Whether on a TV, smartphone, tablet or computer, video oozes from every crevice of society.
So much so that the average person spent over 5 hours a day watching videos in 2021 (across TV and digital).
Video ad spending is through the roof, but where are budgets going, and what does the allocation mean for the future?
Advertising Like It’s 1950
Many historians dub the 1950s the Golden Age of TV. One could argue that TV ads shined the brightest around that time, too, as “motion pictures” captured the attention of consumers and advertisers alike.
It’s 2023, and TV is still popular, with Americans watching more than 2 hours of it a day. But the emergence of YouTube, connected TV (CTVs), and social media have turned the spotlight.
Certainly, ad dollars have followed, right?
Yes, but less than you’d think.
In 2022, advertisers for more than 12.5K brands spent more than $59b on TV ads, representing a 3% YoY increase from 2021; the number of brands buying TV ads also increased by 3% YoY.
Eight thousand of those brands increased TV spending by more than 20%, while advertisers for more than 30 brands surpassed the $100mm mark, including 4imprint Inc. ($175mm), BetterHelp ($349mm), FanDuel ($994mm), and St. Jude Children’s Research Hospital ($213mm).
For FanDuel and other gambling advertisers, the spending follows a historical MO centered around flashy, often costly, campaigns aimed at customer acquisition. But those strategies are souring.
David VanEgmond, a former FanDuel and Barstool Sportsbook executive, said, “You’ve seen the industry pull back and say, ‘Wow, fighting for market share got pretty ugly in terms of losses.”
He was talking about the lengths gambling advertisers went to catch the attention of the 1 in 5 people who bet on sports. Although those lengths were powerful, they often lacked measurement and attribution.
As gambling advertisers shift their focus to efficiency and profitability, expect the advertisers from FanDuel, DraftKings, and BetMGM to move their dollars to digital video where they can measure performance and optimize in the best interest of their bottom line.
While no one’s surprised by the TV-heavy strategy among gambling advertisers, the investment from direct-to-consumer (DTC) brands may turn heads.
Digital-native DTC brands embrace traditional video ads
When most people think of DTC brands, they think of digital-native ones that built their business online. Brands like Allbirds, Harry’s, and Stitchfix are all examples of DTC brands that live and breathe the internet and, thus, digital advertising.
Despite DTC’s digital association, many brands still embrace traditional ads.
In 2022, more than 475 DTC brands spent over $5b on TV, representing a 5% YoY increase (the number of DTC brands investing in TV ads decreased by 9% YoY).
They’re not just dipping their toes into TV to diversify their media mix, either. Nearly 270 DTC brands increased TV spending by over 20% in 2022.
As surprising as DTC brands’ investment in TV may seem, it follows the recent trend of brands embracing traditional ads to escape the digital clutter, take advantage of consumers’ trust in these formats and prepare for the final downfall of third-party cookies in 2024.
Still, DTC brands aren’t abandoning the digital highway that got them to the top.
Of those 270 DTC brands that increased spending by at least 20%, 93% spread their dollars across multiple formats, including Airbnb ($96mm), Booking.com ($77mm), Chime (bank brand) ($63mm), and Instacart ($118mm).
Advertising Like It’s 2023
In 2021, digital video ad spending surpassed $55b and is expected to reach $80b this year, which would represent an increase of more than 140% from 2019.
Video advertising is table stakes, but how are advertisers spending on formats across OTT, online video, and social media?
OTT intimidation
OTT advertising made up just 3% of ad budgets in 2020 despite accounting for 29% of the time people spent watching their favorite shows and movies.
A couple of years later, OTT gained mainstream status. As of 2022, the average household had nearly 7 OTT streaming services.
However, despite the preference for OTT, advertisers don’t seem ready to dive into OTT ads.
In 2022, advertisers for more than 7.3k brands, especially those in insurance, quick service restaurants (QSRs), and cell phones, invested $1.7b on OTT ads, with nearly 4.5k (61%) advertising in multiple formats. (Remember: Advertisers spent almost $60b on TV.)
While advertisers appear uneasy about OTT, which could be due to the down economy and the need to invest in more measurable formats, ad dollars will come as younger generations abandon traditional TV, streaming services—now including Netflix—improve their ad tech, and advertisers flock to ecosystems that can help them thrive without third-party cookies.
Online Video (OLV)
If advertisers are keeping OTT at arm’s length, they’re making up for it with a firm grip on online video (OLV).
In 2022, advertisers for almost 53k brands (up by 7% YoY) spent over $28b on OLV, with over 75% (~41k brands) increasing their budgets by at least 20%.
A select group, including Aviron Interactive ($324mm), Harbor Freight Tools ($109mm), Ka’Chava ($175mm), and Purdue University Global ($111mm), each spent more than $100mm.
For big and small advertisers alike, OLV is a safe bet, providing them with an engaging and measurable way to reach a massive addressable audience across popular platforms like YouTube.
While these video hotspots have long served as a haven for advertisers, their popularity often ignites rising ad loads—and prices. If these hotspots become too crowded and expensive, forward-thinking advertisers may exit right to more affordable (but less proven) ones, like OTT and CTV.
Social Media
Last year, advertisers for 37k brands spent $6.7b on video ads across social media, but are they falling out of favor?
Maybe.
Only a fraction of brands (~5k) increased their spending on video ads by more than 20%—and those were brands with deep pockets, like AMC+, Masterclass, and Spotify. Nevertheless, spending from these brands reached nearly $5b, or 72% of overall spending on social media video ads.
The apparent aversion to social video—at least compared to video ads elsewhere—is likely due to the rising ad loads and negative sentiment. Social media ads are also losing some of their steam in the wake of Apple’s App Tracking Transparency, which allows iPhone users to ask apps not to track them across other websites and apps.
According to analysis, Apple’s firm stance on privacy was expected to cost Facebook more than $12b in 2022 due largely to its ads’ diminishing impact. Other social platforms are feeling the brunt as well.
What We Learned at NewFronts 2022
The battle for video advertising supremacy (and dollars) is full steam ahead, and it’s far from reaching its main event. The degree of diversification between digital and traditional formats that still exists makes that abundantly clear.
But there’s a battle within the battle that’s arguably more captivating. We’re talking about the battle for digital video advertising supremacy, which took center stage at IAB’s NewFronts.
Here are some takeaways:
- Peacock introduced two new ad formats, including “scene ads,” which allow brands to insert themselves “directly into targeted content moments through natural visual effects.” Amazon released a similar format.
- In Twitter’s first NewFront since Elon Musk’s acquisition, the platform pushed Amplify (released in 2019) as a way for brands to run ads alongside audio and video content.
- Snap teamed up with Cameo and introduced Snap Promote, a solution aimed at content partners on Discover.
- Meta focused on its metaverse and highlighted how brands could connect with consumers on Reels.
Whichever battle you watch, the fighting is over the same thing: Video ad dollars—and both digital and traditional players will stop at nothing to get them.
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