Connected TV: What You Need To Know
Tier10 | On 12, Feb 2019
Thanks to customers looking to “cut the cord” from their cable company, connected TV is growing.
Because connected TV is growing at an exponential rate, there is an increasing need for content. This content includes original and syndicated programming. But, this also includes advertising content designed for this new, sophisticated viewing audience.
This sophisticated viewing audience wants advertising content because it’s a fair value proposition. The rise of subscription television services (e.g., HBO) came from an “older” generation of viewers and their view of advertising as an annoyance. And, the rise of connected TV advertising comes from a “younger” generation of viewers understanding that commercials are necessary for cost offset.
Let’s take a look at how connected TVs have forever altered the advertising landscape. Let’s also discuss how your company can take advantage of the rising trend.
Connected TV: A definition
Connected TV is a catch-all term that includes the following:
- smart TVs,
- over-the-top (OTT) devices like Roku and Amazon Fire TV,
- subscription services like Netflix and Hulu, and
- gaming consoles like Xbox One and PS4.
According to eMarketer, approximately 180 million Americans watch some form of connected TV. But, according to a survey of ANA marketers, only 15% of Americans have connected TV as part of a media plan. Some marketers believe that connected TV has fragmented the television market. And, to be frank, they are correct in this assertion. But this fragmentation is a gain, not a loss! There’s a whole new potential to reach a different market than ever before.
Connected TV advertising has more targeted capabilities
There’s a level of sophistication surrounding connected TV advertising that is lacking in linear television advertising. According to ClickZ, besides providing relevant retargeting, connected TV’s data providers “also enable more effective reporting and measuring, telling advertisers where and how many times, and on which devices, an ad [is seen].”
In a world where data is king for companies, the data provided by connected TV provides a treasure trove of information that companies can then use for customer acquisition and retention.
Connected TV advertising can target and re-target better customers
By using either first-party or third-party data, companies can serve their ads on the biggest screens in a customer’s house. They can then use the same data to retarget these customers on other platforms.
What metrics should you observe?
“Big data” is good to have, but there are some metrics that carry more weight than others. Video completion rates (VCRs) and gross rating points (GRPs) are most important. Companies may be able to see the entire sales cycle, from advertisement to the completed sale.
Metrics show a direct correlation between connected TV and eCommerce
According to ClickZ, there’s a direct correlation between connected TV and eCommerce. This is especially true among the younger demographic. But, older demographics and late adopters are catching up in the numbers.
Today’s companies focus their efforts on the millennial and Gen Z demographic. These two demographics are the largest buying demographics in the United States. Also, they buy goods and services advertised through connected TV ads more than any other demographic.
And the numbers bear this assessment out. This same report for ClickZ reports that Roku’s projected ad revenue is $293 million this year, coming in second to Hulu in OTT ad sales. According to Nielsen, “Roku ads also have 10.2% greater incremental reach over linear TV among 18- to 34-year-olds.”
But while these numbers are impressive, they’re no match for traditional TV ad spends. Though TV ad spends are down year-over-year, TV ad spends still reached almost $70 billion in 2018. So, while connected TV ads generate a great deal of revenue for companies, linear TV ads still dominate the market — for now. But as more consumers “cut the cord” from linear TV, connected TV ads will penetrate both the national and international markets.
How do marketing agencies feel about connected TV advertisements?
Career IQ surveyed 100 digital advertising decision-makers about connected TV. Their survey found that only 7% of companies are in the optimization phase. But, 56% of those companies polled are testing. About 65% of the companies polled will, or have, entered the connected TV market. Only 7% of the companies polled said they aren’t considering the connected TV market.
According to eMarketer, by 2022, more than 204 million people in the United States will be using connected TV. That translates to about 61% of all American television users. The potential for advertiser penetration is self-explanatory.
Finally, connected TV is the most relevant medium out there. But, it’s still in its complete penetration phase. As such, connected TV should complement linear television ad buys. Maeve Alpin suggests as much in her piece for The Trade Desk.
