An Early Take on the Netflix Advertising Tier

An Early Take on the Netflix Advertising Tier

Connected TV

Netflix disclosed the details of its highly anticipated ad tier at a time when the streaming industry faces intensified competition and economic headwinds. Under pressure to shore up revenue and a loss of subscribers, the company has fast-tracked the roll-out of its ad tier in partnership with Microsoft. Known as Basic with Ads, this lesser priced option will cost $6.99 a month in the United States and launch on November 3 at 9:00 am PT. Here’s how the ad-free Netflix stacks up against the competition:

Netflix Ad Tier

(Image courtesy of The Wall Street Journal)

In one sense, the launch is well timed. Inflation continues to be a problem affecting consumer sentiment, making a less expensive option more appealing.

Here are more details:

  • If you like your current Netflix’s ad-free tier, nothing will change for you. Basic with Ads complements Netflix’s ad-free Basic, Standard, and Premium plans.
  • There will be an average of 4 to 5 minutes of ads per hour.
  • At launch, ads will be 15 or 30 seconds in length, which will play before and during shows and films.
  • Advertisers will be able to target ads by by country and genre (e.g., action, drama, romance, sci-fi). Advertisers will also be able to prevent their ads from appearing on content that they find unsuitable for their brand.
  • To enable advertisers to understand how Netflix can reach their target audience, Nielsen will use its Digital Ad Ratings (DAR) in the United States. This will become available sometime in 2023 and eventually be reported through Nielsen ONE Ads.

My Take

This approach looks to be pretty standard and in line with other streaming services that include ads in programming.

I was a little surprised to see 4-5 minutes of ads per hour, though. I didn’t think Netflix would come out of the gate with that many minutes devoted to advertising. I also was thinking they would only serve ads before a show started to try and differentiate themselves from someplace like Fubo Tv Online, an American streaming television service serving customers in the United States, Canada, and Spain that focuses primarily on channels that distribute live sports.

To put the volume of ad minutes in perspective: The Stranger Things Season 4 finale was 2 hours and 20 minutes in length. This means a viewer might see upwards of 10 minutes of ads throughout the show. This amount feels like it could detract from a person’s binging experience.

The fact that measurement is coming to Netflix via Nielsen should bring more clarity to just how well Netflix programming performs. For years, Netflix was tight-lipped about reporting performance data. Only recently did the company begin to report on its most popular shows. Third-party data from Nielsen will provide a much-needed lens.

Netflix probably needed to lay down its pipes quickly because its competitors are moving fast. The ad-supported tier of Disney+ launches in November, and Apple is rumored to be launching an Apple TV+ option with advertising in 2023.

The big picture is just as important as the specifics of Netflix’s tier: It’s important that businesses understand the growth of advertising on streaming platforms in context of the rise of connected TV. If you’ve not done so already, take a closer look at why connected TV is growing and how it could expand your audience. (True Interactive can help you with that.) Connected TV is enjoying 60-percent growth, driven by a public’s appetite for streaming that continues unabated.

Meanwhile, the Netflix tier has attracted the interest of roughly half of Netflix subscribers who would consider switching; and if the program succeeds, Netflix will gain more subscribers. For another perspective, here are the results of a poll that Ad Age conducted recently on LinkedIn:

Poll

Bottom line: the movers and shakers of the streaming world are paving the way for something much bigger: connected TV advertising.

Contact True Interactive

True Interactive can help you navigate the connected TV landscape. Our services range from media strategy and planning to automated performance reporting. Learn more about our services here, and contact us to learn more.

 

 

Why Walmart Connect Expanded Its Advertising Partnerships

Why Walmart Connect Expanded Its Advertising Partnerships

Walmart

As the 2022 holiday season kicks into high gear, retail analysts are watching closely how much consumers will spend during a time of inflation. But it’s equally fascinating to understand how people shop. Walmart Connect, Walmart’s fast-growing advertising arm, believes that holiday shopping online – indeed all shopping online — will increasingly happen via social media, television commerce (t-commerce), and livestreaming. That’s one reason that Walmart Connect has expanded its advertising partner program to encompass social apps such as TikTok and streaming platforms such as TalkShopLive.

