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.

 

 

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

For Further Reading

What’s Next for Netflix?

What’s Next for Netflix?

Connected TV

Remember when Meta shocked the world by announcing a historic drop in its stock price? Well, Meta has some company now that Netflix realized a massive drop in its own market capitalization after announcing that the streaming service had lost subscribers for the first time in 10 years. The news shook investors, but it also inspired speculation about new directions for Netflix – notably the likely introduction of advertising, a move that Netflix has resisted for years. But times have changed, and now Netflix must adapt or die. Here’s what I think will happen next:

  • Advertising will happen sooner than you think. Netflix said it will take a few years to integrate ads into the platform. But I’m thinking it will take months. The company has endured two consecutive disastrous quarters and forecast another bad one on the way. Netflix is under too much pressure to wait two years. Plus, its audience is receptive: two-thirds of connected TV viewers in the U.S. prefer to see ads if they can pay less for the service, according to a recent survey conducted by DeepIntent and LG Ads Solutions. On top of that, Netflix is already set up to create an ad business. The company is sitting on top of deep first-party data. All Netflix needs to do is partner with an ad tech platform to get an ad business up and running. (The Trade Desk has been circulated as a likely partner.) And watching content on streaming is a pretty straightforward experience: it’s easy to drop in ad spots before or after shows, and during them, just like linear TV. And connected TV offers even more options such as ads appearing alongside the search bar or in the screen menu. Knowing Netflix’s aversion to advertising, I suspect the company will avoid interruptive ads even for a lower-price tier.
  • Ads will get creative. Sure, we’ll see plenty of traditional commercial spots like you see on Hulu. But Netflix has been quietly building a merchandising operation over the past few years. The company recently launched its own digital commerce site to sell clothing tied into its popular shows. Netflix will likely create merchandise licensing deals to feature products from other businesses in its shows, such as Stranger Things. So far, Netflix CEO Reed Hastings has been reluctant to go down this route. But all bets are off now.
  • Netflix will get sold. I don’t think advertising will be a savior for Netflix. True, there is a receptive audience, but is there enough to sustain Netflix’s future? I predict that Netflix will be sold to Apple. Apple launched its own streaming service, Apple TV+, in 2019, and the company is hungry to grow. Apple has deep pockets and is eager to achieve brand cachet, which it lacks right now. But Netflix has plenty of brand cachet. I could see Apple buying Netflix but allowing the company to keep its own name. The most expensive part of owning a streaming service is creating contentNetflix gives Apple TV+ a way to accelerate content development.

What Brands Should Do

The Netflix news is a wake-up call for advertisers to embrace connected TV. The only reason Netflix has a future is because connected TV (CTV) has evolved far enough to allow for ads in the first place. Oh, and guess what? Executives at competitors such as Disney+ are doing exactly what Netflix is doing. Hulu, for one, already figured out how to crack the code with CTV ads.

According to Forbes, a recent study from the Leichtman Research Group estimates that 80 percent of TV homes in the U.S. have at least one connected TV device. That number represents a steady increase from the 57 percent logged in 2015, and 24 percent in 2010.

Predictably, CTV use soared during the pandemic: Forbes also cites a Nielson report, which notes that CTV viewing exploded from 2.7 billion hours during the pre-pandemic week of March 2, to 3.9 billion hours during the weeks of March 23, March 30, and April 6. Even during the week of May 4, when stay-at-home laws eased in some states, CTV viewing remained above pre-pandemic levels at 3.5 billion hours.

These stats are good news for advertisers embracing CTV. So is the fact that CTV allows brands to reach out to specific audiences. As Forbes notes, “CTV’s targeting capabilities are the ‘holy grail’ for advertisers.” Many CTV companies use ACR, or Automated Content Recognition, which collects data that can inform programming recommendations for users and better target ads to niche groups. Although audiences in the era of connected TV may not be as huge as the linear TV days, CTV helps brands better understand and reach their niche market effectively.

Contact True Interactive

Eager to capitalize on the opportunities CTV can offer your brand? Contact us. We can help.

