As viewers move away from traditional linear TV toward streaming services, including those with advertising models, the ad dollars are slowly following them. The industry sees connected TVs, or CTVs, one of the main viewing platforms for over-the-top services, as providing a similar viewing experience to linear TV. The increase in CTV ad revenue and the newness of the market have encouraged many advertising technology vendors to follow the opportunity. By 2023, Kagan forecasts that CTV advertising technology vendors will reach a revenue of $1.9 billion, a sixfold increase from $283.2 million in 2018.
Connected TV advertising has become an increasingly important segment of the ad industry in 2019 with continued growth projected in the future. While Demand for connected TV, or CTV, advertising propels growth expansion for ad tech vendors, all is not rosy in CTV advertising. The following issues could hold it back which in turn impacts the ad tech vendors:
- Greater demand than supply for CTV ad inventory and the ability to target viewers are both reflected in the higher costs per mile, or CPMs, for CTV as compared to linear TV. These higher prices may limit TV advertising dollars from moving to CTV because — even though some of the TV advertising is wasted on viewers who will not be interested — it can still be more cost-effective than reaching only a targeted audience. Just because audience targeting is possible does not mean it is always the best way to spend advertising money.
- The industry lacks a common measurement system and currency. Each CTV viewing device has its own ID format with multiple manufacturer ecosystems as compared to digital with only a few important desktop browsers and two ecosystems in mobile. Correlating data across the CTV systems, finding viewers and frequency capping are all more difficult.
- Planning and buying across TV and CTV are very complex. CTV ad inventory is available from many sellers including the content providers themselves as well as the platforms or ad-based video-on-demand, or AVOD, services to which they license content, at least in North America. In some cases, the larger device platforms are demanding a share of ad inventory from programmers/content providers in exchange for keeping their app on the platform. Each can monetize its portion of inventory as it chooses. Fragmentation may not be as much of an issue in other countries, where a few media sales houses control a large portion of the inventory.