What Is the Walmart Advertising Partner Program?

Walmart Connect wants to help businesses advertise across the digital world beyond Walmart.com. To do that, Walmart Connect’s partnership program works with platforms to help brands scale, automate, and optimize their Walmart Connect advertising. These include partners that make it possible for Walmart Connect to expand self-service advertising through an application programming interface (API). Those API partners can be found here.

The partnership program is becoming more important to Walmart as it positions itself as a strong retailer-based ad platform alternative to Amazon Ads. And Walmart says the program is increasingly delivering value. For example, when BirdRock Brands turned to Pacvue (an enterprise software suite for eCommerce advertising) to scale its manual Walmart Sponsored Products campaigns, BirdRock was able to help design a campaign that ultimately experienced a return on ad spend 11 percent greater than its target, and an 83 percent increase in sales quarter over quarter.

What Did Walmart Announce About Its Advertising Partner Program?

Walmart has added a slew of advertising partners known as innovation partners. According to Walmart, these innovation partners will provide test-and-learn opportunities with formats such as social, entertainment, and live streaming throughout the entire holiday season. The newly expanded offering includes additional touchpoints and channels to reach customers wherever they are with new ad formats:

  • TikTok: this partnership provides an opportunity for advertisers to connect with potential shoppers on the red-hot TikTok platform. As Walmart noted, more than 50 percent of TikTok users say they watch ads on their feed instead of scrolling past them. The first-to-market pilot between TikTok and Walmart Connect will provide advertisers with the opportunity to serve in-feed ads on TikTok. This will leverage TikTok’s sound-on full screen video format together with Walmart Connect’s targeting and measurement.
  • Snap: the partnership with Snap enables advertisers to buy ad units including augmented realityCollection Ads and Snap Ads through Walmart Connect and take advantage of the Walmart Connect’s geo-based measurement. This is the first time advertisers can buy Snap ad units through Walmart Connect and get in front of the unique Snapchat audience (75 percent of 13-34 year-olds in the U.S.), who hold over $1.9 trillion in spending power.
  • Firework: this partnership enables supplier-funded shoppable livestreams and short shoppable videos on Walmart.com/live. Walmart Connect is testing how brands can leverage Firework’s capabilities to create premium, engaging, mobile-first video experiences and, to start, has partnered with Johnson & Johnson and Procter & Gamble.
  • TalkShopLive: Walmart Connect is expanding its relationship with TalkShopLive to partnership enable supplier-funded shoppable livestreams on Walmart.com/live, TalkShopLive’s platform, brand and publisher sites, as well as across the web. Walmart Connect is testing how brands can amplify their content and connect with shoppers at scale. To start, it has already executed livestreams with Johnson & Johnson, Procter & Gamble, and Samsung, among others.
  • Roku: Walmart wants to help make TV streaming the next e-commerce shopping destination. Walmart touts Roku as America’s Number One TV streaming platform (citing Hypothesis Group research). So, Walmart has become the exclusive retailer to enable streamers on Roku to purchase featured products and have the transactions fulfilled by the chain. Walmart Connect will connect brands to customers through the Roku platform, and checkout will be seamless for customers, while advertisers receive insights on effectiveness via Walmart Connect measurement.

In announcing these partnerships, Walmart discussed how online search and shopping has become more diversified especially in the post-pandemic age. Seth Dallaire, Executive Vice President and Chief Revenue Officer, Walmart U.S., wrote in a blog post:

Consumers who turned to online shopping during the pandemic have chosen to stay there, with those returning to in-store relying on online research to guide their decisions. Consumers realized the importance of “connection” and were forced to adapt and connect in new ways including social feeds, livestreaming, mobile and more, specifically across video and connected TV. In fact, the predicted growth of social commerce from 10% of all e-commerce to 17% by 2025 will be driven by Gen Z and millennial consumers and nearly two-thirds (64%) of social media users — an estimated 2 billion social buyers — said they made a purchase on social media in the past year.

