The coming year promises significant change and equally significant growth for advertising-based streaming services. Programmatic CTV advertising is set to benefit from this growth – if CTV services and advertisers can take advantage of the major trends.
Key Takeaways
OTT streaming video will show significant growth in 2023, especially for ad-supported services
A combination of increasing ad loads and increasing ad rates will result in higher advertising revenues for AVOD services
2023 will also see more advertising automation, more efficient ad spending, and more targeted advertising
Programmatic CTV revenues will grow by 14.4% in 2023
What Are the Top Programmatic CTV Trends for 2023?
Connected TV (CTV) describes both smart TVs and streaming media players that connected television sets to the Internet to display streaming video programming. Also referred to as over-the-top (OTT) television, CTV providers offer both subscription-based (SVOD) and ad-supported (AVOD) services over the Internet.
AVOD services utilize programmatic advertising to serve relevant ads to their streaming viewers. Programmatic CTV is on the rise as an increasing number of streaming viewers shift from costly subscription services to free or low-cost ad-supported services.
That general shift is behind several important trends that look to evolve in the coming year. Programmatic CTV advertising will play a huge role in streaming video in 2023.
CTV and OTT advertising explained.
CTV Viewership Continues to Grow
CTV continues to gain viewers for both subscription and ad-supported formats. According to Statista, SVOD services are expected to have 1.29 billion viewers in 2023, up from 1.16 billion in 2022. AVOD services will experience even stronger growth, increasing from 2.66 billion viewers in 2022 to 2.83 billion viewers in 2023.
AVOD Outpaces SVOD
AVOD growth has been and will continue to outpace SVOD growth. This is due in no small part to subscription overload as viewers look to trim their monthly budgets by cutting superfluous streaming video subscriptions. This is driving more cost-conscious consumers away from costly monthly subscriptions and toward free AVOD and FAST services instead.
Viewers Gladly Accept Streaming Advertising
Given several years of growth in subscription streaming, some in the industry were taken by surprise by how eagerly viewers accepted ad-based services. While it's true that some viewers grew accustomed to and prefer an ad-free viewing experience, large numbers of viewers are willing to accept a few minutes of ads each hour in return for free or lower-priced programming.
It’s a return to the traditional ad-supported model offered for decades by broadcast television – willingly accepted by hundreds of millions of viewers over the years. Viewers are used to ad-supported programming and are less willing to pay for ad-free content.
SVOD Services Embrace AVOD Tiers
SVOD services adding ad-supported tiers will accelerate the move to AVOD. These tiers are seldom free but do offer lower subscription pricing in return for showing several minutes of ads each hour. All the big players, including Netflix, Disney+, and HBO Max, are currently offering lower-priced AVOD tiers in addition to their higher-priced ad-free services.
Ad Loads Will Grow Slowly
Ad loads on AVOD services have historically been lower than traditional linear television ad loads. That’s going to change somewhat in 2023, as more advertisers turn their attention – and their ad budgets – to streaming services. To accommodate a growing number of advertisers, some AVOD services will increase the number of ad slots available, while remaining below linear TV’s oppressive ad load.
Ad Rates Will Increase, But Not So Slowly
Other AVOD services will respond to the growing ad demand by increasing their ad rates – and not by a little. With more advertisers chasing a relatively limited number of ad slots, supply and demand dictate that prices will rise. Whether it’s due to increased ad rates or increased ad loads, OTT services will benefit.
Streaming Advertising Gets More Automated
The automation of CTV advertising will continue unabated. Programmatic ads will become the norm due to their ability to better connect advertisers with their targeted audiences. Automated advertising also benefits OTT providers, helping optimize their available ad inventory.
Programmatic advertising also helps AVOD services more easily scale as their services grow. This is important as an increasing number of advertisers shift their ad spending from linear to streaming programming. Automated advertising models enable the industry to handle the increased number of advertisers chasing the increased number of streaming ad slots more efficiently.
Ad Spend Gets More Efficient
All these new and growing AVOD services and tiers represent more choices for online advertisers. This will enable marketers to spend more efficiently, prioritizing better-performing outlets. Advertisers will be able to get more return for less spend, making the most of their online advertising budgets.
Top media investment goals for 2023
Advertisers Get More Focused
Part and parcel with this new efficiency is the ability for advertisers to target narrower groups of consumers more effectively. Programmatic advertising enables advertisers to move away from the traditional scattershot approach and instead narrowly target viewers by:
Age
Gender
Education
Location
Online behavior
Hobbies and interests
Instead of trying to reach more people, AVOD advertisers can now focus on reaching and engaging the right people.
Better Measurement
As AVOD services begin to mature, the industry will see a more robust and accurate measurement of streaming viewers. Services will be able to tell advertisers not just who is watching what, but also for how long and how engaged they are when viewing. Content owners will be able to better gather and share contextual data about their programming and viewers with advertisers.
Better measurement will complement programmatic technologies to help advertisers and OTT services accurately target specific types of consumers. This will help advertisers improve their impact and ROI and help AVOD services better fit advertisers with their program content.
How Much Will Programmatic CTV Grow in 2023?
U.S. CTV ad spending 2020-2023.
Rapid viewership growth translates into similarly aggressive revenue growth for AVOD services. Not only do AVOD services benefit from more viewers, but they’ll also benefit from the increasing ad rates justified by better viewer targeting.
The Interactive Advertising Bureau (IAB) projects that CTV ad spending will increase by 14.4% in 2023, reaching almost $27 billion in the U.S. alone. This compares to a 6.3% decrease in media revenue for traditional linear TV, a significant shift in ad spend by advertisers of all types.
How to Optimize CTV Advertising Revenues
OTT services that seek to maximize their programmatic revenues in 2023 are looking for ways to optimize their ad inventory. One of the most effective approaches is to enable real-time ad decisioning.
With real-time ad decisions in the programmatic CTV ad process, AVOD services can increase fill rates and serve more targeted advertising, thus increasing ad rates and revenues.
Contact Penthera today to learn more about optimizing CTV advertising revenue.
