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Major factors driving the growth of the connected TV (CTV) market include increasing internet penetration, rapid technological progress, falling product prices for new devices, and the digital transformation of the media industry.
The connected TV1 market has great potential for growth, not only in the U.S. but also in Europe. Major factors driving the growth of the connected TV (CTV) market include increasing internet penetration, rapid technological progress, falling product prices for new devices, and the digital transformation of the media industry.
鈥淐onnected TV鈥� (CTV) is understood as an umbrella term for devices that are connected to the internet and enable users to consume TV content. This content tends to be watched in a 鈥渓iving-room鈥� environment, with the device being only connected to the relevant household. The term encompasses not only smart TVs but also set-top boxes, TV sticks, and even some game consoles.
MANUFACTURERS of connected TVs are competing to offer the latest innovations when it comes to the user interface, the aggregation of content, and the development of apps, e.g., for connected TVs, which are equipped with an operating system that can run apps and widgets, stream videos and music, or serve as an eCommerce platform. There is hardly a more exciting platform, with the possible exception of the metaverse and connected cars.
APP DEVeLOPERS make use of the connectivity of new devices and the possibilities of interacting with the actual TV program. The current features of connected TVs enable users to find, share, and/or download content, to chat with one another, to interact, to date, and to engage in any other type of communication. The availability of content that users can consume on their connected TVs has contributed significantly to the increase in the demand for devices and, consequently, their growing reach.
BROADCASTERS AND CONTENT PROVIDERS such as Apple TV, Amazon Fire TV, and Google Chromecast are transforming users鈥� viewing experience. Manufacturers often collaborate with over-the-top (OTT) content providers and vendors of OTT devices so that they can offer various functions which no longer require a set-top box. Connected TVs thus enable users to run apps that were formerly developed for smartphones. This, in turn, increases interactivity and makes the devices more attractive to consumers. Accordingly, usage times for connected TVs are increasing significantly, whereas those for the conventional internet are somewhat stagnant.
Moreover, the COVID-19 crisis has further accelerated the increase in usage times and reach. Lockdowns and work-from-home measures have boosted at-home video consumption to unprecedented heights: Video streaming platforms such as Netflix and Amazon Prime Video as well as local providers such as RTL+ in Germany have thus seen viewership skyrocket.
So-called 鈥渉ybrid TV viewing鈥� has become the new normal. A study by Magnite and 糖心破解版 found that, nowadays, 71% of European viewers consume a combination of traditional TV and connected TV content. 30% of households stated that they primarily watched CTV content. In contrast, only 22% exclusively watched traditional television.
CTV users are increasingly both watching traditional TV and interacting with CTV content:
CTV users are well represented in target groups relevant to advertisers 鈥� in fact, they are more representative of the total population than viewers of traditional TV since the latter is increasingly becoming the territory of the 鈥渙lder鈥� generation:
At the same time, more and more content on offer is being financed through advertising; or rather, ad-free content provided by Netflix and Disney+, for example, no longer dominate the consumption of CTV content. By now, the average CTV viewer watches almost as much ad-funded content as paid content. So all is well in the connected TV market, or is it? On further examination, there are indeed some challenges.
2. A closer look 鈥� strategic challenges in a new media segment
With its seemingly high-quality content and wide reach, CTV, which is often used on platforms such as Google Chromecast, Amazon Fire TV, Roku, Apple TV, and Samsung TV, among others, seems to be a safe bet when it comes to ad placement. And since the imminent death of 3rd-party cookies is causing panic about a lack of targeting on desktops and mobile devices, CTV inventory is becoming an attractive option. There may, however, be a serious disadvantage for those who adhere to certain duties of care: So-called 鈥渂ad actors鈥� could easily take advantage of the current CTV hype.
Consequently, we are now faced with challenges that we already encountered when dealing with fixed and mobile internet connections, which were believed to have been partially overcome:
High CPMs attract scammers. Pricing is higher in CTV inventory than in many other forms of advertising. Scammers prefer high CPMs because they can maximize their returns with them. Coupled with a vulnerable advertising ecosystem, it is possible to gain high yields with little effort 鈥� ideal conditions for scammers and the like.
Scarcity results in lower standards. Due to its relatively recent development, there is (still) little CTV inventory. Further CTV channels/apps need to be developed for publishers to earn more. In addition, content needs to be either produced by publishers themselves or they need to obtain content licenses. This creates a domino effect: Advertising platforms and networks are overzealous when it comes to acquiring sufficient inventory to keep the business going, which results in excessively lax standards on the supply side. This leads to greater heterogeneity and a lack of pervasive market standards. Missing cross-channel concepts result in experimental squandering. Both advertisers and publishers often take the approach of simply 鈥渆xtending鈥� content and campaigns to CTV environments. This is a cardinal error from the early days of smartphone use. Instead, integrated media strategies are required.
The dominance of platforms is crushing smaller publishers and therefore acts as an obstacle to creativity. It is already noticeable in the CTV market that large platforms are dictating the rules by which content and advertising are distributed. This could provoke adverse reactions from publishers, who may not be willing to invest in yet another walled garden, even though the CTV channel might also be of interest to news publishers thanks to its high level of interactivity. All of the above-mentioned points are challenges that can be dealt with, but in order to unleash the full potential of the new channel, a judicious media distribution and advertising strategy is required.
3. Outlook 鈥� what media owners and advertisers can do
For advertisers, CTV can be a viable and powerful channel which they could add to their advertising mix. However, one should be aware of the fact that CTV advertising may also entail risks. Don鈥檛 get swept away by the hype and/or fall prey to scammers. It is a wise approach to invest time and resources into one鈥檚 strategy in order to use CTV advertising deliberately and properly before expanding one鈥檚 activities.
For publishers, the new CTV environment can be an attractive distribution channel for potentially interactive and time-consuming content 鈥� consumers are open to this, and the platforms have the necessary interactive capabilities. Similar to what was true for the mobile segment after the launch of the iPhone, there is no time to waste because it is the early adopters who will benefit in the long run when it comes to reach. By now, CTV platform usage is far from being restricted to video content:
Ultimately, CTV is a new, highly interactive media channel that can have its place in the development and implementation of a carefully thought-out and data-driven content distribution strategy. 鈥� Get in touch with us if you need a partner to assist you in this endeavor.