Now, Walmart Connect intends to do its part in connecting social media discovery to actual sales. So far, Walmart Connect’s partnerships have been hands-on in nature. Brands get custom reporting about their campaigns, based on activations on Walmart.com’s live shopping, TikTok, Snap, and Roku. But Seth Dallaire told Advertising Age that the partnership program expanding to the point where it would be more automated and widely available within Walmart Connect, so that brands could better target ads on social media and connected TV.

Contact True Interactive

To succeed with online advertising, contact True Interactive. Read about some of our client work here and our Walmart Connect expertise here.

For Further Insight

Why Walmart Connect Is Winning,” Tim Colucci, February 25, 2022.

Why Retailers Are Launching Ad Businesses,” Tim Colucci, January 11, 2022.

Walgreens Doubles Down on Its Advertising Business,” Tim Colucci, May 19, 2021.

Amazon Unveils New Ad Units Across Its Ecosystem,” Kurt Anagnostopoulos, May 4, 2021.

Why Macy’s Launched an Advertising Platform,” Tim Colucci, March 3, 2021.

Walmart Asserts Its Leadership in Advertising,” Tim Colucci, February 8, 2021.

Why the NFL on Amazon Prime Is a Victory for Connected TV

Why the NFL on Amazon Prime Is a Victory for Connected TV

Amazon

For decades, watching NFL games on television has meant gathering in front of a TV set and watching a game on one of the major networks. NFL games have been events that vanquish the competition. Featured programming such as Sunday Night Football, Thursday Night Football, and Monday Night Football have dominated viewer ratings. All of this is still the case. But how we watch football is changing.

On September 15, the NFL officially entered a new era of television broadcasting when the Kansas City Chiefs and Los Angeles Chargers took the field for Thursday Night Football. Instead of televising the game on an established linear TV network, the NFL streamed the match-up on Amazon Prime as part of a $13 billion, 11-year deal with Amazon.

The game marked the NFL’s official embrace of streaming. It also meant that to watch TNF going forward, football fans would need to sign up for Amazon Prime, which is Amazon’s premium service costing $139 annually. And so far, it looks like fans are willing to pony up. According to an internal Amazon memo, the September 15 broadcast drew a record number of Prime sign-ups for a year-hour period.

Given the popularity of the NFL – easily the most dominant brand on TV based on viewer ratings – the streaming agreement has significant ramifications for advertisers. Notably, this is a victory for connected TV, which means watching TV content through a device such as Roku or Amazon Fire. Many people refer to connected TV as over-the-top (OTT) TV, which refers to streaming content directly over the internet instead of cable, broadcast, and satellite television platforms. Although technically the two terms differ – with connected TV referring specifically to the device people use to stream content – for all intents and purposes, they are the same. Whatever you want to call it, connected TV has arrived: streaming is now more popular than cable. It’s no longer optional for businesses to have an OTT advertising strategy.

Connected advertising is similar to linear TV advertising because both formats rely obviously on video. But connected TV is different in many important ways. For one thing, advertisers need to understand how to create video content that will reach viewers across a variety of viewing devices in addition to TV screens, and connected TV ads are competing with multiple content streams. (You can watch TNF on a laptop, mobile phone, or gaming console with multiple screens open.)

And each streaming service and connected TV device (ranging from Amazon Fire to Roku) offer their own ad units. For example, Amazon Ads, which is Amazon’s fast-growing advertising business, offers ad units such as inline ads (which appear as selectable rows in each major browsing section of Fire TV) and feature rotator (a carousel-like ad placement appearing above the fold of the screen).

Ahead of the launch of TNF on Amazon Prime, Danielle Carney, Amazon Ads’ Head of NFL Sales, said:

We’re offering myriad opportunities to get involved with TNF, catering to brands’ range of needs. Our premier sponsorships give advertisers the ability to elevate their brands during the pre-game, pre-kick, halftime, and post-game shows. But that’s not all. We’re continuing to innovate and explore other potential sponsorships and packages that will enable brands tell their stories in unique ways through our surround, alternate feeds, and ancillary programming. Our newly built creative sports team will help customize the experience for our partners.

