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Top 4 Challenges Facing Advertisers Amidst the Rise of Ad-Supported Streaming

The world of streaming is increasingly competitive, with more (and bigger) players than at any point in its history.

Changes in viewer preferences are leading to new opportunities for marketers. As we detailed on our earlier blog, 2023 saw CTV audiences continue to grow at the expense of traditional broadcast and cable TV. Viewers proved they were willing to watch ads on CTV, unlocking streamers’ ability to monetize more of the CTV experience. Streamers and content companies followed suit, and there are now thousands of free ad-supported streaming TV (FAST) channels, giving viewers seemingly unlimited choices for what to watch.

Even apps like Netflix are now offering lower cost, ad-supported subscription tiers – an important evolution since Hub Entertainment research reveals a growing consumer interest in ad-supported streaming. Approximately 64% of their respondents said they would opt for an ad-supported service to save on subscription costs.

Still, as the industry leans more into FAST and advertising video on demand (AVOD), there are some challenges that advertisers need to crack to make the most out of this exciting opportunity.

Challenge #1: Industry Fragmentation

As the industry grows, audiences are increasingly diversifying their viewing behavior. According to Comscore, as viewers spend more time watching streaming TV, 75% of those newly acquired hours are spent watching content outside of the top six streaming apps (Netflix, YouTube, Prime Video, Hulu, Max, and Disney+).

Fragmentation doesn’t just persist in terms of where viewers are watching. With so much growth potential and a relatively nascent ecosystem, we haven’t yet seen the huge exits, M&A, and consolidation that defined ad tech over the past decade. On top of that, the largest CTV publishers and streamers often act as walled gardens, limiting transparency in the hopes of winning direct sales. What this means is that ad-supported streaming in 2024 is notably fragmented, making it challenging for advertisers to buy audiences at scale and track where their ads are running. It also makes it difficult to fairly assess performance – since it is hard to compare results across platforms or even to track the full impact of individual channels on results.

Longer term, we will likely see increased consolidation in the AVOD/FAST space, as the sector matures and economies of scale come to bear on the key industry players. If you think of the Gartner Hype Cycle, we’re probably still in the technology trigger stage, with next-gen tools such as generative AI (GenAI) poised to massively disrupt how we all do business.

If you’re an advertiser in 2024, how do you win in the existing ecosystem? Partners like Wurl – whose platforms are foundational to CTV content and ad delivery, and who enable advertisers to buy across platforms and channels efficiently – are aiming to help make sense of the fragmented ecosystem. We offer a streamlined approach to reach diverse audiences without the headache of dealing with multiple, disparate systems.

Challenge #2: Performance on CTV

CTV media buying is often a bit of a jump ball. In some cases, it’s managed by buyers of traditional teams, but the currencies and technologies make it challenging to translate linear TV strategies to CTV. Often, CTV is picked up by teams with digital backgrounds. These individuals are accustomed to the detailed performance metrics of web and mobile advertising, leading to frustration that they don’t often have access to the types of data and reporting they are used to. In fact, despite the growth of CTV, only 8% of advertisers see it as the top medium for marketing performance through programmatic systems.

The demand for accountability and transparency in CTV advertising is high, yet – as we just discussed – many solutions often lack clarity. Another consequence of AVOD/FAST being a relatively nascent industry is that many advertisers don’t have a good insight into the important metrics to track. While CTV can be a performance channel – with the correct tools – advertisers with a performance mindset should ask themselves what types of data they need in order to measure and optimize their campaigns.

We strongly believe that the industry will eventually coalesce around the players offering both transparency and direction on how to do performance marketing on CTV. Wurl addresses this by providing clear insights into where and when ads run, ensuring advertisers can measure and optimize their CTV campaigns with confidence.

Challenge #3: A Crowded Advertising Market

The unique value proposition of AVOD/FAST (and the reason for the hype and competition we discussed above) is that CTV offers a unique blend of digital’s sharp targeting with TV’s wide reach and immersive viewing experience. But, with so much content out there, simply appearing on a viewer’s screen isn’t enough. Advertisers must engage viewers effectively, making ads that not only show up but also stand out.

There are two elements to this: an advertising challenge and a technological one. In terms of advertising, understanding what ads perform well on CTV is an ongoing journey of discovery. Finding the right messages, and the right contexts to display them in, will be the key challenge for advertisers as the ecosystem continues to mature.

However, this marketing challenge is both linked to, and separate from, the technological challenge posed by AVOD/FAST advertising. We’re already seeing advertisers and vendors experiment with innovative solutions like QR codes, and companies like Disney are on the cutting edge of shoppable TV ads. These trials highlight attempts to engage viewers more interactively, marrying distinctive creatives and the technological edge unique to CTV.

Furthermore, as the technology for measuring ‘positive’ attention grows, it becomes easier to dial in on the tactics and messages that are driving results. Research from Amplified Intelligence suggests:

Keeping this in mind, there is a huge opportunity for technology to identify the correct contextual keys in programming and allow advertisers to target their creatives to where they will get the maximum positive active attention.

Challenge #4: Ad Load and Viewer Tolerance

As the CTV ecosystem grows, so does the challenge of presenting ads in a way that doesn’t detract from the viewer’s experience. Viewers are increasingly intolerant of intrusive ad breaks, preferring shorter ad pods that don’t disrupt their viewing experience too significantly. For platforms and advertisers, the goal is to strike a balance between generating positive attention and maintaining an enjoyable viewer experience that reduces ad fatigue.

When it comes to CTV advertising, managing the frequency of ads is critical to maintaining this balance. Advertisers and platforms must work together to ensure that ads are not only relevant, but also not overly repetitive. It seems like the industry is making modest strides in this direction, but even this past week when I was streaming a show with my family, we saw the same ad repeated so many times that it actually became the joke of the room. This is a great example of where viewer tolerance tipped what could have been positive attention for the advertiser into the realm of negative attention.

Frequency-capping tactics are essential tools in creating positive attention, however, dialing in for relevance is also a key difference-maker. In the situation described above, part of the problem came from the fact that the ad didn’t match the content. Viewers will be more tolerant of ads when they are less disruptive. While accurate audience profiles can certainly help ads feel relevant, it shouldn’t be the only targeting strategy applied. I’d argue that context, and thus contextual targeting, is equally important.

The stakes for frequency capping and relevance are higher with CTV because of the prominent and immersive nature of television as a medium. Viewers watching content on the largest screen in their home are less forgiving. Partners like Wurl, who can offer contextual targeting solutions, and access to billions of impressions across multiple streamers and publishers, can help solve for not only frequency but relevancy as well.

Advertisers can still define the market that they want

The rise of AVOD/FAST as a content distribution model presents unprecedented opportunities – and also challenges – for advertisers aiming to capitalize on this growing market. From the industry’s fragmentation to the need for performance transparency, there are still common pain points for brands looking to expand their presence on CTV. As technological innovation provides increasingly sophisticated solutions for many of these common issues, marketers would do well to test, learn, and invest in solutions that help them fully realize the potential of CTV to engage audiences, build positive attention, and deliver measurable results.

Here at Wurl, we’re excited to be on the forefront of innovation in CTV – developing solutions that work for advertisers, publishers, and streamers alike. I can’t wait to see what the future brings.

Originally Published at MediaVillage

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