2020 Will See “Hockey Stick”-Like Growth in Ad-Supported Streaming TV netflix free account 2020
The streaming wars are heating up. But investors should be sure to get the story right as they look for ways to profit from intensifying competition.
Netflix‘s (NASDAQ:NFLX) popularity with consumers, along with recent high-profile launches of ad-free streaming services from Apple (NASDAQ:AAPL) and Walt Disney (NYSE:DIS) may lead some industry watchers to believe that the future of streaming TV is subscription-based. But a closer look reveals that Netflix, Apple TV+, and Disney+ may not be representative of where connected TV (CTV) is headed.
As it turns out, there’s a “subscription fatigue threshold” for streaming services, according to a recent survey of consumers by data-driven digital advertising company The Trade Desk (NASDAQ:TTD). In other words, many consumers are approaching the maximum amount of money they want to spend per month on streaming services. Ad-funded CTV, of course, is the answer to keeping consumers’ total subscription costs low enough as content and viewing time shifts from traditional television to CTV.
While it’s going to take time for publishers and advertisers to get ad-funded CTV right, The Trade Desk CEO Jeff Green thinks 2020 may be a tipping point in this evolving landscape.
Ad-funded CTV is taking off
It’s not hard to find evidence that ad-supported CTV is taking off. Just about any business with a foothold in the segment is telling the tales of the nascent segment’s uncanny growth. Streaming-TV platform specialist Roku (NASDAQ:ROKU) said in its third-quarter update that monetized video ad impressions on its platform more than doubled year over year. In addition, CTV ad spend on The Trade Desk’s platform jumped 145% year over year over the same time frame. Finally, The Trade Desk noted in its third-quarter earnings call that the number of Amazon (NASDAQ:AMZN) Fire TV ad impressions on its platform surged throughout the quarter after The Trade Desk got access to the inventory in August 2020.
Looking to 2020, rapid growth in CTV appears poised to continue.
“The ads are moving over very quickly [from traditional TV to CTV], and I believe 2020 is the year of the hockey stick for AVOD — advertise-funded video on demand,” Green said in a recent YouTube video on The Trade Desk’s YouTube channel. Green explained that rising cost per impressions (the amount of money publishers can generate from ad inventory, referred to as CPMs) on CTV and growing demand from advertisers for CTV inventory will drive growth in CTV ads in 2020.
Subscription fatigue may be kicking in
Another key catalyst for ad-funded CTV in 2020 may be subscription fatigue. The Trade Desk’s November 2020 survey of 2,613 U.S. adults indicated that 75% of consumers are unwilling to pay over $30 a month for streaming services, and 59% plan to limit their streaming spending to $20 per month. With an estimated 53% of households subscribed to Netflix, 43% to Amazon Prime, and 29% to Hulu, combined with the recent launches of subscription-based services from Apple and Disney, many consumers are likely starting to experience subscription fatigue.
Fortunately, The Trade Desk’s survey also indicated that many consumers are willing to watch some ads if it means lowering the costs of their subscriptions, particularly if those ads were more relevant — an area CTV can keep improving on thanks to data-driven targeting technology.
Considering all of the strong tailwinds driving CTV and the possibility of subscription fatigue on the horizon for many consumers, 2020 could be a key turning point for ad-funded CTV.
As The Trade Desk’s Chief Strategy Officer Brian Stempeck put it, “With almost three quarters of U.S. consumers accessing content via streaming devices, and with almost every major broadcaster launching new streaming services, 2020 will be the year that data-driven TV advertising comes of age.”