Outside of sponsorships, brands can use Streaming TV ads to reach fans throughout games on Prime Video and Twitch. Like our sponsorships, these video ads are backed by Amazon’s first-party insights, bringing more value and insight into campaign performance for brands.

To succeed, though, Amazon Prime needs to deliver viewing numbers to advertisers. Reportedly, Amazon has told advertisers that it expects to see nightly viewership of about 12.5 million people for its inaugural season of TNF. We’ll soon see. Amazon agreed for Nielsen to track ratings for TNF, and ratings for the September broadcast are still forthcoming.

Amazon Prime also needs to deliver a desirable experience. Amazon promises alternative ways to watch TNF, including Dude Perfect, a popular trick-shot comedy group. Amazon Fire TV and Alexa are bringing new features to NFL fans as well, such as trivia and real-time access to statistics (which should appeal to Fantasy Football devotees). Early fan reactions to the September 15 broadcast were mixed, and it looks like Amazon has some technical issues with content buffering to fix. Of course, no one can predict the quality of an actual NFL game, but Amazon can certainly deliver on the overall experience. Let’s see how Amazon adapts.

The broadcast is also significant for another reason: a victory for first-party data, which is the information that businesses collect directly from their customers. Amazon will use first-party data to sell targeted ads to help drive revenue for the games. This is huge. Right now, third-party audience data is withering away thanks to Apple’s and Google’s privacy measures. Businesses that figure out how to monetize first-party data enjoy an enormous advantage. Amazon has already become the third biggest ad platform in the world (behind Google and Meta) by using first-party data to sell targeted ads. The ascendance of first-party data is one reason why retailer-based ad networks have become so popular.

Bottom line: what is your advertising game plan for connected TV?

Contact True Interactive

To succeed with connected TV advertising, contact True Interactive. We have deep experience with this format.

How Apple Will Grow Its Advertising Business

How Apple Will Grow Its Advertising Business

Apple

Apple changed the advertising industry when the company launched an important privacy control in 2021, Application Tracking Transparency (ATT).  ATT asks iPhone users to decide whether apps can track them across other applications and websites. After the introduction of ATT, 62 percent of iPhone users opted out.

This has created a problem for advertisers and ad tech platforms such as Meta that rely on the ability to track user behavior across the web in order to serve up targeted ads to them. Without tracking user behavior via third-party cookies, their ads are less personalized. Meta said that ATT would cost the firm $10 billion in revenue in 2022. Apple, for its part, justified the new privacy control as taking a stand for consumer privacy.

Well, we now know Apple had something else in mind with ATT: taking a stand for Apple’s advertising business.

As Bloomberg reported recently, Apple is now earning $4 billion in revenue annually by selling ads on its devices, and the company plans to grow that amount aggressively. Granted, $4 billion is a far cry from the $209 billion that Google pulled down from advertising in 2021, but Apple’s newfound focus on ads sure casts its consumer privacy push in a different light.

How Does Apple Earn Ad Revenue?

Apple makes money selling ads on spaces that people see all the time on their iPhones and connected TVs as they navigate their screens to download apps, read the news, and watch content. Those include:

  • The App Store, as shown here:

Apple Ads

  • Apple’s own News and Stocks apps.

The additional ad revenue will come from:

  • The Today tab (the home page of the home page of the App Store, which includes content ranging from App of the Day to Game of the Day).
  • The You Might Also Like section of the App Store (this is found at the bottom of the App Store).
  • Third-party app download pages.

Does ATT Apply to Apple?

How will Apple sell targeted ads? By collecting first-party data, meaning the information that users of Apple devices cough up to Apple whenever they use the App Store, News and Stock apps, and so on. And, by the way, Apple will not make it easy for users to opt out of having their data tracked. You can disable the ad personalization feature, but you have to look for it under Apple Advertising in the settings app’s Privacy & Security menu. There is no pop-up menu asking you if you’d like to have tracking disabled as is the case with ATT, as shown below:privacy noticeBut shouldn’t ATT also apply to Apple? Not in Apple’s view. According to Bloomberg:

You may ask then, why don’t Apple apps have to ask permission to track users via a pop-up message? That’s what happens with other apps under ATT.

