging with audiences “where they are.” It’s forcing them to think differently about how they buy, measure, personalize, and optimize a much more diverse, cross-platform, dynamic video mix.
Regardless of the platform, advertisers are demanding independent, transparent insight into the reach and outcomes of their campaigns. And the right platform – whether AVOD, linear, or anything in between – will help them understand campaign effectiveness, optimize to drive outcomes (sales, downloads, registrations, etc.), and demonstrate ROI.
Jes Santoro, EVP, Advanced TV & Video, Cadent notes that consumers of all ages seem to understand the transaction involved in watching ads in exchange for free or reduced-cost content. He further observes that while consumers want relevant advertising, they don’t expect every single ad to speak directly to them.
“Ad support is critical to sustaining the huge variety of content being produced and distributed by streaming platforms. And while it may differ across different age demographics, there is an understanding of the value-exchange behind ad supported content – you let me watch your content for ‘free,’ and in exchange, I’ll give you some of my time and attention, but don’t abuse my attention! The lack of relevance and increasing frequency in much of the ad-supported streaming has driven low satisfaction among viewers. A less than optimal experience. However, it’s not because viewers inherently dislike ads. In fact, I think people are still entertained by good ad creative. But pure 1:1 addressable is not the answer. Consumers don’t think every single ad needs to speak directly to them, but the overall relevancy needs to over-index. As more streaming services offer ad-supported tiers, taking even modest steps to better utilize audience data will go a long way in improving viewer experience and ad engagement.”
Finally, Raf Bagdasarian, Founder of Paket Media spoke to the need for ads and recommendations to be “room aware” e.g. to know who is actually in the room and watching, for it to really take off. He even provided a graphic.
Ad supported television needs to become more “room-aware” if it is to be fully realized. Knowing who is in the room, watching - and with what context (location, interests, etc.) will allow for more relevant content recommendations and ad decisions. The current paradigm assumes, at most, a single device profile - and that the profile owner is the one watching. This cannot be adequately assessed - and is, invariably, not the case (especially in group viewing environments… families… dorms… roommates…). Because I’m a visual thinker, I’ve attached a little graphic explaining :).
Our TVREV take is that there’s not just one reason. Part of the appeal is that people don’t mind ads when they are (a) few in numbers, (b) contextually relevant and (c) entertaining and clever.
So there’s that, and there’s the fact that sometimes you just want to have something familiar on in the background and people are attached to the shows of their childhood and younger years—they’re a reminder of a happier, simpler time.
And then there’s subscription overload—ad-supported TV, especially free ad-supported TV (FASTs) don’t tax the budget and don’t require a decision to sign up, another password to remember. That lack of friction is huge.
Finally, the shorter ad breaks on streaming provide a less-painful ad experience. Throw in more relevant or better targeted ads (or the prospect thereof) and consumers are willing to give up bingeing.
At least some of the time.
