Traditional TV advertising is certainly going through a period of significant and disruptive change. But the shift of ad dollars from linear to connected TV (CTV) is not the inevitable consequence of changing audience viewing habits. Rather, it is a consequence of advertisers feeling like they have more control over campaign targeting and measurement in CTV compared to linear.
In fact, there is an imbalance when comparing how ad spend on linear and CTV is changing in response to time spent on those devices.
Audience time spent on linear TV is dropping nearly 50%, from 4:37 hours in 2012 to a projected 2:46 hours in 2024. But the drop in ad spending over the same period is less than 5%. In 2022, linear TV ad spend even grew by $1 billion.
Meanwhile, time spent on CTV has doubled over the last four years, but ad spending has tripled during the same period. In other words, CTV advertising is growing at a faster pace than can be explained by its growth in viewership.
So, if the shift in ad spend isn’t correlated to audience time spent, why is it happening? Most likely, it’s because CTV offers entirely new possibilities to advertisers.
CTV isn’t just an alternative to TV – it brings new potential
Given CTV’s digital nature, advertisers can allocate budgets based on real-time measurement data. Demand-side platforms (DSPs), such as tvScientific, Vibe.co, and The Trade Desk, have played a pivotal role in amplifying automation and ensuring that ad inventory on the big screen can be bought programmatically.
While it is clear that ad spending on linear TV is in decline (falling to 2008 levels this year), it’s too easy to say that CTV spend is rising simply because it’s filling the gap left behind by decreases in linear spend.
CTV’s incremental dollars aren’t just coming from linear. Many advertisers also seem to be reallocating budgets away from digital and mobile video. This is a strong indication that advertisers are capitalizing on the bigger creative potential, the higher engagement and the greater accountability of CTV – not just compared to linear, but compared to other advertising avenues like mobile, desktop and even PC.
It’s also important to note that even though spend is shrinking, linear TV is still a major line item in media plans. One reason is because of the persistent myth that Baby Boomers remain reluctant to cut their linear cords. Advertisers who buy into this narrative stick to linear to reach Boomers, while those chasing Gen Z are putting their bets on CTV.
However, this way of thinking is superficial at best. What keeps Boomers attached to linear is not the device, but the content. And now, traditional linear TV outlets, such as the BBC, are successfully digitizing their archives, allowing Boomers to watch shows from way back through on-demand streaming platforms they can access on their CTVs. Marketers are realizing this means they can reach Boomers on CTV, in addition to younger generations.
The rise of shoppable CTV ads could also hasten the shift in budgets from linear to CTV. Just in the last year, we’ve seen companies experimenting with directly sold products within specific TV shows across various platforms. This area of digital commerce will continue to grow and experience huge advancements over the next several years.
In fact, with its audio and video capabilities, CTV has the potential to turn the television into the household shopping hub in the long run – perhaps even the most highly qualified medium to experience products before purchase.
Still, it’s difficult to predict exactly how the growth of shoppable CTV will materialize and which generations will be its biggest driver. Boomers might rejoice that they can get so much more out of their TV, while Gen Z will use CTV as another touch point in their acquisition journeys, which already span multiple devices. As shoppable CTV evolves, it will not only reshape consumer habits, but also the dynamics of advertising and content creation.
The future of CTV is nuanced
CTV is attracting more ad spend because it’s much more than a simple replacement for linear TV. Its impact is similar to how the smartphone enhanced the capabilities of the telephone: The phone never became obsolete, and we still make phone calls today. Instead, it evolved into a convenient daily companion, offering functionalities beyond mere calls.
CTV is similarly poised to transform, rather than eliminate, linear TV, by becoming a complementary platform for both users and advertisers.
“On TV & Video” is a column exploring opportunities and challenges in advanced TV and video.
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