The reason, Apple says, is that the system “does not follow you across apps and websites owned by other companies.” That’s what ATT is designed to prevent. If a third-party app doesn’t track across outside apps and websites, it also doesn’t need to show a pop-up.

The “we are exempt from our own policy” rationale is how Google justifies its plans to kill third-party cookies on the Chrome browser. Google apps such as YouTube are exempt because technically they collect first-party data, not third-party data.

It’s easy to connect the dots and see what’s going on here: by attacking third-party cookie tracking, Apple bolsters its own ad program, which relies on first-party data collection.

Apple’s ad business is far too small to threaten the lead enjoyed by Amazon, Google, and Meta. But Apple has the muscle and money to grow its business quickly. ATT was a declaration of war.

What Advertisers Should Do

  • Understand the big picture. There is no going back: tech firms such as Apple and Google are undercutting the value of third-party cookies. Accept the reality that as third-party cookies crumble and technology companies enact privacy controls, your ads will be less targeted than they were. This does not mean you should stop advertising online. Online advertising remains the most efficient and cost-effective way to reach your audience. At the same time, first-party data is more valuable than ever to advertisers as a means to creating targeted ads. Consider ad platforms such as Amazon Advertising and Walmart Connect, which give businesses entrée to a vast base of customers who search and shop on Amazon and Walmart. True Interactive offers services on both platforms in addition to our longstanding work on Google, Bing, and other platforms. Learn more about our services with Amazon Ads here and Walmart here. Apple and Google cannot undercut what these companies are doing.

True Interactive can help you navigate the ever changing world of consumer privacy and advertising.

Contact True Interactive

To succeed with online advertising, contact True Interactive. Read about some of our client work here.

Lead image source: https://pixabay.com/photos/apple-inc-mac-apple-store-store-508812/

 

 

 

Why Google Delayed Its Cookie-Killing Effort to 2024

Why Google Delayed Its Cookie-Killing Effort to 2024

Google

To no one’s surprise, Google announced that the company is postponing its plans to kill third-party cookies on Google Chrome. The deadline, originally scheduled for 2022, will now be late 2024. If this news seems familiar to you, you are not alone. In 2021, Google announced a delay to 2023, but now 2023 no longer is feasible.

Why?

The problem for Google comes down to the reality that the company raked in more than $209 billion in advertising revenue in 2021.

Google Ad Revenues

As a result, Google needs to proceed very carefully in its phasing out of third-party cookies, which advertisers use to serve up targeted ads to people by tracking their browsing habits across the web. The fact that Google announced the delay after it disclosed subpar quarterly earnings shows just how wary Google is of rocking the boat. To protect its advertising business, Google must:

  • Come up with an alternative to third-party cookies that will satisfy advertisers. If Google fails to do that, Google will lose business to competitors such as Amazon Ads. Amazon Ads deliver targeted ads based on their own data beyond the reach of Google’s privacy controls. And Amazon Ads isn’t the only one, as I blogged recently.
  • Mollify regulators. Because Google is the largest online ad platform in the world, Google must convince regulators that its consumer privacy changes won’t give Google an unfair advantage. As we blogged in 2021, U.K. regulators have already slowed down Google’s efforts. Regulators are concerned that the demise of third-party cookies could give Google too much power because Google can rely on first-party data on sites such as YouTube (which Google owns) to support its ad business.

Google’s approach to satisfy advertisers consists of the Privacy Sandbox, where Google experiments with alternatives to third-party cookies that enable targeting with stricter privacy controls in place. Those alternatives include:

  • Fledge, for remarketing new ads.
  • Attribution reports, for telling advertisers which ads work without compromising consumer privacy.

