The CTV (Connected TV) advertising market, based on AVOD (advertising-based video on demand) and FAST (free ad-supported streaming services) models, is rapidly growing. This article highlights the key factors driving this growth, such as the increasing popularity of smart TVs, innovations in content search and discovery, changes in consumer preferences, and the democratization of large-screen advertising. We will also discuss how the absence of third-party cookies in CTV, IAB Tech Lab innovations, the use of DSP and artificial intelligence, the convergence of retail media and CTV, and precise ad targeting are influencing the development of this market.
Increasing Popularity of Smart TVs
Currently, many households already own smart TVs, which give them access to a wide range of streaming services and apps. These devices, with built-in internet connectivity, are becoming the central point of home entertainment. For those who previously could not afford them, the situation is rapidly changing. Electronic equipment manufacturers (OEMs) continue to lower the prices of their products, making smart TVs increasingly accessible. To offset the lower prices, manufacturers are developing their own advertising businesses, powered by automatic content recognition (ACR) data and FAST services (Free Ad-Supported Streaming TV), allowing them to generate additional revenue from ads displayed on these devices.
Innovations in Content Search and Discovery
In the coming years, we will see many innovations in content „search and discovery” on TVs. Traditional navigation and content discovery methods, such as channel surfing or using simple menus, will be replaced by more advanced, intuitive methods. Users will quickly discover that there are many more options than just SVOD (subscription-based VOD) buttons on their remotes. New technologies will enable easier and more efficient searching of available content, customizing recommendations based on user preferences, and integration with voice assistants, making the entire process more natural and user-friendly. This will open the door to discovering a wide range of content that may have previously been difficult to access or unknown to many viewers.
Changes in Consumer Preferences
Beyond sports, many people no longer want to pay for TV content. Subscription fatigue with SVOD is real! More and more people are giving up paid subscriptions in favor of free ad-supported services. This means that viewers will increasingly use the growing number of AVOD (advertising-based video on demand) and FAST services available through electronic program guides (EPGs) or growing TV app stores. Consumers value the flexibility and choice these platforms offer, while accepting ads as part of the experience, allowing them access to a wide range of content without paying for subscriptions. This shift has a significant impact on the advertising market, creating new opportunities for advertisers to reach larger audiences through these popular platforms.
Increased Availability of Addressable CTV Ad Inventory
As AVOD and FAST services attract more viewers, the availability of addressable CTV ad inventory will also increase. These services offer free access to content in exchange for watching ads, attracting a wide audience looking for alternatives to paid subscriptions. As a result, the number of users utilizing these services is growing, leading to more available ad inventory. This gives advertisers broader opportunities to reach their target audiences on the big screen. Ultimately, this will alleviate concerns about the lack of scale in CTV, which was previously one of the main challenges for the advertising industry. Greater availability of addressable inventory means advertisers can more precisely target their campaigns, achieving better results and efficiency.
Democratization of Large-Screen Advertising
Advertising technologies (AdTech) will continue to democratize the biggest screen in the home for many advertisers. TV broadcasters will increasingly open up to a programmatic approach to advertising (through controlled SSP/DSP agreements or their own technologies) due to agency requests. A programmatic approach automates the buying and selling of ad space, making it more efficient and transparent. For many new players in the AVOD and FAST sector who lack substantial upfront resources, a programmatic approach will be more attractive and help develop a dynamic market of high-quality streaming inventory. New platforms can quickly innovate and adapt to market needs, attracting new advertisers. As a result, large-screen advertising becomes more accessible to a wide range of advertisers, regardless of their size and budget, leading to a more diverse and competitive advertising market.
Absence of Third-Party Cookies in CTV
CTV does not have third-party cookies, and most TV operating systems (OS) are proprietary, different from those on computers and mobile devices, which currently do not restrict the passing of identifiers. AVOD and FAST services increasingly use their contextual insights, allowing for more precise ad targeting. Contextual insights can include information about the type of content being played, the time of day, or user preferences, enabling the creation of more tailored and effective ad campaigns. Moreover, universal identifiers, such as UID2, ID5, or RampID, can be used in CTV, creating even deeper levels of addressable streaming inventory. These identifiers allow tracking and analyzing user behavior without the need for third-party cookies, enhancing privacy and data security. As a result, advertisers have access to advanced analytical tools that help them better understand and target their audience, contributing to increased ad campaign effectiveness.
