Streaming Services Embrace Ads: Advertiser Q&A

Streaming Services Embrace Ads: Advertiser Q&A

by Tim Colucci 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

For Further Reading

Consumer Spend on Mobile Hits Record Levels in Q1 2020

Consumer Spend on Mobile Hits Record Levels in Q1 2020

by Morgan Reilly Mobile

On April 1, I blogged about some trends in mobile behavior based on a 2020 App Annie State of Mobile report. As if on cue, App Annie then revised its report to note the incredible surge in mobile usage during the first quarter of 2020 as people have practiced social distancing on a widespread scale. These numbers should convince businesses to invest in mobile advertising now more than ever:

  • Q1 2020 was the largest-ever quarter in terms of consumer spend on apps: $23.4 billion.
  • The number of new app downloads in Q1 totaled 31 billion, a 15 percent increase over the fourth quarter of 2019. As Tech Crunch reported, “That’s notable, given that the fourth quarter usually sees a big boost in app installs from holiday sales of new phones, and Q1 managed to top that.”
  • The United States and China were the largest contributors to consumer spend on the Apple iOS operating system.
  • Users of the Google Android operating system spent the most on games social, and entertainment apps, in large part due to Disney+ and Twitch.
  • The Top Five apps worldwide for Q1 based on downloads and consumer spend: TikTok, WhatsApp Messenger, Facebook, Instagram, and Facebook Messenger.

All of that time people devote to managing their lives with mobile devices creates opportunities for businesses to engage with customers. The key is to create a sustained presence and to be mindful of using tone appropriate for the times we’re living in right now.

At True Interactive, we have deep experience helping businesses thrive on mobile. For instance, for Snapfish, we launched a digital media campaign that combined major platforms such as the Google Display Network with mobile-centric display networks that serve up ads to consumers on mobile devices. Revenue from mobile app installs grew 343 percent year over year during the holiday season. Mobile app installs grew 23 percent during the same period. Overall, Snapfish saw a 756-percent return on ad spend. Meanwhile, Snapfish saw a 56-percent decrease in costs per install.

For more insight into our work with Snapfish, read this case study. For more insight into responding to the surge in mobile activity, check out my recently published blog post, “Why Mobile Will Power Your Marketing Future.”

Contact True Interactive

Mobile is where the action is. Are you getting in on it? Contact us.

Photo by Rob Hampson on Unsplash

Quibi, the Newest Disruptor: Advertiser Q&A

Quibi, the Newest Disruptor: Advertiser Q&A

by Héctor Ariza Advertising Video

Just when you thought you had a handle on content streaming (Netflix: check, Disney+: check), a new player has emerged with the potential to shake things up all over again. Backed by a boatload of cash and the imprimatur of Hollywood royalty like Steven Spielberg, Quibi is poised to carve a unique niche in a crowded field. Read on to learn more.

What Is Quibi?

 

Quibi is a new premium streaming service that imposes a cap on programming time: the name Quibi, in fact, is shorthand for “quick bites” of video. Quibi aims to showcase stories of 10 minutes or less; content is meant to be viewed specifically on one’s mobile phone. The platform, founded by chairman Jeffrey Katzenberg, has installed tech vet Meg Whitman as the CEO, and investors include studios like Walt Disney Co. and WarnerMedia.

What Kind of Content Will Be on Quibi?

Given the unique mobile phone focus, Quibi will be generating all new content. As Whitman tells Marketplace, “We will be the first streaming service that launches without a library.” As Whitman sees it, starting from ground zero means an opportunity to create something truly fresh: “We have . . . invested significantly in content. This is all about finding the great stories, attaching the great actors and actresses to it and getting them excited about doing something entirely new.”

Quibi expects to deliver 175 shows and 8,500 episodes in its first year. The content promises to be a diverse mix, from long-form narratives to reality programming, documentaries, food shows, and daily news programs. Given Quibi’s format, the long-form narratives will be delivered in bite-sized chunks, serial fashion (think Dickens and the serial way he delivered novels like Pickwick Papers). Whitman is quick to stress that short format doesn’t mean inferior quality. “Nothing’s lesser about the movies [we’re developing] other than the chapterized way we deliver them,” Whitman says.

