Advertisement and its cost on Connected TV

Advertisement and its cost on Connected TV

Introduction

The use of smart TVs is growing every year, and their users are becoming more and more involved in what is happening on the screen. Access to content libraries, specialized channels, music, video games, and apps allows advertisers to pinpoint the needs of their target audience and thereby improve the effectiveness of their ad campaigns.

When TV sets became true media centers with the combined functions of TV, computers and smartphones, advertising on Smart TV began to combine the strong emotional impact of videos familiar to conventional television and the free choice of viewing of Internet advertising. Media consumption has radically changed with the advent of gadgets that are always at hand: interaction with banners or video ads is many times greater than the response to inbox ads.

The history of TV advertising

The first official pay TV spot in the United States aired on July 1, 1941, on the New York television station WNBT (now WNBC) ahead of the Brooklyn Dodgers-Philadelphia Phillies baseball game. It advertised the Bulova wristwatch. The watch manufacturer paid for it, according to various sources, from $ 4 to $ 9. The announcement was a modified WNBT test plate - from a regular plate it became a clock with hands that showed the time. The lower right quarter of the watch plate displayed the Bulova “Bulova Watch Time” logo and the motto “America runs on Bulova time”. The advertisement ran for one minute while the sweep hand made a full circle.

Connected TV

  1. According to three US buy-side sources, CPMs (Cost per thousand impressions) for in-stream ads on connected TV ranged from $19.84 to $28.33 during the timeframe of Q4 2017 to Q4 2018.
  2. “Although streaming services receive much of the industry’s attention, traditional ad-supported television continues to do the bulk of the work supporting marketers’ brand-building efforts,” says GroupM.
  3. While the CPM of average video ads in normal circumstances reaches $10-$15, the CPM of Connected TV ads pays off at $65.

Broadcast&Cable TV

From 2008 to 2020, the difference in the cost of advertising on radio and TV was almost $ 20, namely, it rose from $ 16.80 to $ 36.19. In percentage terms, sometimes the increase step exceeded 13%. However, in dollar terms, it rarely exceeded $ 2.

In the case of cable TV, over the same time period, the ad price increased by $ 10. In percentage terms, the increment exceeded 11%. In dollars, the increment was from 1 to 2 dollars.

Thus, the cost of cable TV advertising has increased to approximately $ 19 in 2020.

The popular platform’s monetizing with ads

More and more developers are using advertising as the main way to monetize OTT apps. Paid subscriptions are fine, but advertising remains one of the best (if not the only) method of earning apps without a monthly subscription to access content. In addition, according to forecasts, in 2021 digital advertising spending will amount to more than $ 90 billion, and 60% of that will go to OTT.

The popular platform’s monetizing with ads

- Banner

- Native

- Intermediate full screen (Interstitial)

- Video (including rewarding)

-Interactive and game advertising

Pros

- It's easier to attract users to a free application, which means you can monetize it from the very beginning;

- Variety of ad formats, which can sometimes even improve the user experience;

- Regarding the rest - the easiest way.

Cons:

- Low income per user - you need a very large audience to start making same money;

- Banner blindness and user ad fatigue.

Conclusions

According to PwC, by 2023 the volume of the global OTT video market will grow to $ 72.8 billion (for example, in 2018 it was $ 38.2 billion). This amount includes income from subscriptions and one-time payments.

While most users are streaming TVs, mobile accounts for almost a quarter of the time spent on platforms.

This means marketers should consider streaming audiences as potential consumers of advertising content.

In the West, most platforms are monetized through subscriptions. Globally in the world, OTT platforms live by the aid of embedded ads.

With the pandemic crisis, users can be expected to become more selective about their subscriptions and spendings, and possibly move to freemium models. This means streaming services will place more ads to make money.

Today, the AVOD monetization model - when the provider does not charge for subscriptions, but places ads before, after, or while watching a video - has already grown by 148%.

(see: https://ottapp.dnt-lab.com/blog/what-ad_insertion_better_for_avod_business_model)