52% of all video ad impressions over the past year took place on Connected TV (CTV). This marks the new report from the Innovid advertising platform, which describes Internet television content.

This represents a 44% increase compared to the previous year and has outpaced both mobile devices (37%) and desktops (11%). This signifies a paradigm shift in how Americans consume entertainment.

The Origin 

After finding commercial success in 2007 with Netflix's decision to shift from DVD shipments to streaming, Amazon Prime Video and Hulu joined as part of a new wave of tech companies offering on-demand devices, such as Roku and Amazon Fire Stick. All these services offer libraries of content from existing studios while also investing in their own content. In 2019, several media giants began streaming. Disney+ and AppleTV+ launched that year, while HBO Max, NBCUniversal's Peacock, and Discovery+ launched in the following two years.

Both newcomers and established players were poised to capitalize on the massive growth of streaming during the height of the pandemic, when many people stayed home with ample time to watch content and allocate money to multiple streaming services. Globally, streaming service subscriptions surpassed one billion for the first time in 2020, with a 26% growth from 2019, according to the Motion Picture Association. In 2021, U.S. online video subscription revenues grew by 24% and surpassed satellite, while cable retained its lead, though revenues declined by 3%.

Certainly, the landscape changed after pandemic restrictions began to lift in 2022. Netflix lost one million subscribers in the second quarter and had to lay off staff. On the other hand, Disney added 14.4 million through its services in the same time frame. Long-term, industry leaders see streaming only continuing to grow.

While ads are commonplace in the linear TV viewing experience, they didn't immediately translate to streaming. From its inception, Netflix took the stance of remaining ad-free, setting the tone for a different viewing experience. However, Hulu incorporated an ad-supported tier, demonstrating that there was a way to display ads while also giving consumers the option not to participate. In the context of subscription losses, Netflix has announced plans to introduce advertising as part of a lower-cost subscription designed to broaden access to the service. They've partnered with Microsoft to implement advertising technology.

During the pandemic, the CTV advertising market grew alongside streaming in general. According to eMarketer, initial CTV ad spending grew by 34% in 2021, and the company forecasts it will repeat that growth in 2022 to reach $6.4 billion.

Smart TVs Are Driving CTV Growth

Many brands and agencies are particularly eager to explore new avenues at a time when social media advertising has been challenged by Apple's App Tracking Transparency with the iOS 14 update.

Context matters, so it makes sense for CTV ads to promote products to people in their homes. The Innovid report found that CPG (Consumer Packaged Goods) brands that manufacture products used in the home were the most active advertisers.

CTV also has some built-in advantages as an advertising format. It benefits from both linear TV viewing patterns and the data capabilities offered by the internet. Audiences will see ads as part of the content-watching experience, as they always have. But with internet connectivity in play, there's an opportunity to use ad tech tools to deliver a message to someone the data shows is more likely to buy a product.

There are also opportunities to make content interactive. Innovid found that more than half (53%) of all CPG advertisers ran some form of advanced creative video, such as dynamic creatives and interactive content like an ad with a QR code. The report says CPG brands using advanced dynamic creative optimization (DCO) formats, a form of ad tech that uses data to guide and optimize creative elements and messages, achieved a video completion rate of 98.6%, compared to an average completion rate of 93.9% for standard video.

Along with expanding reach, there could be more convergence between advertising, retailers, and online shopping tools. CTV advertising remains in its early stages as new opportunities and capabilities arise.

Smart Ads

Walmart and Roku have partnered to enable advertising on the streaming device. They're also bringing commerce capabilities to content streaming. Under a pilot program, Roku ads purchased by brands through Walmart Connect, Walmart's advertising arm, will contain products that can be purchased with a Roku remote control. The payment process is completed via Roku Pay, and Walmart fulfills the products. It points to a future where CTV reduces the number of steps between seeing a product in an ad and buying it.

This week, Walmart Connect provided details about its capabilities for advertising on platforms beyond the retailer's own channels, such as social and video platforms. This presents intriguing prospects for bringing ads to other streaming services as well. The retailer recently signed a deal with Paramount+ to offer that service for free to Walmart+ members.

Disney+ Plans to Sell Its Own Products on CTV

Disney+ is gearing up to launch its own advertising-supported plan. Disney+ Basic will be launched on December 8 at the service's lowest price of $7.99 per month, following a similar model to Hulu, which is majority-owned by Disney. In its most recent Upfront, Variety reported that 40% of Disney's $9 billion in advertising commitments were allocated to streaming and digital.

Advertisements for Disney's own products may also make an appearance soon. According to the Wall Street Journal, Disney is planning to integrate the sale of its merchandise by the end of 2022. As per the reported plan, viewers will be able to click on a QR code and purchase a toy related to the content they are watching. Additionally, Disney is exploring a membership program, which could help them gather more customer data that could enhance the effectiveness of advertising.

Retail and programmatic

Retailers are highlighting their in-house advertising capabilities, known as retail media networks, to provide brands with a way to stand out on e-commerce platforms. One example is Kroger Precision Marketing (KPM), the retail media arm of the grocery store chain Kroger. These networks leverage customer purchase data, a powerful tool at any time, but especially now as many question the effectiveness of third-party tools following iOS 14.

KPM is making its sales data available for use in programmatic advertising, which describes the digital ad space that is automatically bought and optimized. Advertisers can use this data to reach people through inventory providers like Magnite, OpenX, PubMatic, and Xandr.

KPM is based on Kroger Private Marketplace, a self-serve platform where advertising agencies and brands reach households by applying sales data to programmatic campaigns within a preferred ad-buying platform. Advertisers will now have self-serve access to audience intelligence, customizable video and CTV inventory, and campaign measurement against attributable retail sales and household reach, according to KPM.