Should you start running Connected TV (CTV) ads?

It’s ad-supported. It consists of multiple devices and platforms. And it’s apparently killing cinema…

Yes, we’re talking about connected TV (CTV).

During and after the pandemic, the concept of CTV became common knowledge among US users.  At the same time, ad tech improved and became widely available—even to “regular, smaller advertisers.”

So what are CTV ads? How effective are they? Should you test them out? CTV might not be good for the box office industry, but what does it do for the advertising industry?

Let’s try to find answers to all these questions.

The number of CTV households keeps rising

Do you have a CTV at home?

Because if not, you’re in a minority.

According to data, there are around 130M households in the entire US. Possibly more. And more than 120M own a CTV device now—a 20M jump since 2019.

This means that almost all households in the US can be your potential customers.

Who are you advertising to when you’re buying CTV ads?

Let’s start with the audience first. 

Who are the household members who are watching CTV the most? 

Here’s the data:

The majority of CTV viewers are Gen Zs and millennials, with almost two-thirds saying they watch CTV every day.

Gen Xers follow closely, with 58% tuning in for their favorite CTV content daily. However, only a quarter of viewers aged 55+ are daily watchers. 

Let’s look at some more audience data:

As already mentioned, you can reach 93% of all users by CTV. 

And by now, more people are using streaming-only CTV than linear and CTV combined. In the future, you can expect linear to shrink further before slowly diminishing. Which might not be a bad thing.

CTV has:

• A higher attention index: A combination of industry-standard metrics that measure how effective your eyes stay on the screen during ads. Stuff like interruption rate, pause rate, eye gaze, and similar. The higher the rate-the more engaging the ads.
• A much higher co-viewing index: The chance multiple people will watch CTV at the same time and see your ads, making them more effective.

The Crew’s opinion: Zoomers, millennials, and Gen Xers, are all frequent CTV viewers—which you might consider if you’re looking to target any of these demographics. 

Testing compelling campaigns on CTV sounds interesting. Especially due to CTV’s higher attention and co-viewing traits… but we’ll also have to look at the rest.

CTV ad revenue soared since the pandemic

Color us surprised, eh? 

Apparently, staying more at home means watching more TV—and advertisers quickly recognized this.

Hence this trending curve:

That’s a big wow.

In 2019, ad revenue was $6.4B. Last year, it was $24.6B. A $18B rise—or 284% if you want a percentual spike—in 4 years.

That’s insane. 

Moreover, the increase is projected to continue all the way to 2027—with $42.4B in projected revenue. Nice.

What does it mean: That CTV ads are definitely on the rise. Advertisers are either banking on potential—or are seeing tangible results from their campaigns.

In any way, they’re pumping more money into the channel. 

In the following sections, we’ll look into why…

Which devices drive CTV ads growth?

To know which ad networks work best on CTV, we’ll look into the following data:

It appears that Roku is one of the major drivers of CTV ad revenue, accounting for almost half (40%+) of all CTV ad views for the last couple of years.

At the same time, we can see that Chromecast and Gaming Console ad views are holding steady with 6% and 3% respectively. 

Fire TV’s share of views halved, while Smart TV’s ads appear to be taking more slice of the pie.

The most interesting, however, is the “other” category, which could start including ad-supported streaming service tiers, which might account for more and more ad view share.

Take Netflix, for example:

Chart 1 | Chart 2

The streaming service’s total revenue flatlined for a few quarters.

Shortly after the addition of ad-supported tier, which started gaining right away, the platform’s revenue again started going up.

We can’t guarantee, but we can assume that introducing ad-supported tier had something to do with that. By the time of this writing, Netflix officially passed 40M ad-supported subscribers.

Its success can also encourage other streaming services to follow in its footsteps. Especially given that users don’t seem to mind seeing ads for a lower monthly payment.

What do advertisers think of CTV ads?

We’ve already found revenue is increasing—so that’s a hint.

Now let’s see how it ranks among other video ad counterparts:

It’s no surprise that CTV fares much better than national and local cable. But what’s surprising is that it’s considered an equally important video ad type as social video ads. 

It might be for a few reasons: They can be highly targeted and pretty engaging, with measurement tools getting more sophisticated by the day. 

Another underrated aspect is ad fraud prevention, which we’ll tackle in the next section.

But now let’s focus on one more interesting part—cookie deprecation. Look at this:

Third-party cookies are going away. We don’t know when yet, but it’s inevitable—and advertisers are looking for channels that’re best poised to get them bangs–for–bucks. 

It looks like CTV will be one of the most interesting channels to test in the brave new cookieless world—particularly due to its powerful non-intrusive, targeting options.

The Crew’s opinion: If you’re planning to invest more into video ads—and you have the budget—CTV ads might be a great, effective, future–proof option. 

At least that’s what our peers say.

Why are advertisers increasing their CTV budgets?

CTV ad revenue is increasing.

In this case, however, it doesn’t mean that the ad business is expanding a lot. In other words, advertisers are “relocating” their budget to CTV.

Here’s what we mean:

It appears that CTV is taking a share from linear TV—which is natural—but is also taking a slice from other non-video digital and traditional ads.

Around a third of respondents are actually taking money out of their social media ads pool and other types of digital ads—which is an interesting stat.

A similar number claims an increase in CTV ads is due to overall ad budget expansion.

Let’s see what are some other reasons for increased spending:

Brand safety and reaching relevant audiences are major drivers. 

In case you’re unfamiliar with the term—brand safety means that you can ensure your ads won’t appear around inappropriate, or outright offensive content. 

In one part of our Ad Annoyance Data Story, we’ve found that users also care whether ads appear next to offensive content—and CTV’s contextual network might have some control over that. 

On the same note, respondents believe CTV can provide better measurement while reducing the chances of ad fraud—something that’s still a big problem for most channels.

Verdict: Should you connect to connected TV?

One thing’s clear. CTV ads have a vast and growing audience—with high engagement across multiple generations. 

What we’ve learned is that CTV offers an effective platform for targeted advertising, especially with the slow but steady approach of cookie deprecation, among other things.

As CTV ad revenue continues to soar, reallocating ad budgets to it could prove to be a strategic and future-proof investment for your—or your client’s brands.

Sources

• Statista
• IAB
• LG Ads