Advertisers have been chasing cord cutters for the last 10 years. But the story in 2023 is viewers cutting streaming subscriptions – and most advertisers aren’t keeping up with this behavior change.
Ad-supported streaming TV has become the predominant connected TV (CTV) model over the last year. More streamers watch ad-supported content than ad-free or subscription-based content, according to a recently released Magnite report. Free ad-supported streaming TV (FAST) is the fastest-growing category within the ad-supported world.
Yet some advertisers lag far behind this shift. The majority of CTV advertising remains tied up in committed spend with the major media companies’ premium advertising-based video on demand (AVOD), subscription-based video on demand (SVOD), and “freemium” AVOD services (Peacock, Paramount+, Disney+, HBO Max, etc.). Those advertisers are overinvested in this low-supply, high-CPM premium CTV world, which leaves huge FAST audiences unaddressed.
FAST is growing – fast
The streaming world keeps growing, but premium AVOD, SVOD and freemium services now see growth slowing. Notoriously, Netflix saw declining subscriptions over the past two years. One reason: Viewers are flocking to FAST channels.
FAST channels present streaming video content in a more conventional, linear model, complete with ad breaks. On the back end, FAST offers advertisers the full benefits of the digital ad world, including dynamic targeting and granular tracking.
As of Fall 2022, a report from TVREV showed the proliferation of FAST channels over the past five years includes the 60 million viewers using offerings built into TV operating systems (e.g., Samsung TV), 50 million using device-based offerings like the Roku Channel, and the 30 million-and-quickly-growing using apps like Paramount’s Pluto and Amazon’s Freevee.
Eighty-seven percent of streamers are likely to try a new FAST service in the next year, according to the 2023 Magnite report, which predicts that FAST will account for the majority of CTV growth in 2023.
Why are people loving FAST? Many simply enjoy the “lean-back” experience that’s reminiscent of linear TV. They experience none of the decision anxiety that comes with scrolling through endless libraries of content.
But economic conditions are also accelerating the shift toward FAST. Ironically, many households now see CTV subscription costs creeping up toward the hefty cable bills they thought they left behind. With recession anxieties looming, individuals and households are reigning things in and tightening their budget belts. They’re recognizing that they don’t use – and don’t need – all those subscriptions. At the same time, they’re realizing they can access a tremendous volume of high-quality content for free through FAST options.
Advertisers need to follow viewers to FAST
Since the peak of cable TV in 2015, advertisers have increasingly followed viewers to CTV, yet they haven’t been as quick to follow viewers to FAST.
Some national CTV advertisers are possibly overinvested in premium and freemium services, forced to play by the rules of the major publishers that flex tremendous leverage. They are increasingly frustrated by the low supply and high CPM from these publishers. And the outlook isn’t going to get any better as subscriptions level off (or drop).
Even setting aside the problems with freemium services’ rising costs and limited supply, advertisers simply can’t afford to ignore the huge and growing reach of FAST. They need to adjust ad spend to align with the shifting viewership trends. They’re leaving viewers – and ROI – on the table.
The path to better targeting (and value) runs through independent streaming media
Advertisers can buy FAST ad space programmatically, but the real potential is in contextual advertising on FAST. Many FAST channels target specific niches, letting advertisers use the same tools and tactics they use for contextual targeting in other digital media.
But this potential gets limited when advertisers buy through the FAST platforms themselves. Advertisers end up with very little control and transparency around where ads run (which channel, which program, time of day, etc.). To make a simple analogy to linear TV, this approach is much like buying a generic ad package from a cable provider – with no control over whether your ad runs on specific channels or within certain dayparts.
Advertisers should expect a greater level of transparency and control. And right now, the best way to get that level of transparency and control is to buy directly from the publishers of the FAST content. Many independent media companies, including Scripps Networks, will give advertisers full access to all the metadata needed to power advanced targeting, such as contextual, network, program, and rating levels.
This more direct approach benefits advertisers in a number of other ways. They get a solid guarantee that the spot is going to air (and not get programmatically outbid at the last second). They know they’re buying glass-on-wall CTV inventory – the linear experience they’re seeking – and not getting mobile and desktop ads mixed into their CTV media plan. This direct approach emboldens transparency and mitigates fraudulent activity.
What’s old is new again
Trends tend to have a cyclical nature to them. We see it in fashion and design. It’s true in broader consumer behaviors and preferences as well. So, while the cord cutting continues, it shouldn’t be surprising that the pendulum is swinging back from “on-demand all the time.” Viewers have come back to the more traditional, linear-like experience of FAST channels – and economic tightening will only increase the FAST appeal.
Ad investment should follow viewers to FAST. Savvy advertisers will get ahead of the trend by mastering the world of FAST as a primary channel. It also means working today to build relationships with the independent and streaming publishers that can deliver the transparency and control needed to efficiently take advantage of the unique reach that the FAST landscape delivers.
