The digital advertising landscape is undergoing a significant transformation, with Connected TV (CTV) emerging as a dominant force. As advertisers increasingly shift their focus toward digital platforms, CTV is gaining prominence, particularly in the realm of programmatic buying. This article delves into the trends, insights, and strategic forecasts shaping the future of CTV and its impact on programmatic ad buys.
The Rise of Connected TV in Advertising
CTV’s Growth in Ad Spend
Connected TV has seen a remarkable surge in advertising spend, outpacing other digital video channels such as online video (OLV) and social video. This year, CTV ad spend is projected to be 35% higher than OLV, reflecting the growing confidence among advertisers in this medium. The increasing reliance on digital platforms has made programmatic buying the predominant method for executing transactions in the CTV arena. This trend underscores the monumental shift in advertising strategies as advertisers aim to reach audiences through the most effective channels.
One of the core reasons for CTV’s rise in ad spend is its ability to offer a television-like experience combined with the advantages of digital advertising. Advertisers are attracted to CTV because it allows them to deliver high-quality video content to targeted audiences. The precision of targeting enables better engagement and interaction rates. This precise targeting, paired with the immersive nature of video ads on larger screens, makes CTV a desirable outlet for advertising dollars. Furthermore, with the proliferation of streaming devices and smart TVs, the audience base for CTV continues to expand, presenting more opportunities for advertisers to connect with viewers within their targeted demographics.
Programmatic Buying Dominance
A substantial 75% of CTV ad purchases are now conducted programmatically, highlighting the preference for automated approaches among media buyers. This shift towards programmatic buying is driven by the ease of campaign optimization, improved return on investment (ROI), and the ability to achieve broader scale efficiently. As proficiency in programmatic buying increases, the flow of CTV dollars into these automated channels is expected to continue. This high percentage of programmatic transactions signifies a fundamental transformation in the way advertising is bought and sold, with automation taking center stage.
The benefits of programmatic buying are manifold. Automated processes reduce the time and manual effort required to manage campaigns, enabling faster adjustments and optimizations. This agility is crucial in today’s fast-paced advertising environment, where real-time data can inform immediate changes to improve performance. Furthermore, programmatic buying provides access to a vast array of inventory, allowing advertisers to strategically bid on placements that align closely with their campaign objectives. As a result, programmatic approaches are becoming the norm, particularly in CTV, where the demand for efficiency and effectiveness is paramount.
Strategic Insights and Forecasts
Metrics Driving Investment Decisions
Metrics for reach, ad quality, and measurement are pivotal in the decision-making process for investing in video channels. However, there’s a discernible shift towards valuing business outcomes as a critical criterion for assessing the success of ad campaigns. This evolving metric system prioritizes tangible business results over traditional reach and frequency metrics, indicating a significant change in how success is measured in digital advertising. Metrics like sales conversions, website visits, and customer acquisitions are now taking precedence, reflecting a more results-driven approach to advertising investments.
This shift is not only changing how campaigns are evaluated but also influencing where budgets are allocated. Advertisers seek channels that can provide clear, measurable outcomes that directly impact their business goals. Social video, for instance, excels in this regard due to its engagement-focused nature and integration with e-commerce functionalities. Consequently, channels that facilitate outcome-based measurement are likely to attract more ad spend as advertisers strive to demonstrate the return on their investments with concrete data. The push towards business outcomes also underscores the importance of advanced analytics and accurate reporting tools in today’s advertising landscape.
Projected Growth in Digital Video Ad Spend
Total digital video advertising expenditure is anticipated to grow by 16% in 2024, encompassing CTV, OLV, and social video. Specifically, CTV is projected to rise by 12%, reaching an estimated $22.7 billion. Investments in free ad-supported streaming TV (FAST) services are also on the rise, with a 7% year-over-year increase, bringing it close to parity with ads placed on virtual multichannel video programming distributors (MVPDs) and streaming platforms. This growth highlights the increasing importance of digital video as an advertising medium.