But it is taking some time for Google to devise solutions as noted above, and not without some considerable trial and effort. For the record, here is Google’s rationale for the delay this time:

The most consistent feedback we’ve received is the need for more time to evaluate and test the new Privacy Sandbox technologies before deprecating third-party cookies in Chrome. This feedback aligns with our commitment to the [U.K. Competition and Markets Authority] to ensure that the Privacy Sandbox provides effective, privacy-preserving technologies and the industry has sufficient time to adopt these new solutions. This deliberate approach to transitioning from third-party cookies ensures that the web can continue to thrive, without relying on cross-site tracking identifiers or covert techniques like fingerprinting.

That rationale underlines both the impact of regulators and the difficulty in developing an answer to third-party cookies.

This latest delay has annoyed advertisers who had been taking measures to adapt to a cookie-less world and now find themselves delaying their plans. Others simply do not like the uncertainty of living in an extended transitional period while Apple enacts privacy control measures of its own. We suggest that for now, advertisers:

  • Accept the reality that as third-party cookies crumble and technology companies enact privacy controls, your ads will be less targeted than they were – at least until the industry adapts to alternative tools being developed. This does not mean you should stop advertising online. Online advertising remains the most efficient and cost-effective way to reach your audience.
  • Try alternatives beyond Google’s Privacy Sandbox. These include alternative IDs, contextual targeting, and seller-defined audiences.
  • Work with your advertising agency to understand what’s happening and how you may be affected. That’s exactly what our clients are doing with True Interactive. That’s what we’re here for.
  • Don’t abandon ship with ads that rely on web tracking. As you can see with Google’s announcement, things may not proceed the way Google plans.
  • Do invest in ways to leverage your own (first-party) customer data to create personalized ads. We can help you do that.
  • Consider ad platforms such as Amazon Advertising and Walmart Connect, which give businesses entrée to a vast base of customers who search and shop on Amazon and Walmart. True Interactive offers services on both platforms in addition to our longstanding work on Google, Bing, and other platforms. Learn more about our services with Amazon Ads here and Walmart here.

One other important consideration: remember, Google is not the only company doing away with third-party cookie tracking. Apple did so with Safari in 2020, and Mozilla with Firefox. The writing is on the wall: it’s time to adapt to a world without third-party cookies. True Interactive can help you do that.

Contact True Interactive

To succeed with online advertising, contact True Interactive. Read about some of our client work here.

Lead image source: https://unsplash.com/@laurenedvalson

For Further Reading

Netflix Chooses Microsoft As Its Ad Tech Partner

Netflix Chooses Microsoft As Its Ad Tech Partner

Advertising Microsoft

Netflix continues to roll out its previously announced plan to provide an ad-supported subscription tier. The streaming company has chosen Microsoft to be its global advertising technology and sales partner. This means Microsoft will supply technology to facilitate the placement of video ads on Netflix. All ads served on Netflix will be available exclusively through Microsoft’s platforms.

In a statement, Netflix Chief Operating Officer and Chief Product Officer Greg Peters said:

In April we announced that we will introduce a new lower priced ad-supported subscription plan for consumers, in addition to our existing ads-free basic, standard and premium plans. Today we are pleased to announce that we have selected Microsoft as our global advertising technology and sales partner.

Microsoft has the proven ability to support all our advertising needs as we work together to build a new ad-supported offering. More importantly, Microsoft offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members.

It’s very early days and we have much to work through. But our long term goal is clear. More choice for consumers and a premium, better-than-linear TV brand experience for advertisers. We’re excited to work with Microsoft as we bring this new service to life.

The news comes weeks after Microsoft completed its acquisition of the Xandr ad-tech unit from AT&T, which had been involved in programmatic advertising. Xandr provides a data-enabled technology platform with tools that help power a diverse ecosystem connecting marketers and media owners through first-party, data-led advertising solutions across its network. The Wall Street Journal reported that the acquisition gave Microsoft the technology necessary to become a contender for the Netflix deal. The Wall Street Journal also noted that in pitching itself as a contender against rivals suchas Google, Microsoft “stressed one word: agnostic. Microsoft emphasized that it won’t compete in streaming with Netflix, the person said. Comcast’s NBCUniversal operates the Peacock streaming service while Google owns YouTube.”

