In the rapidly evolving landscape of media advertising, connected TV (CTV) is undeniably the future. The US market has witnessed a remarkable shift in ad spending, with CTV ad spend surging by 21.2% year on year, while linear TV ad spend has contracted by 8.0%. This year alone, US CTV ad spend is projected to reach an impressive $25.09 billion, whereas linear TV will still account for a substantial $61.31 billion.
Analyst, Paul Verna, emphasized on a recent podcast that the future of CTV is already here, not years down the road. Despite the tremendous growth of CTV, linear TV continues to offer substantial value to advertisers.
Both linear and CTV formats have their advertising use cases, as US adults still spend a significant amount of time on both platforms: 2 hours and 55 minutes for linear TV and 1 hour and 55 minutes for CTV. Linear TV remains particularly valuable during major events such as the Olympics, the World Cup, and US elections, as it attracts a broader audience, including older demographics. Plus, the cpm pricing is a lot more attractive for Direct Response clients.
However, CTV holds great promise due to its expanding audience base and precise targeting potential. Advertisers don’t have to completely reinvent their marketing strategies when transitioning to CTV, as the basic creative units remain like traditional TV.
The current leaders in the US CTV ad market are Hulu, YouTube, and Roku, with respective spends of $3.63 billion, $2.89 billion, and $2.19 billion this year. Hulu’s prominent position can be attributed to its early adoption of the ad-supported model. YouTube is also gaining ground as 45% of its viewership now occurs on TV screens, indicating a shift from smartphones to CTV. Advertisers should consider YouTube as a crucial platform for TV advertising.
While the CTV ad spend leaderboard might not experience significant shifts, new players are entering the ad-supported space. Disney+ and Netflix introduced ad-supported tiers last year, and though they are expected to become major players, building up their ad businesses will take time. Additionally, Amazon is contemplating an ad tier for Prime Video, which could lead to a surge in CTV ad spend as brands seek to leverage Amazon’s retail media data. Furthermore, free ad-supported TV platforms like Amazon’s Freevee are experiencing growth in viewership and content offerings.
In conclusion, while CTV unquestionably represents the future of media advertising, advertisers should not disregard linear TV from their media mix. Both formats offer unique advantages and cater to different audiences, making a balanced approach essential for a successful advertising strategy in this dynamic media landscape.