In October, we outlined some of the opportunities and challenges that stood in the path of growing ad spend in over-the-top (OTT) environments. Despite these challenges, ad spend in OTT continued to grow in 2019 and budgets are predicted to increase by 32% in the year ahead. However, the double-digit growth OTT ad spend has seen is still lagging when compared to larger trends, like consumer viewing behavior.
In 2020, total US digital ad spend is projected to reach $151B. Yet, the amount advertisers are predicted to spend on streaming in OTT environments is fractional in comparison, clocking in at just $5B. With OTT accounting for 29% of the total time people around the world spend watching TV, ad spend in streaming environments is very underrepresented – making up just 3% of all US ad budgets.
Here are a few reasons why we think ad spend in OTT environments will continue to grow as budgets catch up with viewing behavior.
1. It’s historic.
While we eagerly await 2020’s Internet Trends Report by the well-known venture capital investor Mary Meeker, we took a minute to reflect on the end of a decade by poring over past reports, including this 2019 one. If the history of ad spend vs. time spent on a device tells us anything, it’s that ad budgets have always lagged behind consumer and technology trends. In the comparison below, the amount of time consumers spent on mobile in 2010 (a time when mobile was still new) far outpaced ad spend. Over the years, the tides turned. Advertisers now spend significantly more on mobile today. This increase in spend is directly related to the maturation of mobile and consumer behavior.
2. It’s where viewers already are.
More than half of Americans use at least one OTT service, and the average US internet user spends 18.9 hours per week – for an average of 2.7 hours per day – watching OTT TV. That’s more time than the average person spends driving or socializing with friends and family.
3. It’s where viewers are most engaged.
Given the breadth of content and options provided by today’s streaming services, OTT viewers are more engaged audiences – they’re paying attention to the content they’ve chosen to watch rather than having it play in the background. In turn, OTT viewers are more engaged with advertising and complete 98% of all video ads. Studies have shown that this is a good thing for advertising. One study conducted by MAGNA found that video ads on the Roku OTT platform were 67% more effective per exposure at driving purchase intent than ads on broadcast and cable TV.
4. It’s where advertisers are seeing a new value proposition.
In this study conducted by the IAB, more than half of buyers stated they plan to spend more on OTT this year than they have in past years. The primary reason? Advertisers are seeing OTT’s value in delivering to tough-to-reach audiences. Given nearly 60% of Americans have cut the cord and no longer watch linear TV, these audiences (who have migrated to OTT devices and streaming-only services, like Netflix, Roku, and Disney+) are impossible to reach unless advertisers spend on OTT.
5. It’s more customizable and optimizable.
While the media landscape is becoming increasingly fragmented, this fragmentation is one of the benefits of OTT. As new platforms come to the forefront, audiences continue to break away and choose the content that’s most relevant to them. This enhanced relevancy opens up new doors for advertisers to make meaningful connections with more curated messages. Increased ad relevance is one of the top three benefits advertisers see in OTT, right behind campaign optimization and delivering to hard-to-reach audiences.
As consumer behavior and technology trends continue to mature around OTT, we expect to see ad spend catch up with the amount of time people spend engaging with streaming content. Until then, we look forward to seeing and participating in the conversations that will help get us there.
This article was written by Bethany Lechner, product marketing manager at SpotX