Ready or Not, Here They Come: The Arrival of Ads on Top-Tier Streaming

In years past, streaming services differentiated themselves from linear TV providers by allowing customers to purchase premium access as a way to avoid ads while watching TV. When these platforms first burst onto the scene, most consumers maintained their cable subscriptions and added one or two streaming services to the mix. Now, the scale has tipped the other way: more U.S. consumers rely on streaming services than cable. In light of these consumer changes, the ad-free platforms appear to be an idea of the past, as such platforms are facing a harsh reality that to maintain competitiveness in an increasingly saturated market time and ensure revenue numbers are reached, they’ll need to incorporate ads sooner rather than later.

The biggest names in streaming, Netflix and Disney+, have recently announced that they’ll start allowing advertisers to place ads within their premium streaming packages. This follows suit with many of the other streaming services — Hulu, Peacock, and HBO Max — that have found great success with ad-based models as well.

Netflix and streaming are nearly synonymous, as Netflix was the first successful platform to emerge when consumer trends began shifting toward streaming. So to see the king of streaming making this change raises some questions and possible concerns. Luckily, the decision to incorporate this ad-based service tier will ultimately benefit all parties involved:

• Advertisers: Marketers will once again have the opportunity to reach viewers while they consume TV through streaming services, thanks to the creation of new advertising options.
• Consumers:Consumers have the option to purchase an ad-free tier if they desire, though an ad-based model allows viewers more choice in what they consume and where their money goes.
• Platforms:An ad-based model is a straightforward way to reestablish a revenue stream for streaming services without making drastic platform changes.

So while the headlines may be jarring, the outlook is not so grim. With more opportunities on the horizon, now is the perfect time for marketers to dip their toes into advertising on streaming platforms. Here’s what you need to know as you begin shifting your budget and business objectives to the different advertising opportunities available across both different platforms and different tiers.

1. Research the ad-supporting streaming services.

Each streaming service has a slightly different subscription pricing structure and approach to paid advertising, so it’s crucial to understand the many options available. For example, Netflix announced in 2022 that it would introduce a lower-priced, ad-supported version in the near future. Hulu already offers different subscription levels, including an ad-supported tier (which 70% of their customers use). Peacock, Pluto, and Tubi are all built to carry ads at a base level, and Amazon Prime, Roku, and HBO Max all have ad-supported services to choose from. Additionally, Disney+ announced in March that it would introduce a lower-price advertising tier as well.

As a marketer, you need to conduct research before choosing which streaming service(s) to invest your advertising budget. The top four platforms collectively earned $3.5 billion in advertising revenue between September 2020 and September 2021. That number will only continue to rise as more and more companies see the value in streaming-based advertising, meaning now is the time to get ahead of the game.

2. Find a digital advertising partner.

This is one of the most effective steps you can take now to future-proof your advertising campaigns. When seeking out a partner, you will want to find a company that has access to premium inventory across different publishers and platforms. This will help eliminate the challenge of navigating the evolving streaming landscape and limited reach and scale.

A good partner will help you target customers while managing your frequency capping and consolidating dashboards. They’ll help you explore solutions such as contextual targeting, device ID, access to premium publishers, inside access to the biggest OTT players, and best-in-breed omnichannel DSP platforms.

3. Invest in automated content recognition.

Consider investing in automated content recognition technology. ACR is an identification technology that recognizes content played on a media device or present in a media file. ACR works when an individual turns on a Wi-Fi-powered device for the first time, and then selects to opt-in to audio and video data collection during setup. The device provider is then able to analyze small fragments of images or sounds from the content being consumed over time.

The tiny samples processed by ACR software are cross-referenced and matched to existing data. This data is then shared with advertisers like you to help better inform ad placement decisions. For instance, you might retarget TV ad viewers or target new users who saw competitors’ TV ads. Using ACR technology allows you to create custom audiences based on observed behavior, ultimately resulting in a better advertising campaign and content tailored for specific consumers.

4. Start small as proof of concept.

You may find it beneficial to shift a smaller “test” portion of your budget toward tiered ad programs to see how to reach your target audience most effectively. If you need a resource to guide you in shifting your budget, this chart can help you understand strategic budget moves for streaming ads.

Because advertisers can still rely on third-party cookies, the next few months present an opportune environment for marketers like you to test out the water and see whether you are ready to dive into a new advertising medium.

Big changes are coming for streaming service customers and advertisers alike. By capitalizing on the advantages of tier-based advertising and related technology, you can proactively position your brand for success among strategic audiences. The principles of traditional advertising still apply, but streaming technology and digital tracking allow you to hyper-target audiences like never before.

If you’re ready to begin leveraging new opportunities in your marketing mix, contact us to learn more about our robust Advanced TV Solutions here.