“Advertisers can coordinate messaging across all Internet-connected devices. [F]rom CTV to gaming consoles to mobile phones to laptops. The result is a more powerful advertising experience than ever before… Some still argue that traditional television buys remain effective… My response is: you’re right, keep them; but complement those buys with CTV advertising. [T]he impact of traditional TV advertising and the precision offered by digital advertising [makes] CTV [a] valuable asset.”
The shift simply means that advertisers will need to create more diverse and targeted marketing strategies to reach their desired audiences. According to Tier10’s Director of Media Olivia Devereux, a good mix such as social media and television tends to accomplish this. She explains that Tier10 operates from a two-pronged marketing strategy, which first involves reaching a broader audience through television advertising to build brand awareness. Then, on the digital end of things, ads are directed at a more targeted audience, people who are really in the market to purchase.
Customers accept watching commercials on connected TV devices
In the early days of the Internet, “pop-up” ads irritated users to the point that pop-up blockers became popular. A whole generation of users avoided and/or skipped over ads. But today’s users accept advertisements as necessary to enjoy their content. The 10th Degree, a company that observes the viewing habits of various user cross-sections, explains:
“Studies show that half of these users who view content on apps like Hulu are willing to sit through video advertising to continue to watch shows. [This is] a huge boost over traditional television viewers. CTV administers video advertising before and during content. [This is] called pre-roll and mid-roll advertising when users are most willing to experience an advertisement to be able to watch the content. In fact, this mid-roll advertising is so popular it is also the most competitive of video advertising.”
Connected TV advertising is “the future of advertising”
Marketing trends suggest that connected TV will soon be the most effective form of advertising for many reasons:
1. Connected TV is everywhere and the market is wide open. As of 2018, approximately 160 million Americans used some form of connected TV every month and total connected TV usage jumped by 300%. But, companies allocated only 1% of advertising dollars for connected TV usage. This suggests that there’s plenty of untapped potential in the market.
2. Connected TV ads are cheaper than traditional TV ads. This means the company gets “more bang for their buck.” In other words, the company spends less and receives more money, thus getting a better ROI (return on investment).
3. There’s potential for more data growth. Right now, connected TV doesn’t deploy cookies or register device IDs. As a result, billions of dollars in advertising have been withheld out of fear that a company “couldn’t get it right.” In the future, however, this may change. If it does, advertising will become much more targeted.
4. Connected TV users won’t skip advertisements. Gone are the days of TiVo, which spent millions of dollars convincing people to “fast forward” through ads. 50% of millennials feel that watching advertisements is a “fair value exchange” for lower-cost content.
5. Connected TV ads are directly addressable. Today’s consumer is “hyper-connected.” That means the majority of people in the United States today connect to the Internet through more than one device. These devices include their computer, “smartphone,” tablet, and even “smart devices.” And, according to MarTech Today, a staggering 94% of television viewers in the United States keep a phone on hand while watching a program. Knowing this, connected TV advertisers can construct“dynamic, fluid, and hyperconnected campaigns, across varied streams and devices. They also offer a variety of available post-click actions such as click-to-video, click-to-website, click-to-custom micro-site, and click-to-app, all of which are full-screen experiences.” This means that connected TV advertisers will see an immediate response to their ad: a user may see their ad on connected TV and buy it on their smartphone or by pressing a button on their Roku remote control. This remarkable capability was unheard of even a few years ago, and it’s easy to see the benefits.
6. Connected TV is popular with millennials. This demographic is the largest consumer market group and thus the target audience for advertisers. And statistics show that millennials are a full 67% more likely to be in a connected TV-only house, according to MultiChannel.
Companies in the automotive industry will enjoy the benefits of moving into the connected TV sector. The field is wide open, and it’s a great way to reach an affluent demographic. What’s more, connected TV will provide a seamless experience for the user. Your commercial will not be “skipped” or “fast-forwarded.” There’s no question that the benefits of advertising in the connected TV sector are plentiful.
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