June 12, 2024

Written by Tim Colucci

Why Disney Advertising Is Hitting Its Stride with Streaming

Few expected Disney’s streaming operations to become profitable by early 2024, especially after Disney launched Disney+ in November 2019, thus incurring content development costs that can eat away at any streaming company’s profits. But that’s exactly what happened in May, when Disney said that its streaming segment – which includes Disney+, ESPN+, Hulu, and Star+ — realized its first quarterly profit. Although there are many reasons why streaming is becoming profitable for Disney, a big one should interest businesses everywhere: the success that Disney Advertising has enjoyed with streaming.

Why Disney’s Streaming Operations Turned a Quarterly Profit

First off, let’s understand why streaming and profitability now go hand in hand at Disney. The major reasons are:

  • Advertising revenue:The introduction of an ad-supported tier on Disney+  opened a new revenue stream. The lower priced tier is managed by Disney Advertising (which is responsible for all Disney advertising operations including its four streaming services). While this tier comes at a lower price point, the advertising revenue generated contributes to overall profitability.
  • Bundle offers:Disney+ offers bundle deals with Hulu and ESPN+, which can incentivize subscribers to sign up for multiple services and increase overall revenue for the company.
  • Increased subscription prices:Disney+ raised its subscription prices in late 2023. This move (while potentially alienating some subscribers) boosted revenue and contributed to profitability.
  • Reduced content spending:Disney+ reduced its spending on content creation, focusing on high-quality projects with potential for high returns. This helped lower costs and improve margins.

The growth of an ad-supported tier is especially intriguing to the ad industry. Both Disney+ and Netflix joined many other streaming services (including Disney-owned Hulu) by introducing lower-priced tiers that include advertising. A recent YouGov survey shows that eight out of 10 Americans are open to ad-supported tiers, and indeed both Disney+ and Netflix have accumulated subscribers for their ad-supported tiers.

Disney Advertising Provides Options

For Disney, a lower-priced ad-supported tier creates a new revenue stream with businesses eager to advertise to subscribers who opt for that lower-cost tier. The ad-supported tier attracts price-sensitive customers who may not have subscribed to the ad-free tier due to its higher cost. This expands the subscriber base and increases overall revenue potential for Disney.

In addition, the ad-supported tier provides Disney+ with valuable user data, allowing Disney to offer targeted advertising and potentially charge higher rates to advertisers through options such as the following:

Advanced Audience Targeting

Advertisers can target specific audience segments based on demographics like age and gender, geographic location (state/designated market area), and Disney’s proprietary first-party audience segments from its Audience Graph. This allows for precise targeting of relevant audiences.

Programmatic Advertising

Disney has expanded programmatic advertising opportunities on Disney+. They include biddable transactions through private marketplaces or invite-only auctions, which are available across 30 demand-side platforms (DSPs), giving advertisers more choice and control at scale

Diversified Ad Formats

In addition to traditional pre-roll and mid-roll video ads, Disney+ accepts varied creative lengths from 15 seconds to 90 seconds and select content sponsorships, such as during the holiday season.

Enhanced Measurement and Attribution

Disney+ has partnered with ad verification, delivery, and measurement vendors to provide campaign insights to advertisers such as:

  • Verification and delivery tracking from DoubleVerify, Moat, IAS, AdForm, and DCM.
  • Reach/frequency insights from Data Plus Math and iSpotTV.
  • Brand lift measurement from Kantar.
  • Web/app conversion tracking from InnovidXP.

This measurement suite allows advertisers to better gauge the effectiveness and return on their Disney+ ad investments. But Disney has plenty of competition, including Netflix, whose revenues from ads are expected to surpass Disney+’s in 2024.

The Disney Advertising Relationship with Walmart Connect

Disney Advertising has other cards to play, including a newly announced relationship with Walmart’s advertising business, Walmart Connect. Walmart Connect has become a shining star in the Walmart empire by using first-party data that Walmart collects from its customers and selling ads to businesses. In May, Disney Advertising announced a partnership with Walmart Connect to enable targeted advertising using the retailer’s data.

This relationship makes sense because Walmart customers are the same price-conscious demographic who are likely to subscribe to the lower-priced ad-supported Disney+ tier (and the ad-supported Hulu tier). The relationship works by combining Walmart’s shopper data with Disney’s proprietary Audience Graph to enable enhanced audience targeting and measurement for advertisers across Disney’s streaming platforms like Disney+ and Hulu. Here’s a breakdown of how it functions:

Audience Targeting

Walmart’s first-party shopper data, which includes insights from around 145 million weekly customers across online and physical stores, is synced with Disney’s Audience Graph using privacy-compliant clean room technology. This allows advertisers to use Walmart’s purchase data to identify and reach their desired audience segments more precisely on Disney’s streaming platforms. Targeting happens programmatically through private marketplace deals, giving advertisers flexibility in bidding on Disney+ and Hulu inventory.

