Connected TVs are pervasive in American homes and the pandemic has further accelerated their use. As linear TV viewing has declined, traditional TV advertisers have been shifting their spending to AVOD services, where long-form content is largely viewed on CTVs. Top of the funnel linear TV advertisers, driven by reach and frequency goals, will continue to be drawn by CTV’s and OTT’s expanding audience, especially as major TV networks move more of their premium programming online, in turn growing ad inventory.
In the long term, equally exciting for CTV and OTT is appealing to bottom of the funnel, or performance-oriented, advertisers, which have focused on digital opportunities like search, social and display. These advertisers are ROI-driven and are constantly optimizing for desired actions and outcomes like clicks, follows, buys, etc. Because CTV enables digitally-delivered TV ads with rich viewer data, performance advertisers can measure and adjust their CTV campaigns as they always have in digital.
On last week’s Q3 earnings call, Roku’s SVP/GM of Platform Business Scott Rosenberg noted that the company has seen “significant growth” among performance advertisers. He observed that budgets for these campaigns are not coming from linear TV, but rather from performance budgets like social. eMarketer estimates social advertising of around $40 billion in 2020, so as Scott says, there’s an opportunity to tap into “very, very large budgets.”
Of course, the effectiveness of performance advertising is dependent on the devices where campaigns run offering interactivity that allows for audience engagement. Mobile devices and desktops have been ideal for this, while traditional TV has been extremely limited, despite years of hype around interactive TV. It is still early days, but because CTVs are IP-based, they are the most realistic path yet for genuine and scalable interactive advertising which will draw the attention of performance advertisers who want to drive actions.
In short, many of us in the industry have been focused justifiably on how CTV and OTT can pull linear TV ad spending from top of the funnel TV ad buyers. But as CTV continues to develop, it is also going to have more appeal to bottom of the funnel performance advertisers, a completely different target. As CTV attracts spending up and down the funnel, it is going to have an ever-growing impact on the overall advertising business.