The proliferation of connected TV (CTV) continues and shows no signs of slowing. This broad category counts a growing list of devices television viewers use to connect to streaming services. It includes connected smart TVs, set-top boxes and dongles by Roku (ROKU -10.29%), Amazon's Fire TV, Chromecast from Alphabet, or Apple TV. Viewers also use connected video game systems and Blu-ray players to access their favorite streaming platforms.
Consumer research from last year found that a whopping 87% of U.S. TV households had at least one internet-connected TV device, up from 80% in 2020, according to data supplied by Leichtman Research Group. Those devices aren't sitting idle, either. The data found that 46% of adults in these households watched video via a connected TV device daily, up from 40% in 2020.
The widespread use of CTV devices also impacts the advertising landscape, grabbing a dominant share of global ad impressions. That's great news for companies in the space, including The Trade Desk (TTD 1.67%) and Roku, which both predicted long ago that this would come to pass.
Image source: Getty Images.
A commanding lead
A more recent study confirms the growing importance of this trend on the advertising market. CTV continued to dominate advertising last year, generating 51% of advertising video impressions, up from 40% the year before, according to data released by advertising and analytics company Innovid.
The report analyzed over 330 billion video advertising impressions across CTV, mobile, and desktop devices and found that CTV outpaced the ad impressions of mobile and desktop combined. Mobile and desktop each lost share, continuing a trend that has continued since 2019.
Furthermore, the report found that interactive "shoppable" ads -- which allow viewers to learn more about a product or buy it -- were not only on the rise but outperformed standard ads.
Intercepting the future
The Trade Desk long believed that CTV would be the wave of the future and positioned its business accordingly. The adtech pioneer developed a self-service platform that manages digital advertising campaigns, using high-speed computers and sophisticated artificial intelligence (AI) to connect advertisers with their target market.
During the company's first-quarter earnings call, CEO Jeff Green talked at length about CTV, which came up 51 times. He noted that "video, which includes CTV, was the fastest-growing channel of our business ... not just here in the United States ... [but] both in EMEA and across Asia."
Green went on to note that CTV was "driving significant change" across the advertising industry, not just in television, but omnichannel advertising as well. He also noted that "in some cases, brands and agencies are asking streaming publishers to let The Trade Desk be a part of the deals." That's likely due to the company's scale, which reaches into every corner of the ad industry.
At the company's Forward '23 CTV event earlier this year, major ad-supported streaming partners, including Disney and Comcast's NBC Universal, addressed the proliferation of CTV and the advantages of The Trade Desk's Unified ID 2, the heir apparent to internet cookies. He also cited a Netflix executive at the event as saying that the "ad-funded subscriber is more valuable to them than the ad-free subscriber."
Roku has also long been a proponent of CTV, which is the simplest and easiest way to access its channel-agnostic streaming platform. On its first-quarter earnings call, Charlie Collier, the new president of Roku media, said, "[m]ore and more clients drive dollars to accountable connected TV advertising." He also pointed out that traditional TV viewing hours declined 10% year over year, while Roku streaming hours jumped 20%. So not only is the company attracting a larger share of the market, but advertisers are shifting more advertising spend away from traditional TV and to streaming.
The elephant in the room
I'd be remiss if I didn't address the elephant in the room: Both The Trade Desk and Roku have suffered as a result of the downturn. It's well documented that cutting back on marketing is a quick and easy way for companies to reduce spending in times of economic uncertainty. That, in turn, punished the stocks of The Trade Desk and Roku, which are still down 21% and 84% from their respective peaks.
However, the growing penetration of CTV, the increasing adoption of ad-supported streaming services, and the ongoing shift of advertising dollars from traditional to streaming television bodes well for both Roku and The Trade Desk -- and their investors.
