The streaming wars escalated this year with the release of Peacock and HBO Max.
In the crowded over-the-top media market, we saw one of the first casualties last week. After six months, Quibi announced that it would officially sell its assets and shut down. This is a sobering situation for its Blue Chip sponsors who’ve already committed over $150 million to securing ad placements.
This leaves advertisers wondering—what safety net is there for buying ad space in the highly competitive OTT industry?
Programmatic OTT may be one option for brands to stay nimble and feel more secure when committing to this popular channel.
We encourage you to subscribe to our blog for the latest data surrounding the advertising industry. We will provide daily updates as COVID-19 continues to make its mark on the US economy.
What is Programmatic OTT?
Programmatic OTT, at its core, can be understood by breaking down its two parts: programmatic and OTT.
- Programmatic advertising: refers to the practice of selling ad inventory in real time via automated bidding. The program determines the suitability of an ad for a slot based on such factors as demographic, behavior, and cookie data.
- OTT advertising: refers to ad content delivered directly to audiences over streaming services or through devices. The benefit of these ads is that they bypass the TV providers that have traditionally controlled the advertising scene.
Programmatic OTT involves the real time, automated buying and selling process of ad space within streaming platforms or on specific devices (such as smart tvs). These can include programmatic video ads or banner ads.
Why is Programmatic OTT an Important Channel for Brands?
Advertising across OTT is important because viewers are increasingly less tied to cable TV, and are instead streaming content online. The total number of U.S. households with cable, satellite or telecom TV packages has already dropped by 7.5% year-over-year (YoY) in 2020, the biggest recorded drop in a year.
While forced to stay at home amid the pandemic, viewers’ time spent streaming content accelerated. With this shift, brands need to follow their audiences—but they are just getting started.
“It’s clear there is another, messier battle still looming in streaming video: the battle for the $70 billion that still goes toward TV advertising,” explains Sahil Patel at Digiday. Last year, Magna Global reported that OTT accounts for 29% of TV viewing but only 3% of TV ad budgets.
The top ad-supported OTT platforms include:
- Hulu: Hulu gained $1.5 billion in ad revenue in 2018
- Roku: Roku earned about $416 million from “platform revenue,” mostly sourced from advertising
Due to its importance in the media mix, programmatic OTT has been on the rise: Pixalate reported about a 330% rise in programmatic OTT/ CTV ad transactions in 2019. Amazon Fire TV ads experienced a 300% YoY increase alone.
As COVID took over 2020, OTT TV advertising transactions from automated ad platforms rose 40% from April 5 through May 16, as brands capitalized on audiences stuck at home.
Bigger Players Change the Landscape of OTT Advertising
Though Hulu, Roku, and Amazon dominate the programmatic OTT ad scene, larger players are coming up strong in ad-supported OTT—even if they are late to the game. This will change how advertisers approach programmatic vs upfront purchases.
Peacock, for example, launched earlier this year and already has 15 million people using the platform. Unlike other major platforms with massive libraries of content—like Disney+ and Netflix—Peacock offers a free, ad-supported tier. Watching classics like, The Office and Parks and Rec, costs viewers nothing except for less than five minutes of advertisements per hour—a cost many viewers are willing to pay.
Peacock is currently targeting big name advertisers who are willing to pay a premium for custom units—but is navigating uncharted territory. Right now, advertisers are happy with the granular measurement of performance attribution, sharing anonymized device IDs with brands and impression-level information such as region or time of day. However, brands and publishers are negotiating what ad impressions are worth, how secure upfront placements are, and other questions about this new form of advertising.
HBO Max is expected to launch an ad-supported tier next spring, further expanding viewers’ free options of quality video. They will ask advertisers to spend at least $250,000 per quarter. However, CPMs are set high and that budget might not go far, according to Digiday.
The quick demise of Quibi, mixed with the uncertainty of 2020, likely raises questions about premium, secured units vs programmatic campaigns that can be turned on or off immediately.
Though there are many questions and doubts, programmatic OTT sales haven’t slowed down yet. The entertainment world is moving fast, which is why we’re excited to start tracking programmatic OTT data and sharing it here on this blog.
For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy.