35% of digital video ad budget will be allocated to CTV, followed by mobile and desktop.
Connected TV (CTV) has become increasingly popular among consumers, thanks to the plethora of content options they offer to the viewer and the COVID-19 pandemic-induced lockdowns. According to Nielsen, CTV consumption hit 4 billion hours per weekOpens a new window between March to April last year. It remained higher than the pre-pandemic levels, even after the lockdown restrictions were eased. The growth in CTV consumption has presented numerous opportunities for advertisers. Many advertisers are also making use of these opportunities. According to Pixalate’s State of Connected TV/OTT: Ad Supply Trends ReportOpens a new window , there was a 70% increase in global CTV/OTT ad spend between Q1 and Q3 2020.
The Interactive Advertising Bureau (IAB) recently released a survey reportOpens a new window on the video ad spend in 2020 and where it is headed this year. According to the survey, digital video advertising will be allocated 56% of total video spend this year against linear TV.
The following are the findings of the study in detail.
Also read: CTV Ad Spending To Hit $6.69 B in 2021: New Research RevealsÂ
1. Video Ad Spend Expectations and Estimates in 2021
Digital video using the internet represented the largest advertising media used in 2020. Further, CTV witnessed the biggest gains in ad spending (approx 22%) YoY compared to digital desktop and mobile video. The CTV ad spending increase was primarily driven by the furniture/appliances (+105%), retail (+99%), CPG (+87%), and auto (59%) sectors.
This year, 56% of the video ad budgets are allocated to digital. These include mobile, desktop, and CTV. Only 41% of the budgets are allocated to linear TV and data-driven TV. Other forms of video take up 2% of the budget. Further, CTV advertising is expected to be allocated 35% of the digital video ad budget while 33% will be allocated to mobile and 32% to desktop videos.
CTV is expected to witness the strongest growth this year too. More than 35% of ad buyers are expected to increase their ad spends on CTV, while 59% expect it to remain the same. Compared to this, 21% are expected to increase their budgets on data-driven linear TV, and the same percentage of respondents will increase their budgets on broadcast/cable TV.
About 73% of advertisers also reported shifting their budgets from net-based linear TV, and 41% reported shifting funds from desktop and mobile video advertising to CTV. About 80% plan to move their budgets from cable and broadcast TV. It was further seen that about 37% of CTV ad buyers are increasing their budget share to pure play streaming services, such as Hulu, Roku, and Tubi. About 35% are increasing their budget.
What is driving the decision of advertisers to increase CTV ad spending? According to 62% of the respondents, the deprecation of cookies and mobile ad IDs had some impact. 22% said that the same factor had a significant impact on their decision.
Industry verticals looking to reboot ad spending on CTVs this year include such as health/wellness (144%), finance (97%), travel (92%), telecom (71%), and media & entertainment (48%). The significant growth in spending from these verticals indicate advertiser optimism and their demand for more audience-based buying approaches.
When it comes to the pandemic-induced changes in advertising planning and buying, 51% of advertisers expect more flexible contracts, while 46% expect to allocate less budget to traditional TV. 45% expect more just in time buying. 84% of advertisers also expect to see a converged video marketplace for ad buying in the coming years.
Also read: Digital TV Advertising: Ready To Cross the CTV and OTT Advertising Hurdles?
2. First-Party Data Is Important for Advertisers
With the deprecation of third-party cookies, first-party data has become critical for advertisers this year. This has also become the criteria for choosing digital video partners. 77% of ad buyers indicated that robust first-party data is vital in choosing video partners. 42% also intend to use ad formats that focus on first-party data and DTC engagement this year. When it comes to audience-based targeting when buying CTV ads, 65% use the publisher’s first-party data sources and 63% use brand/client’s first-party data sources for targeting.
The study further found that 52% of advertisers will focus on the increased use of first-party data to combat privacy issues. 51% will use contextual targeting, and 49% will use a mix of contextual and first-party data.
3. Digital Video Industry Measurement
When it comes to measuring a video campaign’s KPIs, about 34% look at them daily for real-time optimization. About 32% look at them a few times a week. About 93% of advertisers also have medium to high confidence about the ability to tie together audience measurement results from cable/broadcast TV with digital video campaigns.
When asked about what improvements are needed to measure video ad effectiveness successfully, 53% indicated standardization of video metrics, 52% indicated deeper audience insights, and 50% said attribution modeling.
While CTV is expected to see a significant increase in ad budget allocation this year, it remains second when it comes to competitive pricing and measurement clarity. Desktop and mobile video ranked first on both parameters. Further, CTV was found more effective in driving the return on advertising spend (ROAS) and managing frequency than linear TV. However, it falls short on mass reach.
High pricing is another challenge for CTV ad buyers. 60% of advertisers said that desktop/mobile videos have competitive pricing, while 40% cited high prices as a challenge to using CTV. However, 61% expect linear TV and CTV CPMs to change at the same rate over the next year.
Also read: 9 Essential Tips to Optimize Connected TV Advertising Spends
Summing Up
The popularity of CTV among viewers, the opportunities it offers to advertisers, and the demise of third-party cookies are expected to boost the advertising budget for this media in 2021. However, certain challenges, such as higher CPM and lesser mass reach, still affect CTV advertising. However, its effectiveness in driving ROAS and managing frequency has enabled it to capture dollars from linear TV. Having said that, advertisers must find standardization in metrics and practices to ensure CTV advertising becomes more widely accepted by brands.
Do you plan to allocate a digital video ad budget? If yes, where? Do share with us on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window .