"On TV & Video" is a column exploring opportunities and challenges in advanced TV and video.
Today's column is by Daniel Elad, chief strategy officer at TheViewPoint, an SaaS ad monetization platform for CTV publishers.
One of the key concerns surrounding the CTV space is undoubtedly the transparency of its supply chains. The fragmentation of the sprawling landscape filled with many walled garden ecosystems makes routing impressions resemble chasing the white rabbit.
So, let’s attempt to clear things up.
CTV fragmentation explained
Each CTV device operates with its own software, hardware and unique IDs, which creates real hurdles to achieving interoperability of systems. Fragmentation in CTV and over-the-top TV affects not just the physical devices, but also creates obstacles for ad supply chains.
As things stand, Roku is in pole position. They, together with Amazon, control more than three quarters of the US CTV market, according to eMarketer stats on viewership.
When it comes to ad revenue, Hulu, Roku and YouTube collect approximately half of all CTV ad revenues in the US, according to eMarketer. The lion’s share of the remainder belongs to Amazon, which sells inventory that pops up on the Fire operating system and IMDb TV streaming.
TV set manufacturers, TV networks and publishers partnering with Hulu, Roku and YouTube hold the remaining share of the market. If this sounds complicated, wait until you hear about each CTV supply path having different sales rights.
In reality, there are both pros and cons to this fragmented environment. On the one hand, managing multiple supply channels is tricky, especially when it comes to measuring various metrics across different platforms. The setup process and finding the optimal price efficiency is no small feat.
On the other hand, the preponderance of competition brings prices down. To make sure budgets go their way, platforms have to strike commercially viable deals to win ad budgets. As long as this level of fragmentation remains, marketers benefit from having more negotiating power. Thus, marketers can feed their messages to their potential customers for peanuts in contrast to traditional linear television, which has very limited targeting tools.
Where are CTV impressions coming from?
The COVID-19 pandemic has accelerated the growth of streaming in 2020, which in turn has seen programmatic buying in CTV skyrocket. eMarketer estimates that in 2021 over $6.7 billion of CTV ad revenues will be traded via DSPs and ad-exchange-powered programmatic auctions. This translates into 55% of all CTV trades.
Despite this impressive growth, programmatic CTV inventory remains scarce because upfront buyers are taking large chunks of the programmers’ inventory. Direct-to-publisher deals account for another large share. Programmatic inventory is mostly made available through private marketplaces. Currently, the programmatic landscape is dominated by vMVPDs (Virtual Multichannel Video Programming Distributors). Only a relatively small portion of premium content owners’ inventory can actually be bought programmatically. Undoubtedly, premium impressions rarely appear in programmatic CTV pipes.
CTV sellers, be they content owners, resellers or distributors, usually seek monetization across a range of properties. As a result, it may not always be easy for buyers to determine who actually sold an impression. This is due to CTV sales rights, which overcomplicate the supply chain. Generally speaking, content can be purchased via:
- A distributor or aggregator: A DSP pays an ad exchange, which in turn pays a distributor. Some of the most well-known content distributors and aggregators are Hulu, Tubi, FuboTV and Xumo.
- A content owner: A DSP pays an ad exchange, which then pays a content owner, like Disney, WarnerMedia, Fox, etc.
- A reseller: A DSP pays an ad exchange, which pays other ad exchanges, until the funds reach a distributor or aggregator.
The future does seem promising, as more and more CTV publishers are starting to appreciate the advantages of automating transactions, improved targeting, broadened reach and streamlined technology. Changes should already be noticeable in 2021. More inventory is available with every coming year.
Studies show that one of the prime reasons for opting for CTV as opposed to linear is a cost-effective CPM, according to IAB’s survey of marketers. While it is inevitable that the price of CTV will rise with time as the market consolidates, currently it offers a unique opportunity for media buyers to reap high rewards fast.
Look back at the history of social media. In its early stages, those familiar with the processes reaped the benefits of advertising and audience access. Those willing to deal with the complexity and shortcomings of buying at the early stages of social media received an early-bird discount. Similarly, the time is right to capitalize on the CTV landscape – even if it means going down a maze-like rabbit hole to understand how to buy effectively.