Content can be downloaded, so users won’t need an active Internet connection to view programming. And quality of the viewing experience is a prime mandate. As Whitman told Marketplace, “[P]eople are watching a lot of videos on their mobile phone today, but it’s an uneven experience. Sometimes, if you’re holding the phone in portrait, it’s a little postage-stamp size, then you turn it horizontally, it’s got big black lines. Some content is only available in portrait, some is only available in landscape . . . we have to be able to have seamless portrait-to-landscape rotation with full-screen video.” To that end, the company is employing what Whitman calls “compression technology,” and reportedly working with Google to ensure flawless video streams. Whitman also notes, “[W]e shot, obviously, to the aspect ratio of the phone.”

How Is Quibi Different from YouTube and Other Platforms?

As noted, story lengths on Quibi are capped at 10 minutes. And Quibi content has specifically been created for viewing on a mobile phone.

There is a distinction between what Quibi promises and the content made for mobile phones on free platforms like, say, TikTok. Services like TikTok offer user-generated content. By contrast, filmmakers like Steven Spielberg and Catherine Hardwicke are collaborating with Quibi to create programs designed specifically for viewing via Quibi, sometimes even at certain times: “Spielberg’s After Dark” series will only appear on the service at night, for example. An untitled show devoted to zombies is reportedly being discussed with Guillermo del Toro. User experience will also be informed by how customers hold their phones: changing from vertical to horizon orientation will change what the viewer sees.

Who Is the Target Audience for Quibi?

The target audience is Millennials—ages 18 to 44. The idea is that the platform will especially appeal to consumers on the go: someone waiting in line at the bank, say, or taking a quick bus ride during which 10 minutes of content might be the perfect diversion.

When Does Quibi Launch?

The platform is due to launch in the United States on April 6, 2020, but as Whitman notes, “you don’t have to wait till then to get involved.” On Quibi.com, you can learn about new shows, the technology, and any milestones before launch date. Whitman adds, “We’ll let you know on April 6 when you can download the app from either the Apple App Store or Google Play Store.”

What Advertising Opportunities Exist on Quibi?

There will indeed be opportunities for advertisers, as users will be invited to choose between Quibi with or without ads. The service will launch, for viewers in the United States, at $4.99 a month with ads, $7.99 a month without. Whitman shares with Marketplace, “We think that most [consumers] will pick the ad-supported version because it’s a very light ad load. It’s only 2.5 minutes per hour of watching, which is much less than prime time TV, which is 17.5 minutes of advertising for every hour that you watch.” Ads will appear before a Quibi show begins and last six, 10, or 15 seconds. They will be unskippable. Advertisers already onboard include Discover, General Mills, Taco Bell, Walmart, and PepsiCo.

Quibi programming will also come with ratings to help advertisers determine whether a show is geared to mature audiences. At the WSJ Tech Live conference in October 2019, Whitman said, “[Marketers] can feel safe that their brand shows up next to content that they’re OK with.”

And because Quibi programming is structured around serialized chapters, the platform is looking into an alternative where advertisers could serialize their ads, too.

What Kind of Reception Has Quibi Received?

It’s a mixed one. Naysayers insist the endeavor is a gamble, and that the subscription fee will discourage consumers used to video content that can be viewed for free on platforms like YouTube. Katzenberg, however, is confident. “I think we are doing something that is now such a well established consumer habit,” he told NewsDio. “There are 2.5 billion people walking with these televisions in their pocket. They are already watching a billion hours of content every day. I just know that it will work.”

Quibi has tried to get out in front of its critics by building visibility through some (presumably expensive) ads during the 2020 Super Bowls and Oscars.

Not all watchers have been impressed, as this Verge article discusses.

There’s no denying Quibi has attracted some heavyweights to create content. Will consumers be willing to pay for that content? Only time will tell.

Contact True Interactive

Curious about Quibi and the opportunities this new platform affords? Contact us.

How the Streaming Wars Benefit Brands

How the Streaming Wars Benefit Brands

by Héctor Ariza Advertising

How will the streaming wars affect the way businesses market themselves in 2020?

This question looms large. A growing number of streaming services, including Apple TV+ and Disney+, now compete with already established players Amazon Prime, Hulu, and Netflix. More services, including one coming from AT&T, are on the way. All of them cater to a younger audience that is notoriously indifferent to ads, which helps explain why most – but not all — streaming services remain ad-free. But that doesn’t mean it’s impossible for businesses to market themselves through streaming services.

