Navigating the Shift: How Linear TV Advertising Budgets Are Moving to CTV
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Pathlabs Marketing |
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June 24th, 2024 |
We’ve all heard the saying ‘money follows eyeballs.’ The same holds true in the world of streaming content. More and more advertising dollars are making the great migration from traditional linear TV to connected TV (CTV). This ongoing movement is the direct result of advertisers following a qualified audience of viewers who choose to consume more CTV content each and every day.
While this likely does not shock most people, the accelerated rate at which this occurs is worth noting. In fact, eMarketer predicts that combined US TV and CTV ad spend will grow every year through to the end of its forecast period in 2027, when it will reach nearly $100 billion, according to their October 2023 forecast. CTV will account for all of the growth, with spend increasing by $5.50 billion YOY in 2024.
eMarketer estimates the following key industry changes:
CTV gains will make up for the decline of linear TV ad spend, dropping 4.7% in 2025, 1.2% in 2026, and 4.0% in 2027.
Viewers are increasingly watching more streaming content, with time spent on streaming platforms surpassing linear by 22%.
Programmatic advertising will account for 84.2% of the $32.09 billion going towards US CTV video ad spend in 2025.
Factors Driving the Shift
The cards—and data—are on the table. Users and advertisers alike are shifting from linear TV to the connected TV realm. But what are the main factors causing this shift?
Consumer Behavior
Cord-cutting is a prevalent driver for the shift from Linear TV to CTV. Consumers are increasingly abandoning traditional linear TV hardware and expensive cable subscriptions in favor of internet-powered CTV devices and OTT streaming services.
Additionally, Americans, in particular, are spending more time consuming digital media. The CTV viewing model is conducive to this trend, as it offers media streaming on demand, liberating users from the rigid schedules of linear TV and allowing them to watch their favorite long-form video content at their convenience.
Targeting Capabilities
Advertisers seek greater certainty that their ads reach the intended audience, a precision linear TV has struggled to provide due to its limited user-level targeting capabilities.
Traditionally, for the linear TV setup, advertisers specify general TV channels and air times to align their ad placements with their target audience. However, these ads are preprogrammed into set inventory slots, requiring advertisers to hope that the right viewers are watching at the right times.
In contrast, CTV utilizes a more technological and data-based ad-serving infrastructure that enables far superior targeting capabilities; more on that below.
Cost Efficiency
Advertising on linear TV typically involves direct negotiations with major network publishers and broadcasters. This costly and time-consuming process makes it challenging to justify the effort, especially just for general audience reach.
In contrast, the CTV media execution model enhances cost efficiency. Teams can avoid many of the direct negotiations by using advanced ad-buying platforms such as The Trade Desk, Hulu, Amazon, DV360, and others. These platforms allow teams to build and execute targeted campaigns more quickly. They also offer various inventory options, from premium packages to more cost-effective longtail CTV ad placements, accommodating different budgetary needs.
While some direct collaboration with ad platforms provider is necessary, there are efficient media execution solutions to streamline the people, workflow, and tech requirements through partnerships., Overall, this model generally offers a lower barrier to entry for advertisers of all sizes, making it an attractive alternative to traditional linear TV advertising.
Benefits of CTV Advertising over Linear TV Advertising
The transition from Linear TV to CTV is well underway for many advertisers. Let’s dive into some of the main benefits of CTV that are at the top of these advertisers' minds as they make the jump.
Data-Driven Targeting
CTV employs a sophisticated, data-driven ad targeting approach far superior to linear TV’s capabilities. Advertisers can meticulously set targeting criteria using demographic, geographic, and contextual parameters and choose from first-party, third-party, or platform-provided audience segments.
Once the campaign launches, ads are matched and served more precisely to viewers who meet these criteria in a real-time format. This dramatically reduces impression waste by serving ads purposefully to the right audience on their CTV devices.
Flexibility In Execution and Optimization
Within the CTV ad-buying platform, even after the campaign launches, teams can modify settings, bid ranges, targeting criteria, frequencies, and more. Depending on the platforms, they can even swap out creatives mid-campaign. These optimization capabilities are not found with linear TV, where advertisers have less control over campaign setup and execution. If they need to make modifications, it will typically require cumbersome coordination with linear TV network representatives.
Reporting and Analytics
Linear TV often fails to provide detailed campaign insights, typically limited to reach and post-flight generalized audience data. In stark contrast, CTV platforms offer more in-depth reporting and analytics. From the campaign’s outset, advertisers can track detailed metrics such as impressions delivered, completion rates, budget expenditure spent so far, and cost per completed view. Teams can also pull inventory reports to see the CTV inventory locations where their ads serve and the corresponding performance and then make optimizations accordingly mid-flight.
These features of CTV platforms are especially lucrative for independent agencies executing CTV campaigns for brand clients, allowing them to provide regular updates and insights into how their campaigns perform relative to their costs. The ability to pull this data keeps the media team and client well-informed throughout the campaign's lifecycle, leading to better results and more proactive campaign management.
Enhanced Engagement
Both CTV and linear TV tend to benefit from higher user engagement, as users voluntarily watch the long-form video content of their choice on a larger TV device screen. CTV, however, still wins out in terms of interactive advertising opportunities and user engagement.
Linear TV mainly offers a standard mid-roll ad format, while CTV advertising includes pre-, mid-, and post-roll ad options. Additionally, CTV/OTT providers are constantly experimenting with newer, interactive ad formats such as QR codes in ads, page overlay ads, pause ads, and interactive game ads. Some CTV platforms even provide users with a “choose your own ad experience” format. These enable a more transformative viewing experience compared to rigid and predictable linear TV ads.
Navigate CTV Advertising with a Media Execution Partner (MEP)
Enhance your clients’ visibility on CTV with the expertise of a Media Execution Partner (MEP). CTV advertising is a new frontier that is very distinct from traditional linear TV advertising. It involves investing in the appropriate platforms and technology that can deliver results for your clients. You need a team of experts who can manage targeting, budgets, tracking, optimization, and much more, not to mention the workflow tied to it all.
Pathlabs can help independent advertising agencies navigate the people, workflow, and technologies necessary to deliver performance across CTV campaigns. Our experienced team of media experts can ensure your campaigns capture the attention of high-value CTV viewers and receive the most relevant traffic for your clients.
