Ever since its inception in the 1960s, TV advertising has been heralded as the ultimate brand-building tool: a broad creative canvas that lets marketers tell their story to millions of captive viewers.
But the advent of connected TV (CTV) promises to combine the brand-building strength of TV with the measurability and targeting of performance marketing.
CTV ads can exist on both ends of the funnel simultaneously. Brands can use TV’s unique storytelling capabilities, but also track the incrementality of those very impressions. With CTV, marketers can have it all.
Or so they say, at least. The question hanging over the boom in CTV marketing over the past several years is whether CTV actually delivers on its promise to tie TV impressions to actual sales in an easy, closed loop manner.
The short answer is that CTV hasn’t fully delivered on its promise — not yet, at least. Below, we lay out the case for and against CTV as a performance channel, and why the future for CTV is bright.
The explosion in CTV advertising over the past few years is a reflection of how much time viewers spend consuming CTV content. CTV accounted for 43 percent of all TV consumption in 2023, just slightly less than traditional broadcast TV (48 percent), and if current trends hold, CTV will soon eclipse broadcast as the most popular TV viewing format.
And yet spending on CTV still lags behind traditional broadcast television. Marketers are expected to spend $28 billion on CTV in 2024, one-third of all TV spending. Logic would dictate that more advertising dollars will shift to CTV in coming years to reflect consumption habits.
“We haven’t seen peak CTV advertising,” says Tom Eaton, commercial advisor at Above Data, where he counsels CPG brands on CTV strategy. “CTV is still a hot buying opportunity for brands and agencies.”
The chief selling point for CTV is that it brings the measurability of digital advertising to a historically hard-to-measure medium (TV), and that combination is a dream scenario for marketers. The email a consumer uses for their Hulu account, for example, can be used to connect that person’s viewing habits to their shopping history using first-party purchase data, thus showing a clear link between advertising exposure and subsequent purchase behavior. Brands can conduct “close loop” measurement, precisely evaluating the return on their ad spend.
“It’s no different from any other digital media — you get a nice clear signal and you can measure through,” Eaton says.
Perhaps the most exciting development in CTV is incorporating calls-to-action directly into the video ads. Hulu ads allow interested viewers to have more information about the brand sent to the email address on file where marketers can collect first-party data on the consumer — integral for brands looking to run sophisticated digital marketing campaigns.
YouTube and Roku, for example, take it a step further, allowing viewers to buy items directly from their platforms, oftentimes within the video or live stream they’re watching.
“For years we have seen our customers ‘buy now’ when it comes to their favorite streaming services, purchasing movies and adding channels,” Jeff Katz, head of U.S. advertising verticals at Roku, tells The Outcome. “We are beginning to see strong response rates from customers who want to purchase food and household products, and we're even exploring the car design and purchasing process through our virtual showroom.”
These direct calls-to-actions allow brands to measure the effectiveness of their CTV campaigns much more easily. There’s no complicated ID matching on the backend to determine if the consumer converted; the signal comes directly from the ad itself.
The large audience and the precise audience segmentation on CTV make it a costly channel, so achieving a high ROI can be difficult, Eaton adds. “If you’re selling toothbrushes, you gotta sell a lot of toothbrushes to make that ad worth it.”
Many of the largest streaming platforms exist as so-called “walled gardens,” forcing brands to buy their ads from them directly instead of making them more widely accessible on ad exchanges. The siloed nature of these platforms has several downstream effects…
As such, it can be hard for brands to buy CTV ads. Part of the allure of CTV for brands, as opposed to broadcast, is that they could easily buy ads across all the prominent CTV platforms from one convenient location, as opposed to having to negotiate broadcast TV buys with each individual network. But the siloed nature of many of these CTV platforms negates that promise and replicates the broadcast model.
If brands had it their way, they would not only be able to buy all their CTV ads from one place, but they would be able to measure all those ads, across different platforms, from one objective place, too.
CTV platforms don’t necessarily want to have their ads stacked up side-by-side with their direct competitors, however, so they tend to conduct their own reporting on the performance of their ads. This is why larger platforms are often accused of “grading their own homework” when it comes to measurement.
“Measurement needs to continue to evolve, particularly mixed media modeling, to ensure that the quality of viewership that streaming offers is captured appropriately in models,” Katz adds.
Targeting and measuring CTV audiences relies on email login data, but using that data has its limits. There is often only one email login associated with a CTV account, so anyone else in the household viewing that platform is unaccounted for. Brands can track performance, but hitting their brand and reach goals for a campaign, as well, can be a challenge.
CTV has the potential to be everything to everyone, but we might be doing it a disservice by measuring its bottom-funnel performance to the Nth degree. Looking back to its roots, TV’s strengths have always been based in awareness. It’s called a “lean back” medium for a reason.
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