Ad-Supported Tiers

So far, Hulu remains the only major streaming company that offers an ad-supported tier, which costs $5.99 a month. (To watch content ad-free on Hulu, viewers need to shell out $11.99 per month.) Hulu tightly controls ad formats to prevent them from being too intrusive, keeping commercial breaks short. In addition, Hulu is said to be experimenting with different types of ads, such as banner ads that appear when viewers pause their content – making Hulu resemble YouTube as a content-watching option. An ad-supported tier apparently works for Hulu. A recent New York Times article reported that the $5.99 tier is Hulu’s most lucrative one:

Even though it charges $6, the service generates more than $15 in revenue per subscriber each month, because of the high-cost advertising sold against those customers, according to two people familiar with the business.

Advertising grew by 45-percent for Hulu in 2018.

In addition, pressure is mounting for Netflix to provide an ad-supported tier, which Netflix does not offer at the moment. But Netflix might cave in because of rising content creation costs and increased competition. A recent stock downgrade by a prominent financial analyst ratcheted up the pressure.

I believe that Netflix will eventually provide advertising (more about that here). For now, here’s a good rule of thumb: if you’re the type of brand that understands how to capitalize on YouTube ad formats (such as YouTube Masthead), consider the ad tools that Hulu is developing. For instance, Hulu offers “binge watch ads,” which, as the name implies, target people who like to watch multiple programs in one sitting. As reported in TechCrunch,

These “binge watch ads” utilize machine learning techniques to predict when a viewer has begun to binge watch a show, then serves up contextually relevant ads that acknowledge a binge is underway. This culminates when the viewer reaches the third episode, at which point they’re informed the next episode is ad-free or presents a personalized offer from the brand partner.

Expect Hulu to provide more creative ways for brands to attract eyeballs.

Watch Hulu closely. The company’s development of an ad tier may point a way forward for Netflix and other competitors.

Co-Branding

Businesses can brand themselves in other ways beyond traditional advertising, such as having their products placed on shows. Here again, Hulu provides an example of how to do it. According to The New York Times, Hulu has a team dedicated to working with businesses to have their products appear on Hulu programming, with the number of paid arrangements increasing 200 percent from 2018 to 2019.

But Netflix is also cozying up to brands (although it is not monetizing those arrangements as aggressively as Hulu has done). For the Netflix hit show Stranger Things, Netflix has struck 75 co-branding deals, which typically provide Netflix exposure and licensing fees (although they are not product placements, per se). Recently, Netflix and sandwich chain Subway made it possible for Subway to offer a Green Eggs and Ham Sub, an homage to a new Netflix series “Green Eggs and Ham,” which is based on the Dr. Seuss book. The sandwich, in effect, acted as an advertising play for both Netflix and Subway. The awareness included strong digital branding, examples being promotions on Subway’s Instagram and Twitter.

Many other examples abound. For instance, clothing company Diesel paid a licensing fee to Netflix in order to manufacture outfits inspired by the popular Netflix show, La Casa de Papel. Diesel capitalized on the power of digital to run online ads that connected the brand to the show:

 

The Netflix-Diesel relationship is a win-win, generating licensing revenue for Netflix and culturally relevant branding for Diesel.

Amazon Prime Video, meanwhile, is no stranger to co-brands. The service, like Hulu, courts product placement opportunities. For example, snack brand Too Yumm! Recently struck a deal with Amazon Prime Video to have its products integrated into a sports drama thriller Inside Edge 2. Amazon recently struck a deal to have Cheerios placed in episodes of The Marvelous Mrs. Maisel, as well.

As these examples show, the growth of streaming services does not mean the demise of advertising and branding – far from it. In fact, as the Diesel and Subway examples demonstrate, streaming services create online advertising and organic branding through platforms ranging from Instagram to YouTube. In addition, a new survey from the Trade Desk and YouGov indicates that consumers of streaming services are open to advertising in exchange for lower prices.

In 2020, expect streaming services to generate more advertising and marketing opportunities as businesses look for creative ways to court audiences online.

Contact True Interactive

To make online advertising work for you, contact True Interactive. We’re an independent agency that optimizes branded interactions to drive traffic and increase sales.