Needham & Company’s Laura Martin will be speaking at AdExchanger’s Programmatic I/O conference May 20-22 in Las Vegas. Click here to register.
Survival of the fittest is the name of the game in streaming.
Streaming services are scrambling to impress both investors and advertisers with as much data as possible.
The ones with the best chances are those that can turn their media into a performance marketing channel with targeting and attribution that looks and feels like digital advertising – at least according to investors on Wall Street, said Laura Martin, senior media and internet analyst at Needham & Company.
The way investors see it, upper-funnel advertising alone simply isn’t good enough for streaming to be valuable. Platforms have to be able to attribute actual business outcomes to their ad inventory, or risk losing out to the competition. It’s also harder to earn a profit in streaming because there’s less ad inventory compared to linear TV.
But in their quest for outcomes-based measurement, streaming platforms are transforming into mini walled gardens with vaults of viewership and audience data under lock and key, according to Martin. Which certainly goes against the buy-side push for more transparency into streaming data and inventory, she added.
Some platforms are stuck between a rock and a hard place. They face conflicting demands between investors and advertisers. Now, winners and losers are starting to emerge, Martin said.
AdExchanger spoke with Martin about streaming’s competitive path to profitability – and the implications for platforms and marketers.
AdExchanger: How should streamers compete for measurement and attribution clout?
LAURA MARTIN: Retail media networks are giving some platforms a competitive edge because they give marketers closed-loop attribution. Advertisers are willing to pay higher prices for streaming ad inventory they can link to actual sales.
Amazon has this competitive advantage. Walmart making plans to acquire Vizio is how it reacted to Amazon turning its Prime customers into CTV audiences essentially overnight by defaulting Prime Video into an ad-supported model earlier this year.
Wall Street thinks these two – Walmart (with Vizio) and Amazon – are going to take more market share away from other CTV players sooner rather than later.
What about platforms that don’t have a commerce business? How should they compete?
Considering signal loss and rivals like Amazon and Walmart, streaming platforms need more first-party data than ever to make their audience targeting and attribution competitive enough.
Does a stronger focus on first-party data turn streaming services into walled gardens?
Most major platforms are already becoming walled gardens.
Walled gardens have a more competitive business model and, therefore, better economics. Media companies aren’t incentivized to share more data with buyers when they can charge higher prices for exclusive access to a platform’s audience. There’s an information advantage at play, which creates a bigger imbalance of power between buyers and sellers.
Is there anything ad buyers can do to mitigate the issue?
Advertisers can ask for guarantees of deduplicated reach across channels. They can also push for more measurement from publishers, including lower-funnel measurement.
At this stage in the competition, what is the recipe for streaming profitability?
Wall Street expects platforms to have at least two revenue streams, ideally of the same size: subscription and ad revenue.
But investors value streaming platforms even more highly when they have a third revenue stream: ecommerce. Not only does retail data raise CPMs, but it also supports another revenue stream, and more diversification means more stability.
Who are the winners and losers emerging from the streaming wars?
The most important players to watch are Amazon and Apple because their streaming businesses are ancillary to their core businesses. They can subsidize any losses coming from the content creation or TV distribution side. These two are winners because they can’t lose.
Disney also has the scale, first-party data and revenue diversification investors expect.
Many industry execs would also name Netflix as a winner because of scale, although I wouldn’t.
Then that leaves NBCUniversal, Paramount, Warner Bros. Discovery and Fox [which owns Tubi and is part of a streaming-focused venture with WBD and Disney]. Of these four, I think only one will succeed in the long term.
Why wouldn’t you put Netflix on the list of winners?
Because it doesn’t have enough revenue diversification.
Netflix is a pure-play streaming business in the sense that streaming is its only revenue stream – it doesn’t have a legacy TV business, films or a retail media network – and that model is actually pretty dangerous to Wall Street. If the streaming industry falters, Netflix will be hit the hardest.
This interview has been edited and condensed.
For more articles featuring Laura Martin, click here.