How Businesses Are Building Their Brands through “Squid Game”

How Businesses Are Building Their Brands through “Squid Game”

Advertising Branding Marketing

White slip-on Vans have never been so cool. And red light green light? For fans of Netflix’s Korean-language series “Squid Game,” winning that simple childhood contest just took on a whole new meaning. Though it only launched on September 17, “Squid Game” has quickly become Netflix’s most-watched series—ever. Mining themes of economic disparity and the survival instinct, “Squid Game” sets up a disturbing premise: a group of hopelessly indebted people in South Korea are invited to join a tournament of six children’s games to win a pot of cash. The catch? Losers are eliminated—but as the contestants soon find out, that doesn’t mean they just get to take their ball and go home. They are killed off, with the surviving players competing for increasing shares of the loot. Spoiler alert: there will be blood.

 

And audiences don’t seem to mind. Netflix has shared that in the first four weeks after the show’s drop, 142 million households had already tuned in to the dark drama. As early as October 3, Forbes was reporting that “Squid Game” was the number-one Netflix show in a whopping 90 countries. That’s a lot of eyeballs, and the show’s global appeal naturally opened up a huge playing field for businesses to create interesting marketing strategies around the show. But because Netflix doesn’t offer brands an opportunity to run commercials, advertisers have had to figure out some creative ways to tap into this juggernaut. Let’s take a closer look.

Examples of Brands Capitalizing on “Squid Game”

Some brands haven’t had to do much but enjoy the ride. Vans, for example, hasn’t paid for any product placement. But in the show, game contestants are given teal tracksuits and white slip-on shoes to wear during the tournament, a costume that has turned out to be insanely lucrative for Vans. In the two weeks after “Squid Game’s” launch, the American shoe and apparel company reported a jaw-dropping 7,800 percent jump in sales, probably fueled at least in part by a 97 percent increase in online searches for  “white slip-on.”

Other brands have had to be a bit more proactive. Nutter Butter took to Twitter, superimposing its cookie on a “Squid Game” guard’s head and insisting that “We want Nut Game.”

 

Also on Twitter, Heineken used its red star-shaped logo in a nod to one of the show’s tournament games, one in which players, not yet knowing the game rules, choose one shape from a selection of four.

 

They must then extract that shape from where it has been stamped into a “dalgona,” or sugar candy (“The best pick,” Heineken crowed in reference to the star). And Pepsi latched onto the sweet and deadly game with an Instagram post featuring its logo carved into a sugary disk.

Embracing a star from the series has been another way to connect with the show. Louis Vuitton recently announced “Squid Game” actress Ho Yeon Jung as a company brand ambassador. The luxury brand is tapping into her burgeoning popularity on social media channels like Instagram. For context, when the show launched in September, Ho Yeon had 40,000 Instagram followers. Just three weeks later, that number had leapt to 19.1 million. Louis Vuitton clearly took note, and took action, a choice that’s paid off: Ho Yeon’s first post as ambassador earned more than seven million likes in the first few days.

Meanwhile, Netflix, no slouch in the promotions department, has made the savvy move of partnering with another corporate powerhouse — Walmart— to sell merchandise for a number of popular streaming shows including, natch, “Squid Game.” A dedicated digital storefront for Netflix, created by Walmart, is a natural go-to for consumers looking for merch associated with the show: everything from the white numbered tee-shirts worn by “Squid Game” contestants to knit beanies and mugs. This even as Netflix maintains its own line of apparel fans can customize with “designs inspired by the show.”

Lessons Learned

What might your brand take away from the whole “Squid Game” phenom? We suggest that in the face of any hot trend, you:

  • Act quickly. These businesses jumped in right away to capitalize on the buzz appeal of “Squid Game,” timing their marketing with the media frenzy building around the show. Had they waited too long, their marketing would have seemed stale and tired. But by acting quickly, brands like Heineken came across as relevant and cool.
  • Pay attention to your tone. “Squid Game,” despite its popularity, is a violent show that might not be for everyone. The brands discussed above figured out how to strike the right tone with their ads—in this case, content that didn’t skew too dark while still being recognizable as being inspired by the series.
  • Trust your audience—and recognize that you don’t have to reach everyone. The visually appealing ads, such as the Pepsi cut-out, come with zero explanation. But if you are a fan of “Squid Game,” you automatically understand the ad’s inside reference to one of the major plotlines. Pepsi trusted “Squid Game” fans to get the joke, even as they accepted that the ads would probably go over the heads of people who hadn’t seen the show.
  • Align with another brand if it makes sense. Netflix’s partnership with Walmart means that “Squid Game” merch reaches a wider audience. Both brands benefit if those beanies fly off the shelves. Likewise, Louis Vuitton’s connection with one of the show’s stars demonstrates relevance—and represents a mutually beneficial partnership.

