Connected TV And Advertising: What It Is, And Who The Trendsetters Are

More than a decade ago, Bill Gates said, “the future of advertising is internet,” and he has been proven right since then. In recent years, the mode and style of advertising has changed dramatically, keeping pace with the technological advancements in devices and mediums used globally.

Today, Connected TV (CTV) advertising is the buzzword in the advertising world.

Here’s a look at what CTV advertising is and how companies like The Trade Desk (TTD) are tapping this opportunity.

The Ad World, And Connected TV

The worldwide digital ad spending is close to $333 billion, which translates to roughly half of the global ad market. Within the internet advertising space, CTV is growing rapidly as advertisers look to increase market penetration and improve ad effectiveness through precision targeting.

A Connected TV refers to any TV that can be connected to the internet; it includes Smart TVs, Apple TVs, devices like Tivo and Roku, gaming consoles like X-Boxes and PlayStations, and video streaming services (such as Netflix, Hulu, YouTube or Pandora). CTV even enables viewers to search digital content such as movies and photographs on the internet.

The internet is a part of our daily lives; today 57% of the world population (about 4.38 billion) has access to the Internet, and that can only increase from here. The demand for internet-enabled services and products will rise alongside that growth. Television sets, which have been the primary mode of entertainment in most conventional homes, are part of that change.

The Leichtman Research Group (LRG) report found that the largest pay-tv providers in the U.S. lost about 1,530,000 net video subscribers in Q2 2019. Another LRG report suggests that 74% of the U.S. TV households have at least one internet-connected TV device, including connected Smart TVs, stand-alone streaming devices, and connected video game systems.

Fewer views for linear broadcasters and rising internet-connected TVs is a huge opportunity for companies such as The Trade Desk.

The Trade Desk is betting big on Connected TV advertising

“As more viewers access TV content via connected devices and smart TVs, and as more content providers build and launch new streaming platforms, advertisers can apply data to their TV campaigns for the first time. It’s a gamechanger,” believes founder and CEO Jeff Green.

As of September 30, the company spent 145% more than the previous year on its platform in Connected TVs. This reflects growing advertiser appetite to shift their massive TV ad campaigns to streaming platforms. The Trade Desk has partnerships with many of the world’s leading streaming providers, including Disney, Amazon, ProSieben, RTL and Channel 4. Companies such as MediaMath, Amobee, dataxu (recently acquired by Roku) and Beeswax are Trade Desk’s competitors in this segment.

CTV advertising is one of Trade Desk’s focus areas. The company has invested early on the CTV infrastructure and in the supplier ecosystem. The company expects the shift towards CTV advertising to continue, especially its usefulness in live and unpredictable events, such as sports or the 2020 U.S. elections.

Going forward, it is expected that some big players (such as Netflix), which operate ad-free at present, may add an element of advertising as consumers may show fatigue towards high subscriptions. “I believe they’ll eventually adopt what others have—giving consumers the choice to pay more and avoid all ads or pay less and see a few highly relevant ads,” said Green during Trade Desk's Q3 earnings call.

Currently small, CTV advertising is a rapidly growing portion of digital advertising

In its inaugural forecast on CTV spending in the U.S., eMarketer expects the channel to grow 37.6% this year to reach $6.94 billion. By 2021, it will surpass the $10 billion mark and by 2023, it will grow to $14 billion, which would mean that advertisers will allocate almost 5% of paid media budget to CTV placements. The traditional TV advertising spend is around $70 billion annually. A report by IAB highlights that, 50% of ad buyers plan to increase their Connected TV spend in the next 12 months.

While CTV faces certain challenges in terms of fragmentation of inventory, ad fraud, frequent capping and lack of uniform measures and reporting. However, despite them, CTV advertising is attracting marketers given the benefits such as ad quality and relevance and its ability to offer cross-channel media planning, addressability and audience targeting. Advertising is changing yet again, and this time Connected TV is emerging as an important frontier in Internet advertising.

Disclaimer: The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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