25 Jan 2024 | Paul McGee

Ad tiers have huge innovation potential, but not at the expense of the viewing experience

Opinion

For those who struck gold and those who have been less successful in the pivot to streaming, 2024 will be when advertising comes to the fore.

Agencies need to make their voice heard in the growth of ad-supported connected TV (CTV).

Netflix’s earnings call this week had the streamer puffing out its chest, pointing to another quarter of subscriber growth across the globe and 40% of that growth going to its much vaunted ad tier.

Bullish results aside, Netflix started to hone on building out its ad business, with a potential streamlining of its “tier” offering to just the £18 premium and the ad tier.

Coupled with this, a 10-year $5bn deal to stream WWE Raw.

Netflix looks to be moving its model from prestige TV to tempt in subscribers to big-named live broadcast brands bringing in regular audiences. While it may not be throwing the subscription baby out with the bathwater, the acquisition demonstrates the need to build out “scale” for advertisers.

Solutions up and down the funnel, but at what cost?

For those who struck gold and those who have been less successful in the pivot to streaming, 2024 will be when advertising comes to the fore.

Disney+ will be taking its ad tier to the wider market and was at CES talking about shoppable formats, while Amazon will be deploying its terrifying first-party data, with Prime Video launching to 15m unique users from February. The market will finally have scale and start to properly compete with broadcasters — and the major players in this market are organising their troops.

Last week, GroupM launched its Ad Innovation Accelerator programme, aiming to hot-house CTV developments and work with publishers and adtech partners to bring these to life.

Looking at these successful streamers shifting their business models, publishers and agencies are champing at the bit with CTV advertising.

On the table will likely be first-party data integrations, shoppable formats, sequential messaging, cross-media reach measurement, sponsorship and a lot more. The promise for this new market will be to innovate in ways traditional broadcast can’t and won’t, and develop products that their scale can offer, with solutions up and down the funnel.

There is a definite prize out there in the world of video these publishers have their eyes on.

Stealing share from traditional broadcast will be a part of this, but this isn’t the part of the video world where growth currently sits. While broadcaster revenues declined since the height of 2021, instream and outstream video — dominated by Google with YouTube and Meta with Reels — has had precipitous growth over the past four years, according to the IAB. When Disney talks about shoppable and addressable advertising, the focus is as much on Google and Meta as it is ITV and NBC.

Advertising should add, not divert, from the viewing experience

However, the risk for publishers and agencies chasing this model is they devalue the very product they’ve spent billions of dollars developing and risk destabilising the value proposition with viewers.

Ensuring the overall quality of the experience across ad-supported video is paramount.

Advertising on these platforms is nascent and viewers still have uneasy expectations of the value proposition across ad tiers. Seven out of 10 adults feel intrusive ads negatively affect their perception of the brand and 86% said that too many ads on a page “overwhelm” them.

Traditional TV has always delivered on the right sort of brand metrics as the value proposition has been generally settled. Viewers know what the advertising will be, when it will be, how much there will be, that it’s regulated and safe, and it’s there to pay for the content. Subscription VOD tiers that have sold themselves for years on an ad-free experience and still ask for a monthly subscription don’t have the same luxury.

While we have the opportunity to move past what TV can offer and innovate in this space, publishers should heed the warnings of other media that digitised earlier. Advertising should add to the viewing experience, not try to divert or monopolise it.

Advertising in this privileged space should entertain and inform, not accost and divert viewers away from the reason they are there.

Tread softly

Protecting the experience of viewing is key, because it’s that experience that drives the positive effects for brands they crave.

Channel 4’s ad-load test last year proved the case that fewer ads in the reel give double-digit improvements on brand awareness and brand sentiment. Streamers all have much shorter ad loads than broadcasters, so not only will they likely reach people that traditional TV can’t, but they can do so in a more engaging and memorable way.

The streamers can’t win the targeted, lower-funnel outcome battle with Google and Meta; nor should they try. They have something far more valuable: an engaged, youthful audience watching high-quality programming they love. A brand has ample opportunity to entertain, educate and move people on these platforms — something that only comes through the right relationship with viewers and that has built major brands across the life of TV advertising.

The message, then, for this growing market will be to tread softly and don’t piss off your audience.

The streamers are TV for their consumers; they watch them for the same reason they watch traditional TV. This is the high-quality attention that other media struggle to achieve, so publishers and agencies should make sure the ad experience retains its premium feel and buyers get the transparency on how their ads are being seen.

Orientating buys to outcomes have the risk of devaluing that attention and clouding more useful media metrics like reach and frequency — ones that not only drive brand effects but (especially with frequency) maintain the positive viewing experience.

A third way in video advertising

As an industry, we should welcome these initiatives from GroupM and publishers and hold them to their commitments in putting the viewer first.

The growing CTV market should build its own narrative about its value to brands, rather than stealing the language of others. The space to innovate opens a third way in video advertising, away from the old-school linear style and lower-funnel online video.

These platforms offer something similar but different to the rest of the industry — the premium quality of content and heightened need state of the broadcasters, with the tech, global reach and deep pockets of the tech giants.

Paul McGee is head of video planning at Goodstuff Communications