Contact True Interactive

How to not only tap into trends but make it look easy? Contact us. We can help.

Why Streaming Companies Are Embracing Ads

Why Streaming Companies Are Embracing Ads

Advertising

Amazon got all the headlines with the news of its $8.45 billion acquisition of MGM on May 26. But days earlier, HBO Max made an announcement with equally big ramifications for streaming companies and advertisers: the launched of a tiered version in which consumers will pay less for a subscription that includes advertising. The news raised eyebrows. After all, HBO has essentially been known as something of a “walled-off garden”: freedom from advertising has been practically a calling card for the television network since its origination. The new offering is the latest example of a streaming company introducing ads — and a sign that HBO is paying attention to trends and consumer behavior. Let’s take a closer look at the news.

Ad-Supported Streaming Is Gaining Ground

HBO is clearly aware of a shift to more ad-supported services in the streaming realm. And as noted by CNBC, Nielsen data supports the uptick: “In January 2021, 34% of U.S. households that had video streaming capability used ad-supported streaming services, up 6 percentage points from January 2020 . . . That applies both to ad-supported on-demand video platforms and linear streaming.”

The advent of ad-supported services is just the latest chapter in the so-called streaming wars, which have been raging over the last year and a half as media and tech giants rolled out their versions of competitors to Netflix and Amazon Prime. Ad-supported tiers have become part of that contest, as streamers gauge what balance of ads consumers will tolerate — for a lesser fee.

HBO Max’s bid to navigate that balance is HBO Max With Ads, which at $10 a month represents a $5 discount to HBO Max’s ad-free subscription. Even with the discount, HBO Max is still one of the pricier alternatives out there. As CNET observes, “HBO Max’s $15-a-month ad-free pricing goes up against Disney Plus at $8 and Netflix’s cheapest plan at $9. Even among the services with discounted advertising-supported tiers, Hulu and Paramount Plus both charge only $6.”

But Julian Franco, vice president of product management at HBO Max, is confident that consumers will appreciate the dynamic their ad-supported platform creates (if at a higher price point): in Franco’s estimation, viewers won’t be bothered by the ads at all.

In some cases, that’s because even on HBO Max with Ads, there may not always be any. Franco explained that the amount of video advertising one sees — that is, the ad load — may vary depending on what one watches. Programs licensed to HBO Max, like Big Bang Theory, will have ad breaks. But programs that originated on HBO’s regular network won’t feature bumpers or spots during playback. Bottom line: HBO Max estimates that typical ad load for an ad-supported subscriber will clock in at just under four minutes per hour. If this projection holds true, HBO Max will be honoring its vow that it will have the lightest ad load in the streaming industry (NBCUniversal’s Peacock currently holds that crown, with an ad load of five minutes per hour).

Why Are Streaming Companies Introducing Ad-Supported Options?

In part, it all goes back to the streaming wars referenced earlier. More people are online watching content, a phenomenon that really picked up during the online surge of 2020. Streaming companies are competing for those eyeballs — and trying to entice viewers by offering ways those consumers can pay less.

Another factor: it costs a lot of money to operate a streaming service, whether you are producing original shows and movies (like Amazon’s new Lord of the Ring series) or buying rights to someone else’s content. Ads help defray those costs.

What’s Next: A Prediction

Will more streaming companies adopt advertising? Possibly so. But Netflix may not be able to pull it off. Netflix is spending billions to create new content, and the company has gradually increased subscription prices to recoup some of the costs. Netflix does not dare introduce advertising to its 200 million subscribers who are already paying a premium. But offering a lower-priced subscription with advertising may not attract enough subscribers at a time when its customer base is plateauing. I predict that Netflix will be sold to Apple. That’s because Apple has deep pockets and is eager to achieve brand cachet, which it lacks right now.  But Netflix has plenty of brand cachet. I could see Apple buying Netflix but allowing the company to keep its own name. Time will tell. But the day is coming.

