Demand for streaming ads climbing, but clients still view the buy as a ‘trial’

Ashley Regan
By Ashley Regan | 1 August 2024
 
Bastian Riccardi via Unsplash

Brands across categories have a promising appetite to trial streaming advertising, but demand is still in its early stages, media agencies say.

While ad-supported streaming consumption in Australia is increasing with 16.6% of video on demand (VOD) households now choosing ad-supported plans, up from 9.2% a year ago. 

And the market is projected to experience an annual growth rate (2024-2027) of 8.21%, resulting in a projected market volume of US$1.66bn by 2027.

But there are still kinks to be worked out, as audience SVOD reach and measurement is inconsistent, media agencies say.

As a result, many brands still consider the streaming buy in its infancy phase, as a testing and trialling exercise.

Clients typically add SVOD in the mix along with BVOD, YouTube and linear as they continue to understand the potential incremental reach, for example only 7% of a recent client VOD buy went to SVOD at independent agency The Media Store.

But buys are also grounded in the content.

BVOD particularly continues to hold significant value for advertisers targeting broad demographics through popular, live, and event-driven content such as sports, reality, and lifestyle shows, Awaken general manager Veronica Gutierrez told AdNews.

“But SVOD platforms have an edge with younger audiences due to their offering of high-quality original content, which proves more challenging for free-to-air networks to compete with,” Gutierrez said.

“However, the real challenge for networks will come when they face budget constraints compared to the massive financial resources of SVOD giants. This can limit their ability to stay relevant competing for the rights to top-tier content or invest in high-quality original programming.” 

Complexities and the immaturity of the streaming offerings means it will be some time before the streaming services reach the market level of total TV investment, Half Dome head of strategy Adrian Cosstick said.

“Linear TV investment will remain strong due to its cost efficiency and immediate reach, which is critical for mass market and time sensitive campaigns,” Cosstick said.

“For campaigns with specific audiences or ecommerce goals, streaming platforms offer effective brand-building with digital targeting and tracking.” 

For now Foxtel's offering is the most desired

Netflix was the first streamer that went to market with ads, at that point agencies and brands alike were highly interested.

Now 18 months later, the streaming ecosystem is more convoluted with Binge, Kayo, Optus Sport, Paramount+ and most recently Amazon Prime Video.

With client demand looking optimistic the question will soon be, how many players can succeed in this landscape, UM Australia head of media planning Michael Mellington posed.

“Is Disney the next to enter? And will this influx of supply put pressure on the likes of YouTube creating an inflationary product? Overall where the market can sustain more supply this can only benefit advertisers,” Mellington told AdNews.

For now Foxtel’s combination of elite global content combined with local Sports & News, sets them apart as Australia’s leading streamer, Mindshare national head of investment Nik Doble said.

Out of the whole ecosystem, Binge and Kayo are, on average, getting the largest percent of investments from media agencies due to its mature product and consistent audience delivery.

“Binge is most cost effective,” The Media Store performance director Annie Marendaz told AdNews.

“We haven’t had any inventory scale issues. We can run the programmatic guarantee deals in our DSP of choice and help to frequency cap against other screens buys, such as BVOD and YouTube. 

“But BVOD is still favourable due to its overall better rates and audience overlays.”

Currently the market is seeing more buyer confidence with the ad and consumer audience strategy and more credibility with the upfront scale of opportunity, MAGNA head of product and innovation Ros Allison said.

“In the US, the launch of ads on Prime Video helped catapult the share of ad supported viewing to close to 70% of total streaming, we expect Australians to follow suit,” Allison said.

Focusing on brand categories, Havas national head of partnerships and adtech Kevin Fernandes said, there has been varying levels of interest from lifestyle, FMCG, and apparel brands for test investments across Amazon and Paramount+ solutions. 

“But it is important for our clients to test first at these [premium] rate levels to ensure the investment achieves incremental gains vs current channel investment,” Fernandes said.

Similarly, UM's portfolio has seen several brands already go live with Prime, with many more to come.

At GroupM, EssenceMediacom head of media solutions and investment Anthony O'Callaghan said, the demand is mostly coming from larger advertisers, particularly those in the CPG, QSR and banking space.

"We’ve been lucky enough to snap up a bunch of the launch packages for Amazon and Paramount+ for our clients, and we’ve found the rates are competitive," O'Callaghan said.

Particularly Amazon stands out for ecommerce clients due to its extensive purchase data ecosystem – a clear point of difference to the rest of the streaming services.

Prime has also identified Sport central to its strategy.

"In the US securing NFL exclusively on Thursday’s and imminently an 11- year NBA deal, while globally leveraging the recent T20 World Cup to launch their ad tier," Doble said.

"Regulation permitting, the implementation of this strategy locally, will no doubt see Amazon become a key player in all future Australian Sporting rights conversations, and with unrivalled bidding capacity, have the potential to shake up the landscape."

But it's important to note that independents are the slowest to adopt the new platforms due to large upfront investment commitments and exclusive DSP’s which lock out most indie agencies.

For example, Netflix can only be run on Microsoft/Xandr, although this is changing indies are trying to deduplicate audiences across screens via frequency capping.

“Across Prime, the early stages are promising, with supply fulfilling promises, giving clients a good trading experience. The only exception to this is clients with tight legislative parameters, which has put a squeeze on supply,” Mellington said.

“I think Amazon may also spark a leap forward in ad interactivity with Amazon Echo voice integration and links to Amazon stores. It’s an exciting prospect and I can see it gaining a rapid share of total TV investment over the next couple of years,” Cosstick said.

But because there is so much saturation in the market, not everyone can distinguish one platform from the other.

Over the years, so many digital ad platforms have followed a templated setup in order to make it more accessible to advertisers, this means that it doesn't feel like there is a whole lot of difference between platforms, Orange Line head of media Gavin Chew said.

“Sure, they may have their exclusive content; or a slight over-index in a certain demographic; or a certain nuance in their measurement or reporting; but after a while it feels like much of a muchness on the whole,” Chew said.

“Our one skew is that if we have a client setup on Amazon Advertising or DSP, then we may lean towards Prime for inventory to streamline planning, buying, and reporting.”

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