Advertising spend on connected TV (CTV) is growing as viewers and advertisers migrate from linear TV.
WARC’s latest advertising trends report projects that connected TV advertising will reach $26 billion USD globally in 2023, representing year-over-year growth of 13.2%. But the report also says that number is not as high as it could be.
While CTV’s growth is impressive, it is not yet attracting new dollars to the channel, as the majority of CTV investment is coming from existing linear TV budgets. The growth rate is also behind retail media, which is growing three times faster, and the more “traditional” online videos on YouTube, where ad revenue is expected to grow by 17.4% this year.
“CTV ad spend is growing, but not as fast as one might expect,” says Alex Brownsell, head of Content for WARC Media and co-author of the report. “Whilst eyeballs are rapidly shifting from broadcast to streaming, this is evolution, not revolution. The market is fragmented, and CTV ad investment is mainly being drawn from existing budgets. More work must be done to help CTV to realize its full potential and ensure that media owners are able to attract ad dollars from beyond the current confines of the TV market.”
The move to streaming was once seen as a threat to TV advertising, but it has become an opportunity as more viewers move to ad-supported environments. For example, in the first quarter of this year, two thirds of subscribers to NBCUniversal’s Peacock platform chose the ad-supported plan, while Disney said 40% of new subscribers in the U.S. picked the ad-supported option before announcing it was bringing it to more markets. In terms of home-grown options, Bell Media is launching two ad-supported tiers for Crave, done in response to demand for more “flexibility” in subscription options.
FAST channels are showing similar acceptance, with platforms such as Pluto TV reaching 80 million active users in Q1 and experiencing 35% year-over-year growth in total global viewing hours.
Despite the audience migration, WARC says the highly fragmented CTV landscape still needs to prove its effectiveness, at least until the market is more unified.
Scale is one consideration. Linear TV offers mass reach to a potential audience of millions with a single creative execution, particularly through live events. The key selling point for CTV is its ability to help brands target audiences and avoid waste.
WARC report says the lack of single source measurement and transparency are issues holding CTV back from being a must-buy platform. Universal measurement capabilities must be a priority, though it points to options like The Trade Desk’s UID2 as something that could offer it, as more media owners begin adopting the post-cookie identifier. Other concerns are ad verification, brand safety and the quality of content. If those issues are addressed, WARC’s conclusion is that, at its core, CTV ought to offer a level of effectiveness similar to linear TV.