What Advertisers Should Do

How should brands respond in this evolving environment? We suggest:

  • Consider the different options available. According to CNET, HBO Max intends to embrace some unconventional ad formats, including “pause ads,” which come up only after viewers have paused playback for at least 10 seconds, or a “branded discovery” option that places a sponsor’s banner at the top of a page of recommendations. Think about what format best serves your brand.
  • Use analytics to monitor the reaction to ads. The industry is still learning how receptive people will be to ads — and if different approaches, such as HBO’s effort to provide a more “high end” ad experience, engender a more positive response.

Contact True Interactive

Eager to learn more about this new world of advertising in the streaming world? Contact us. We can help.

YouTube: The Streaming Ad Giant

YouTube: The Streaming Ad Giant

YouTube

Who knew? YouTube is an advertising giant in the streaming industry. And YouTube is becoming increasingly vital as more people stay at home and stream content in light of recent news events.

According to App Annie, in 2019, YouTube made a whopping $15 billion on ads alone. The news comes courtesy of Alphabet (the parent company of Google): for the first time since Google acquired YouTube in 2006, Alphabet has released YouTube’s ad revenue. And the figures are staggering, accounting for almost 10 percent of Google’s overall $161 billion revenue in 2019.

Why This Matters

The news is important because it underlines YouTube’s dominance in an increasingly crowded arena. As App Annie points out, on Android phones, about 70 percent of time spent on the top five video streaming apps worldwide was on YouTube. The platform, a pioneer in the world of video streaming, continues to hold its own. That’s telling. As Forbes notes, “In a market where new streaming video services seem to spring up overnight, YouTube isn’t losing viewers or ad money.”

Also notable: while many of the top apps are Chinese brands, enjoying strong support in China, YouTube isn’t active in the Chinese market—and yet it is still number one in rankings measuring time spent on the top streaming platforms. By a significant margin.

How YouTube Does It

So how is YouTube achieving this cash cow status?

  • For one, YouTube delivers an audience, and you need an audience to attract advertisers. As Lifewire points out, YouTube is one of the most popular sites in the world. It’s arguably the favorite video-sharing and viewing site on the web today, offering a range of long- and short-form free content. And as Lifewire notes, “Youtube.com is the second most popular website in both the global market and in the U.S for 2020, even though a huge portion of YouTube views are from outside the U.S.”
  • But YouTube also does something else: it continuously offers advertisers attractive products. As we’ve blogged in the past, YouTube’s Masthead ad format for TV allows brands to connect with consumers the instant users access the YouTube app on their televisions. The Masthead format is a response to the fact that while consumers aren’t watching as much linear TV, they are still using their televisions as a tool for experiencing streaming platforms like YouTube. In other words, YouTube understands viewing trends, and is staying nimble in its bid to connect with advertisers in an informed way.

What Can Be Learned from YouTube’s Success?

We can draw two conclusions from YouTube’s enduring popularity:

  • First, streaming platforms, especially Netflix, cannot help but notice how well an ad-supported format on YouTube has been working. Netflix—and other competing platforms—certainly must be feeling more pressure to create advertising products. And that’s good news for brands. (I blogged about Netflix’s potential adoption of advertising in this post, “Why Netflix Might Embrace Advertising.”)
  • Second, YouTube’s growth likely bodes well for apps like Quibi (another destination for streaming video that relies on ads). Quibi is endeavoring to carve a niche in a crowded field; YouTube shows them what’s possible, and arguably creates an environment ripe for inspiration.

Clearly, streaming platforms offer an attractive opportunity to advertisers. Note also that in light of recent events, it is expected that more people will turn to streaming platforms such as YouTube. Per a blog post from PMG, “Popular media platforms such as YouTube and Tik Tok will also likely see a monumental boost as kids and teens spend more time online and at home” during temporary school closures caused by the COVID-19 pandemic. YouTube, with its combination of innovation and reliability, is proving to be a model for succeeding with ad-supported shorter-form streaming. In its quiet bid for dominance, YouTube has become a leader.

Contact True Interactive

Want to learn more about YouTube, and the opportunities that exist for advertisers in the streaming community? Contact us.