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Connected TV advertising trends for 2023: Part one

Author:

Amy Lawrence

Published On:

February 22, 2023

Published In:

Advertising & Marketing | Technology Insights

Connected TV advertising trends for 2023: Part one

The connected TV (CTV) advertising market is growing – and so are the opportunities for brands.

Global ad spend for connected TV (CTV) is soaring as brands, advertisers, and agencies bring this channel into their media mix, so what can we expect from it in the new year? Forecasts predicted total CTV advertising investment would account for almost 12% of all TV ad budgets in 2022, surpassing $20 billion. Now, in 2023, this investment is projected to rise another 16% and by 2026, CTV advertising will capture $32.6 billion, marking a threefold growth since 2019. 

There is no doubt this level of investment and enthusiasm will make CTV advertising a dynamic space to be in during 2023. So, in the first instalment of our two-part feature, we’ve highlighted three important trends for CTV players to consider.

Ad-supported video-on-demand is becoming ubiquitous 

Netflix and Disney+, the two giants of the subscription video-on-demand world, will roll into 2023 with newly established ad tiers. Netflix launched its cheaper, ad-subsidised tier in November 2022 and Disney+ has introduced its rival offering in the US, with plans to make it available globally in 2023. Similar services are also diversifying their revenue streams beyond subscriptions, with HBO Max and Disney’s Hulu operating with hybrid models as well. 

What Netflix and Disney+ do in this space may set the standard for other streaming services to follow. Their decision to choose this path will help make advertising-based video on demand (AVOD) ubiquitous. With hundreds of millions of subscribers between them, consumers will become very familiar with ads being a part of the streamed video experience.

Accenture research found ad-supported streaming revenue will grow much faster (+205%) than traditional subscription service revenue (+67%) over the next five years. Additionally, the report found that the cost of subscriptions is a key concern for consumers right now, which could increase viewer demand for more affordable alternatives.

Ad loads will be a top priority

Ad-supported streaming on CTV must be done right. Adopting this model puts more pressure on services to deliver positive experiences via the entertainment content and the ads themselves. 

Deloitte research found 60% of streaming service customers are comfortable watching a light amount of ads — that is, six minutes or fewer per hour of streaming — in return for a lower monthly subscription cost. However, it is notable that preferences vary across demographics, with  younger consumers being less accepting of ads. 

In a competitive streaming landscape where viewers are platform agnostic, they will be driven to the services which get this right. Optimising ad loads could become a key point of difference in 2023.

CPG brands flock to connected TV advertising

As more brands turn to CTV advertising, it will be interesting to see how different verticals perform in this space. For consumer packaged goods (CPG) brands in particular, CTV devices account for more than half (52%) of all video ad impressions. Research from Innovid revealed that CTV has overtaken both mobile (37%) and desktop (11%) as the most powerful channel for video ads.

The Innovid report also found that pet supply brands reported the strongest CTV results. For this vertical, 70% of its video impressions were from CTV, while household cleaning (62%), beauty (62%), food (61%), and household goods (60%) also saw positive results.

Evidently, CTV will be a valuable channel for brands as they use it to connect with audiences and strengthen their relationships with consumers.

In conclusion

For a quick summary, our CTV advertising trends predictions for 2023 include:

  • CTV is still an emerging ad channel and is expected to experience threefold growth between 2019 and 2026
  • Netflix and Disney+ adopting hybrid ad-supported subscription models will set AVOD standards for the rest of the industry
  • Managing ad load will be a competitive differentiator in 2023
  • CTV is proving to be an important video advertising channel for CPG brands 

Stay tuned for the second instalment of this two-part trends overview, where we will continue to explore expectations for CTV advertising in the coming year, including the importance of ad measurement, growing audience fragmentation, and the latest in live sports advertising. In the meantime, for more insights into the wider TV landscape, check out our key takeaways from Mediatel’s Future of TV Advertising Global event or contact us to learn more today.

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