The rising spend on digital video, particularly CTV, can be attributed to several factors. Firstly, the shift in consumer behavior, with more viewers opting for streaming services over traditional TV, is driving advertisers to follow their target audiences to these platforms. As a result, ad budgets are being reallocated from traditional TV to digital video formats. Secondly, the advancements in ad technology, including improved targeting and personalization capabilities, are making digital video ads more effective and appealing to advertisers. This double-digit growth in digital video ad spend underscores the ongoing digital transformation within the advertising industry.
Programmatic Activation Strategies
Real-Time Bidding and Private Marketplaces
Various programmatic activation strategies, such as real-time bidding/open exchanges, private marketplaces/preferred deals, and programmatic guaranteed, receive nearly equal focus from buyers. These strategies offer different advantages, from achieving broader scale to ensuring premium ad placements. As advertisers become more proficient in these methods, the reliance on programmatic buying is expected to grow. Each strategy has its unique benefits, allowing advertisers to choose the approach that best aligns with their goals and campaign requirements.
Real-time bidding (RTB) in open exchanges allows advertisers to bid on individual ad impressions in real-time, providing flexibility and scale. Private marketplaces (PMPs) and preferred deals, on the other hand, offer more controlled environments where advertisers can access premium inventory directly from publishers. Programmatic guaranteed deals ensure that specific inventory is reserved for a particular buyer, providing certainty and often higher-quality placements. The choice of strategy depends on factors such as target audience, budget, and campaign objectives. As advertisers navigate these options, their ability to effectively leverage programmatic buying will continue to enhance the efficiency and impact of their ad campaigns.
The Role of Ad Networks
Ad networks play a crucial role in the programmatic buying landscape, providing a bridge between advertisers and publishers. By leveraging ad networks, advertisers can access a wide range of inventory and optimize their campaigns more effectively. This approach not only enhances campaign performance but also improves ROI and return on ad spend (ROAS). Ad networks offer the scale required to reach diverse audiences across multiple platforms, making them an indispensable part of the programmatic ecosystem.
The collaboration between advertisers and ad networks ensures that campaigns are executed smoothly and reach the intended audience segments. Ad networks aggregate inventory from various publishers, providing advertisers with a centralized place to purchase ads programmatically. This aggregation simplifies the process and allows for more streamlined campaign management. Additionally, ad networks offer valuable data insights and targeting options, enabling advertisers to fine-tune their strategies for better performance. By leveraging the capabilities of ad networks, advertisers can maximize the efficiency of their programmatic buys and achieve superior outcomes.
Case Study: Roku’s Programmatic Capabilities
Strategic Emphasis on Programmatic Buying
Roku exemplifies a platform that has significantly invested in bolstering its programmatic capabilities. During Roku’s Q1 earnings call, CEO Anthony Wood emphasized programmatic ad capabilities as a cornerstone for accelerating platform revenue growth into 2025. This strategic emphasis has led to notable increases in programmatic ad spend as a percentage of total video investment. Roku’s investment in programmatic technologies is a testament to the growing importance of automation and data-driven strategies in maximizing advertising success.
Roku’s commitment to enhancing its programmatic infrastructure has enabled it to attract more advertisers seeking efficient and scalable solutions. The platform’s ability to offer precise targeting, real-time bidding, and advanced analytics tools creates a compelling proposition for advertisers. By focusing on programmatic capabilities, Roku has managed to streamline ad transactions and improve campaign effectiveness. This strategic shift not only boosts revenue for Roku but also delivers better outcomes for advertisers, making it a win-win scenario that highlights the potential of programmatic buying in the digital video ad space.
Introduction of Roku Exchange
The introduction of Roku Exchange illustrates the platform’s focus on enhancing partnerships with third-party demand-side platforms (DSPs). This seamless conduit between programmatic demand and the streaming platform’s ad inventory and data has further solidified Roku’s position in the programmatic buying landscape. Roku Exchange serves as a marketplace where advertisers can programmatically access a vast array of ad inventory, ensuring a more efficient and targeted approach to their campaigns.
