It was already on the fringe of the streaming video movement. But, with Comcast's (CMCSA +0.36%) plan to make an ad-supported version of its Peacock streaming service available for free, ad-supported video on demand (AVOD) has just moved into the mainstream.
There is one stumbling block that could slow down the corresponding wave of cord-cutting. That is, the advertising supporting more and more streaming services is poorly managed, and poorly measured. Help is needed to ensure advertisers get the most bang for their buck in this experimental arena. The irony is, with one tweak, connected-TV advertising could be even more potent than traditional cable television ads.
That tweak is now on the table.
Image source: Getty Images.
AVOD's missing link isn't missing anymore
As was expected, Comcast subsidiary NBCUniversal will offer Peacock in a free, fully ad-supported version. But for a monthly fee of $4.95, viewers can access more content, still supported by commercials (but fewer of them). The service's $9.95-a-month option is completely commercial-free.
It's arguably the widest net cast yet for a streaming audience by a major media name. The idea is far from unheard of, however.
Roku (ROKU +5.13%) not only makes and markets the world's best-selling streaming player, but airs commercial-laden programming. IMBDTv, owned and operated by Amazon.com, also offers streaming digital video for free, in exchange for the occasional commercial.
As viewers of most "free" streaming channels know though, the ads aren't always handled well. Repeats are common, and often irrelevant. When they are relevant enough to make an impact, the built-in "learn more here" feature asks viewers to be whisked away from the program they're watching. That's a tough sell, so to speak.
It's not as if advertisers aren't aware of the medium's shortcomings. They're just currently limited in what they can do about it.
That's changing, however, and Roku is one of the leaders of that change. In September, it announced a partnership with a small tech company called Innovid, which will help streaming advertisers measure their impact and manage demographic data.
Companies like Samba and Steelhouse are also helping advertisers get a firmer grip on a connected television market. As Samba TV's SVP Marc Bourget boasted last month, "What's unique about Samba's Audience products across CTV [connected television] and digital devices is that every impression can be connected with a business outcome," addressing what's turned into a frustrating but overlooked challenge.
With the launch of Peacock to Comcast's customers in April followed by a universal launch in July though, the need for connected TV advertising measurement tools could outright explode. That's bad news for cable companies like Charter Communications (CHTR +2.72%), and even for Comcast's linear (non-streaming) cable business.
Addressable television
In simplest terms, addressable television is streaming television viewership that advertisers can do something with, and then confirm they've done something with.
Unlike traditional television commercials, which interrupt programming and are aired universally to everyone watching the same particular program, addressable television gives advertisers a chance to show different viewers of the same program a different advertisement.
Perhaps more important, with new technologies from the likes of Innovid and Steelhouse, advertisers can determine if an ad viewed via a connected television eventually prompts a purchase, even if that purchase happened at a later date using a different device.
It's exactly the sort of tech streaming media companies wanted, and needed, right now.
While the numbers vary slightly from one source to the next, addressable television is a fast-growing market eating into the cable industry's ad business. Television viewing metrics company Nielsen predicted early last year that addressable television advertising would become a $4.7 billion business this year, up from $1.8 billion. eMarketer's estimate for 2019 is a more tempered $2.9 billion, but that's still expected to be followed by an impressive $3.5 billion spend on addressable television in 2021.
In that same vein, an eMarketer report posted in November suggested ad spending on connected TV -- a sliver of the TV market that's a bit wider than addressable television -- would swell from just under $7 billion in 2019 to more than $14 billion in 2023.
For perspective, the shrinking conventional TV advertising market was worth roughly $70 billion last year.
Another headache for cable
Comcast hasn't divulged exactly what sort of capabilities it will offer Peacock's advertisers, but NBCUniversal's chairman of advertising and partnerships Linda Yaccarino noted the platform will offer advertisers voice command ads, interactivity, and an option to sponsor entire programs -- something conventional cable companies can't offer. She added that several advertisers are already lined up.
The end goal is to sign on between 30 million and 35 million subscribers by 2024, which should generate an annual mix of subscription and advertising revenue of around $2.5 billion.
If advertisers find the platform a highly effective one, however, the streaming service may find it can inject fewer ads, thereby attracting more paying members, and in turn, negate the need for as much advertising. Yet, a bigger audience translates into higher ad rates. That's why it still all boils down to the usefulness of its ad-response measuring tools.
To that end, the mere arrival of Peacock now suggests connected TV advertising technologies are ready enough. The cable industry looks set to suffer yet another blow.
