Five or six years ago, industry experts believed linear TV was on its way out. Despite the damning and somewhat over exaggerated predictions, it remains a steadfast part of life today. What it faces though is tough competition in a new ‘user-centric’ era where audiences dictate the flow of content and big tech players own the operating system that underpins it.
TV advertising was once the go-to for reaching mass audiences, while streaming on-demand platforms focused on building subscribers through their popular ad-free model. Despite many years of fast-paced growth, SVOD platforms are now under pressure to become profitable. Today, streaming platforms are carving a different path - and it’s paved in ad revenue.
Path to profitability is paved in ad revenue
In the last few months alone, several new ad-supported streaming tiers have launched in Australia, including Paramount+ and Amazon, while Disney+ is rumored to be on the cards so far in the US. Every player is attempting to find their footing and stand out in a crowd - and competition is fierce. In an unexpected turn of events, advertising may hold the key to maximising streaming revenue and scale.
While the launch of ad-supported streaming has opened up a world of possibilities for advertisers to reach new audiences it has also thrown a grenade into an already complex market of viewers, raising questions and further fragmenting TV ad buying.
‘Two-speed economy’ is fragmenting advertising strategies
Some might argue Australia is still in its infancy when it comes to advertising on streaming platforms and what we have right now is an oversupply of ad-supported streaming options. But, in reality, Australian consumers have moved into streaming much faster than other markets - and it’s actually the investments in terms of ad dollars that have been much slower to move. As advertisers play catch-up, today’s ‘oversupply’ is likely to be short-lived.
Our industry continues to evolve at such a pace, it’s often hard to keep up. Advertisers are working hard to evolve alongside it but not everyone is moving at the same pace. What we’re experiencing right now is a ‘two-speed economy’ that is fragmenting TV buying strategies and slowing down decision making
At one end of the scale are the free-to-air stalwarts that remain focused on broad reach and effectiveness. Here the majority of ad budgets continue to be invested in linear, but wastage in both frequency and duplication remain key challenges.
At the other end of the scale are future-focused digital innovators and agencies whose approach can be described as “bleeding edge” in nature. By leapfrogging key cohorts of streamers, and instead pouring all effort into precision, they too risk losing sight of the more impactful streaming stepping stones along the way.
Positioned somewhere along the remainder of the scale - between these two contradictory bookends - are advertisers focused on following the eyeballs. And, as a result, the demand for streaming ads is climbing.
Glut of ad-supported streaming options, or time to rebalance budgets?
Over two thirds of all time spent watching content on Samsung Smart TVs is within streaming environments and SVOD still holds the lion’s share with 40%, according to internal data. But, earlier this year, for the first time ever in Australia, we saw time spent within ad-funded streaming environments on Samsung TVs match linear viewing time.
In 2023, Australian marketers invested over $3.4B in TV advertising, according to Think TV, yet only a single digit percentage of that spend went to ad-funded streaming. If we look at the UK market in comparison, where less than two thirds of viewers favour streaming, the CTV ad spend was much more significant, sitting at 21% of total TV advertising budgets.
Currently, we believe there’s a state of imbalance in Australia in terms of understanding the TV landscape and the investments and how they're made. This has left some cautious to charter a new path. But advertisers don’t need to increase their budgets to reach audiences where they choose to watch - they just need to rebalance them. A recent Nielsen study suggests that by allocating 30% of Total TV budgets to streaming, advertisers can optimise reach and efficiency.
CPMs will continue to flux - but price is only half the story
Not only is demand growing but reports suggest streaming ads are getting cheaper as more competitors squeeze the market. While CPMs are an important factor, the real focus should be on how we inform media buying decisions and make those dollars work harder.
What I’ve found consistently in my career is that smart advertisers will buy media that works. Leveraging data capabilities guides advertisers to invest optimally in areas where audiences spend their time and achieve unduplicated reach across a highly fragmented market of viewers.
All eyes are on ad-supported streaming right now as more global giants enter the ad-supported market, SVOD players hike their ad-free prices, linear reach continues to decline and the streaming measurement debate gains pace.
As with every innovation, advancement or evolution, there is no rulebook to help navigate ad-supported streaming. But to maximise impact in a streaming-first nation it’s clear TV spend needs to play catch up to audience behaviours - and advertisers are just getting warmed up.
Alex Spurzem, Managing Director, Samsung Ads ANZ & SEA