Measurement and Attribution

The data integration enables closed-loop attribution by connecting ad exposures on Disney’s streaming platforms to actual purchase outcomes from Walmart’s shopper data. Advertisers can measure key metrics like sales lift, foot traffic, and conversions at a granular household level to gauge campaign effectiveness. This closed-loop measurement provides insights for optimizing frequency capping, audience targeting, and future campaign planning.

Partnership Scope

Disney has joined Walmart’s Partner Lab to collaborate on testing new ad formats, measurement solutions, and omnichannel integrations across streaming, social, and other channels. The partnership initially launched in Q2 2024 as an invite-only beta with select advertisers across verticals like consumer packaged goods, electronics, automotive, with plans for broader rollout coming.

Considerations for Advertisers

Disney’s expanding streaming empire competes in growing industry, and keeping track of all the advertising options can be bewildering. Digiday recent published a helpful guide to the streaming advertising ecosystem (which is available to subscribers and is highly recommended). Doing your homework is Job One (and True Interactive does that for our clients when we manage their advertising across the connected TV landscape, including streaming platforms). We recommend that as you explore your options, you take into account some considerations that apply especially to streaming:

Ad Formats and Options

Familiarize yourself with the different ad formats available on each platform, such as pre-roll, mid-roll, post-roll ads, and display ads. Determining which formats are most suitable for your message and product is essential for effective advertising. This is where connected TV options can differ dramatically from linear TV, as our 2023 blog post on Roku’s ad experiences demonstrates.

Platform-Specific Data

Streaming services collect detailed data on viewer behavior, such as binge-watching patterns, content preferences, and interaction history. You can and should apply this rich dataset to create hyper-targeted ads. By understanding the specific viewing habits of users on each platform, you can tailor your messaging to fit the context of the viewer’s habits and preferences.

Second-Screen Behavior

Viewers often use a second screen, such as a smartphone or tablet, while watching content on streaming services. You can create campaigns that integrate with second-screen experiences, encouraging viewers to interact with the ad through their mobile device. This can include call-to-action prompts, social media engagement, or additional content that complements the streaming ad.

Programmatic Buying for Streaming Ads

Programmatic advertising on streaming platforms allows for real-time bidding and placement of ads based on viewer data and behavior. This advanced targeting can be particularly effective in the streaming environment, where ad placements can be dynamically adjusted based on current viewer data. You should use programmatic buying to optimize your ad spend and reach the most relevant audience segments.

Ad Frequency Capping and Personalization

To avoid ad fatigue, streaming services offer frequency capping tools that ensure viewers are not exposed to the same ad too many times. You should use these tools to maintain a positive viewer experience. Additionally, personalized ad sequencing can create a narrative across multiple ad exposures, gradually building the story and keeping the viewer engaged.

Exclusive Content Partnerships

Streaming services often produce exclusive content that garners significant attention and viewership. You can partner with these platforms to sponsor specific shows or create branded content that appears within the context of these exclusive series. This can enhance brand association with popular content and increase viewer engagement.

Measuring Engagement Beyond Impressions

While traditional metrics like impressions and click-through rates are important, streaming services offer deeper engagement metrics. These include time spent with the ad, interaction rates, and even post-ad content engagement. You should focus on these unique metrics to gauge the true impact of your ads and refine your strategies accordingly.

Ad-Supported Originals and Custom Integrations

Streaming platforms are increasingly developing ad-supported original content. Explore opportunities to integrate your brand into these originals through product placements, co-branded content, or sponsorships. This approach can provide a seamless and organic connection between the brand and the content, enhancing viewer receptivity.

Content Relevance

Ensure that ad content is relevant to the streaming platform’s typical viewer. Tailoring ads to fit the tone and style of the content on the platform can enhance engagement. (What works for a Netflix audience may fall flat on Disney+.) Creating multiple versions of the ad to suit different types of content and viewer preferences can also be beneficial.

Contact True Interactive

True Interactive can help you succeed with connected TV, including advertising on streaming platforms. Our services range from media strategy and planning to automated performance reporting. Learn more about our services here, and contact us to learn more.