It was widely known that Netflix would seek an ad tech partner to support its nascent ad-supported tier. The company, facing declining membership and sagging stock price, is under pressure to compensate for lost revenue by adopting ads. Rivals such as Disney+ are set to launch an ad-supported option, too.

But Microsoft is a surprising choice as a partner. Microsoft has not, historically, been known for video ads. Having said that, going with Microsoft likely means that Netflix will launch its ad-based platform as a reservation buy when it goes into beta, but that would be short-term. Long-term, I think this means that Netflix, as well as Microsoft, is looking to open up Netflix advertising in the same way that Google does on YouTube/YouTube TV.

That would mean that after Microsoft works out the kinks through reservation buys, the company would open up placements for all advertisers, regardless of budget, to run video ads on Netflix. Reservation buys would continue for any advertiser, but anytime those placements are not bought, they would go up for auction. I foresee, though, that big series like Stranger Things, The Crown, and The Witcher will require large reservation busy since demand will be high. The same goes for movies.

Disney+ recently announced that the cheaper D+ offering would have ads as well, but those would be done through The Trade Desk. TTD is a popular DSP (demand side platform), but typically they require a reasonably sized budget in order to run campaigns.

With the Netflix/Microsoft deal, it opens up “TV commercials” for the everyday advertiser.

Contact True Interactive

True Interactive can help you navigate the connected TV landscape. Our services range from media strategy and planning to automated performance reporting. Learn more about our services here, and contact us to learn more.

Streaming Services Embrace Ads: Advertiser Q&A

Streaming Services Embrace Ads: Advertiser Q&A

Advertising

Netflix sparked one of the biggest stories in the ad tech industry in April when the streaming company announced it was going to embrace advertising. This move was long anticipated from industry watchers who wondered how long Netflix could satisfy investors and recoup the costs of content creation based on subscriber growth alone. Well, Netflix finally relented after distancing itself from ads. That’s because Netflix’s subscribers are not growing at the rate Netflix once enjoyed when the company was challenged by few competitors. In its first quarter of 2022, the company actually lost subscribers. But Netflix is not the only company adopting an advertising-supported tier. Disney+ will also adopt advertising in 2022. The two platforms join streaming companies such as Hulu and HBO Max in doing so. Here are some questions advertisers might be asking:

Will people who subscribe to Disney+ and Netflix start seeing ads with their current plans?

No. Both Disney+ and Netflix have made it clear an ad-supported plan will cost less than the ad-free plans that exists now.

Netflix CEO Reed Hastings recently told investors, “If you still want the ad-free option, you’ll be able to have that as a consumer. And if you would rather pay a lower price and you’re ad-tolerant, we’re going to cater to you also.” Disney Chief Financial Officer Christine McCarthy said the same about Disney’s plans.

Why are Disney+ and Netflix running ads?

The obvious answer: advertising brings in revenue to offset the costs of content creation. But advertising also gives audiences more options. Recently, Hulu revealed that 70 percent of its viewers were on ad-supported plans with the remainder on the pricier ad-free tiers. Both Disney and Netflix expect that audiences will respond to having both an ad-free and cheaper ad-supported option.

“Based on our Hulu experience, we actually have more AVOD [ad-supported video-on-demand] than SVOD [subscription VOD] subscribers,” Christine McCarthy of Disney said, speaking at the 9th Annual MoffettNathanson Media and Communications Summit. “We expect about the same percentage for both Disney+ and Hulu, just based on the experience curve that we’ve witnessed.”

Reed Hastings of Netflix also cited Hulu’s success when he unveiled Netflix’s plans to investors. Hastings specifically called out Hulu as proof that ads are working for video subscription services: Hulu ended 2021 with 40.9 million paying subscribers, up from 35.4 million a year ago.

When do ads come to Netflix and Disney+?