The launch of Roku Exchange has empowered advertisers with better access to premium content and audiences, enhancing their ability to achieve their marketing objectives. By integrating with third-party DSPs, Roku ensures that advertisers can leverage their existing programmatic buying tools while benefiting from Roku’s robust inventory and data capabilities. This integration not only simplifies the buying process but also enhances the effectiveness of ad placements by leveraging comprehensive audience insights. The success of Roku Exchange underscores the growing importance of seamless programmatic integrations in driving the future of digital video advertising.
Shifting KPIs and Measurement Challenges
Prioritizing Business Outcomes
The report denotes a major shift towards prioritizing business outcomes as the top Key Performance Indicator (KPI) for determining the success of digital video campaigns. Social video leads in this respect, followed by online video and CTV. Advertisers are advised to prioritize channels that facilitate outcome-based measurement, including sales, website actions, and customer acquisition. This shift represents a move away from traditional metrics such as reach and frequency, reflecting a broader industry trend towards more meaningful and measurable results.
As advertisers increasingly focus on business outcomes, they are seeking tools and methods that provide clear visibility into their campaign performance. Channels that enable direct measurement of sales and conversions are becoming more attractive, as they allow advertisers to demonstrate the tangible impact of their advertising efforts. Social video, with its inherent engagement and interactivity features, is particularly well-suited to outcome-based measurement. This trend towards prioritizing business outcomes highlights the need for advanced measurement tools and analytics capabilities to accurately assess and optimize campaign performance.
Measurement Capabilities and Challenges
Despite the promising growth in digital video ad spend, ongoing challenges in measurement capabilities persist. About two-thirds of advertisers face issues in various measurement areas, particularly smaller brands struggling with viewability, standardized targets, currency, and acquiring sell-side data. These measurement issues differ significantly across channels, complicating buyers’ understanding of placement, viewability, and guarantees. This complexity underscores the need for industry-wide advancements in measurement practices to ensure accurate and reliable performance evaluations.
Inconsistent measurement frameworks and a lack of standardized data are among the primary challenges advertisers face when assessing the effectiveness of their digital video campaigns. These issues are particularly pronounced in CTV and OLV, where varying metrics and reporting standards can hinder clear comparisons and benchmarking. Smaller brands often struggle more with measurement due to limited resources and access to advanced tools. Addressing these challenges requires collaboration between industry stakeholders to develop standardized measurement practices and tools that can provide comprehensive and accurate insights into campaign performance. Achieving this will be crucial for the continued growth and success of digital video advertising.
Adoption of Alternative Currencies
Engaging with Multiple Currencies
The market is progressively adopting multiple currencies for transactions. Nearly 90% of TV advertisers are engaging with alternative currencies in some capacity—be it through direct transactions, testing, or discussions with alternative currency measurement vendors. Over a quarter of buyers are currently transacting with alternative currencies, reflecting a significant industry shift. This trend indicates a growing recognition of the limitations of traditional currency methods and an openness to exploring new measurement paradigms that better reflect the complexities of the digital advertising landscape.
The shift towards alternative currencies is driven by the need for more accurate and relevant measurement tools that can better capture the performance of digital video ads. Traditional measurement metrics often fall short in the context of diverse digital channels, prompting advertisers to seek out new methods that can provide more granular insights. Alternative currencies offer the potential for more precise and meaningful performance assessments, enabling advertisers to make better-informed decisions about their ad spend. The adoption of these currencies is likely to accelerate as more advertisers recognize their value in enhancing campaign effectiveness and ROI.
Industry Call for Innovation
The digital advertising landscape is experiencing a substantial transformation, with Connected TV (CTV) emerging as a powerful player. As advertisers increasingly pivot towards digital platforms, CTV is taking center stage, especially in the realm of programmatic buying. This shift is partly driven by the changing viewing habits of consumers who are moving away from traditional cable to streaming services. The rise of CTV offers advertisers the ability to target audiences with greater precision and efficiency. Additionally, the integration of CTV with programmatic technology allows for real-time bidding and data-driven decision-making, enhancing the effectiveness of digital campaigns. This article explores the trends, insights, and strategic predictions that are shaping the future of CTV, as well as its significant impact on programmatic advertising. As the digital landscape evolves, understanding these dynamics will be crucial for advertisers aiming to optimize their ad spends and reach their target audiences more effectively.