IAB Tech Lab Innovations
IAB Tech Lab continues to innovate in CTV programmatic standards, such as OpenRTB 2.6 and OM SDK. OpenRTB 2.6 enables more advanced real-time ad transactions, allowing for better integration and campaign efficiency. OM SDK (Open Measurement Software Development Kit) provides standard tools for measuring ad visibility and user interactions with content. New companies are introducing advanced research and developing „next-gen” TV currencies, combining traditional panel methodologies with streaming viewing data. This enables more precise tracking and analysis of viewer behavior, allowing for better audience measurement understanding and increasing trust in advertising spending. As a result, advertisers can make more informed decisions regarding ad budget allocation, leading to greater campaign efficiency and better return on investment.
DSP and Artificial Intelligence
DSP platforms and generative artificial intelligence (GenAI) will enable many small and medium-sized businesses to create TV inventory and shift spending from search and social media to the biggest screen in the home. DSP (Demand-Side Platform) technologies allow advertisers to purchase ad space in an automated and efficient manner, while GenAI can generate new ad content, such as graphics, videos, or texts, based on collected data and audience preferences. This enables small and medium-sized businesses, which previously lacked access to advanced advertising tools, to create high-quality TV campaigns. This will bring new resources to TV ads, allowing them to reach a wide audience that was previously out of their reach. The growth in TV ad spending will further drive the development of the CTV market, offering consumers more diverse and attractive content.
Convergence of Retail Media and CTV
The convergence of retail media and CTV will continue, and T-commerce (television commerce) will gain popularity with new interactive ad formats. TVs connected to the internet allow for creating interactive ads that let viewers make immediate purchases without leaving the couch. Viewers will increasingly make purchases through their TVs, similar to how they do on their phones. With T-commerce technology, ads become more engaging and interactive, increasing their effectiveness. For example, viewers can click on a product ad to learn more, see reviews, and even make a purchase directly through the TV. This form of advertising is especially attractive to retailers, who can more effectively reach consumers and increase sales through integrated ad campaigns.
Precise and Attractive Ads
Smart TVs offer the image, sound, and motion that advertisers love in traditional TV, but increasingly combined with the precision of digital ad targeting. With internet connectivity, these TVs can collect data on user preferences and behaviors, allowing for creating more tailored and effective ad campaigns. Ads on smart TVs can be personalized based on viewers’ demographics, interests, and viewing history, increasing their effectiveness and audience engagement. Additionally, the ability to measure campaign results in real-time allows advertisers to continuously optimize their strategies and achieve better results. This makes ads on smart TVs not only visually appealing but also highly effective in reaching the right audience with the right message.
Source: Paul Gubbins on LinkedIn.
Glossary of Industry Terms and Acronyms
CTV (Connected TV)
Television connected to the internet
TVs that are connected to the internet, allowing the use of streaming apps and other online services.
AVOD (Advertising-based Video on Demand)
Ad-supported video on demand
Video on demand services that are free for users but contain ads as the primary revenue source.
FAST (Free Ad-Supported Streaming TV)
Free ad-supported streaming services
Streaming services that offer free access to content in exchange for watching ads.
OEM (Original Equipment Manufacturer)
Original equipment manufacturer
Companies that produce devices sold under another company’s brand.
ACR (Automatic Content Recognition)
Automatic content recognition
Technology that identifies content played on a device (e.g., TV) and provides relevant information or ads.
SVOD (Subscription Video on Demand)
Subscription video on demand
Video on demand services available to users based on a paid subscription.
EPG (Electronic Program Guide)
Electronic program guide
On-screen guide to available TV programs and content, often with search and discovery features.
AdTech (Advertising Technology)
Advertising technology
Technological solutions and platforms used to manage and optimize advertising campaigns.
SSP (Supply-Side Platform)
Supply-side platform
Platforms that help publishers manage and sell their ad inventory programmatically.
DSP (Demand-Side Platform)
Demand-side platform
Platforms that help advertisers buy ad space programmatically.
UID (Universal Identifier)
Universal identifier
Identifiers used in digital advertising to track and analyze user behavior.
OpenRTB (Real-Time Bidding)
Open real-time bidding
Standard protocol for real-time bidding on ad inventory.
OM SDK (Open Measurement SDK)
Open measurement software development kit
Standard tools for measuring ad visibility and user interactions.
GenAI (Generative Artificial Intelligence)
AI that generates new content, such as graphics, videos, or texts.
T-commerce (Television Commerce)
Television commerce
The ability to make purchases through a television connected to the internet.