Disney plans to launch an ad-supported plan in 2022 at some point; although Netflix has not specified a timeline, a leaked internal memo from Hastings indicated that an ad-supported plan could be coming before the end of the year.

What will the ads look like?

At the MoffettNathanson conference, Rita Ferro, president of Disney Advertising Sales, said that the Disney+ ad-supported tier will start with 15- and 30-second spots, but will expand to a “full suite of ad products” over time. The ads will have an average of four minutes per hour, which is fewer ads than at Hulu. That’s partly because 65 percent of viewing on Disney+ is movies, which has fewer ad breaks than series.

According to Variety, the ad-supported version of Disney+ will not accept alcohol or political advertising at launch, nor will it run ads from rival streamers or entertainment studios.

Nothing is known yet about Netflix’s plans. But since Netflix cites Hulu as a model for successful advertising, Hulu’s own ad units are worth learning more about. And there are many of them. Here are a few:

  • Standard video ads appear as a commercial break during the streaming of any of Hulu’s full episodes. Such ads can also appear as a pre-roll for clips hosted on distribution partners of Hulu or as companion banners.
  • Binge ads let advertisers deliver contextually relevant messages to the audience during a viewer’s binge session. These ads help businesses to engage with audiences in a non-disruptive way. Binge ads are for viewers who have watched three or more shows of the same series.
  • Sponsored Collection brand placements gives advertisers extended ownership of a collection sponsorship through logo placement adjacent to content in Hulu’s UI across devices.
  • Hulu’s Pause Ad is a non-disruptive, non-intrusive user-initiated ad experience that appears when a viewer presses pause when watching content.
  • The Ad Selector allows the user to control their ad experience by choosing the ad they want to see. The user will be presented with two or three video options. Once a selection is made, the user will be presented with the commercial of their choice. If no selection is made after 15 seconds, one video in the unit will be randomly selected to play.

Hulu shares its ad units in more detail here.

Netflix is renowned for using analytics to personalize content for its audiences around the world. Its own ad units may skew toward the Ad Selector option cited above, tailored to global audiences. But the company will need help.

“Netflix already has a trove of first-party data that can deliver a variety of audience segments for advertisers, and relevance for consumers,” said Adam Helfgott, CEO at MadHive, the programmatic ad tech firm. “In order to sell that inventory in context with TV overall for advertiser objectives, they will need to integrate into the ecosystem and partner with DSPs, SSPs, and infrastructure providers.”

Netflix may also step up product placements in its shows such as Stranger Things. Netflix has not really actively monetized product placements even though its shows are not shy about integrating real products into their plotlines, as Stranger Things does with businesses ranging from Cadillac to Eggo.

Meanwhile, competitors Amazon Prime Video and Peacock will literally drop products into actual shows. These received less attention than the news from Netflix from Disney+, but they are also intriguing. At the 2022 NewFronts, Amazon and Peacock demonstrated new ad formats that use similar virtual product placement (VPP) tools, a post-production technique for inserting a brand into a TV show or movie scene.

Amazon’s VPP tool, operating in beta, lets advertisers place their branded products directly into streaming content after they have already been filmed and produced. Peacock’s new “In-Scene” ads will identify key moments within a show and digitally insert a brand’s customized messaging or product post-production so that the brand is showcased in the right TV show/movie and at the right time. These function very similarly to in-game ads.

It’s going to be an interesting and exciting year for advertising.

What should advertisers do?

  • Understand the growth of advertising on streaming platforms in context of the rise of connected TV. If you’ve not done so already, take a closer look at why connected TV is growing and how it could expand your audience. (True Interactive can help you with that.) Connected TV is enjoying 60-percent growth, driven by a public’s appetite for streaming that continues unabated, Netflix’s slowdown notwithstanding.
  • While you await more clarity on available ad units, get to know the audiences on each platform. Which is right for your brand?

Contact True Interactive

True Interactive can help you navigate the connected TV landscape. Our services range from media strategy and planning to automated performance reporting. Learn more about our services here, and contact us to learn more.

Photo by Souvik Banerjee on Unsplash

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