Keeping the complexities of marketing channels in mind, Modern Retail+ Research has analyzed strategies and challenges across leading marketing channels — like programmatic display and social media — to identify key trends and best practices in our CMO Strategies series.
In this installment, Modern Retail+ Research focuses on an analysis of the ad-supported streaming landscape and its role in marketers’ playbooks. Other reports in this series focus on social media usage and budgets, the retail media landscape and the display ad market.
The next report in this series will lay out how the four ad channels compare to each other, including marketer usage of the channels.
Streaming TV claimed the largest share of U.S. TV viewing in July, according to Nielsen — hitting a new high at 38.7% of total TV usage. What’s more, Americans have been adopting ad-supported streaming services at a faster rate than purely subscription-based options: The number of U.S. homes streaming ad-supported streaming services increased 17% from May 2021 to May 2023 versus a 9% increase in the same period for non-ad subscription-based streaming services, according to Comscore’s 2023 State of Streaming report.
However, as a newer addition to the marketing space than other channels, ad-supported streaming is the channel marketers use the least among the four Modern Retail assessed in our CMO Strategies series. Slightly more than one-quarter of respondents (28%) said they use ad-supported streaming versus, for example, more than one-third of respondents (38%) who use retail media — also a newer marketing channel.
Ad inventory isn’t the problem for ad-supported streaming services, as advertisers are seemingly awash in streaming ad inventory. Netflix has finally joined the ad-supported streaming landscape, and so has Disney+. Amazon is also reportedly considering an ad-supported tier of its Prime Video streaming service. In fact, earlier this year, agency executives from Havas Media, Horizon Media, PMG and Tatari reaffirmed to Modern Retail’s sibling publication Digiday that streaming ad supply was outstripping advertiser demand.
However, many advertisers find the expense of buying and placing ads on platforms to be a barrier, while others are concerned with scale. Then, there are advertisers who feel a bit limited by ad options among so-called premium streamers, like Netflix, but are finding opportunities to supplement their reach and receive more favorable pricing through free ad-supported streaming services, including YouTube.
“We know that some of these premium ad-supported tiers that just came into the marketplace did come in with very limited and/or no targeting,” said Laurie Crowley, svp and group director of investment at Havas Media. “And to be unable to transact on that at least in the nascent stages of some of these top-tier streaming networks, it’s challenging and frustrating for clients.”
Keeping in mind the dichotomy of available ad inventory versus ad placement cost and scalability, along with viewers’ increased interest in streaming TV, Modern Retail examined how marketers are currently investing in ad-supported streaming services.
To map out marketers’ current digital playbook, Modern Retail+ Research sent out three surveys asking 635 respondents about past and upcoming investments, marketing channel tactics and preferences and business challenges.
Modern Retail+ Research also conducted a focus group and individual interviews with marketing executives across industries.
Additionally, for a report released earlier this year that analyzed the ad features of ad-supported streaming services, Modern Retail’s sibling publication Digiday identified the top-earning ad-supported streaming services by 2022 ad revenue and also included other popular platforms selected by the Digiday editorial team for their prominence. Here are those platforms in alphabetical order:
- Amazon Freevee
- Discovery+
- Disney+ Basic with Ads [launched December 2022]
- Hulu
- HBO Max (Ads) [transitioned to Max on May 23]
- Netflix Standard with Ads [launched as Netflix Basic with Ads, November 2022]
- Paramount+
- Peacock
- Pluto TV
- Samsung TV Plus
- The Roku Channel
- Tubi
- YouTube
YouTube, with the largest audience reach of all the ad-supported streaming platforms assessed in this report, received the largest portion of both respondents’ ad placements and budget allocations in 2022. The overwhelming majority (83%) of marketer respondents said they placed ads on YouTube, and more than half (60%) said YouTube consumed the largest portion of their 2022 budget compared with other ad-supported streaming services.
Disney-owned Hulu and Roku’s The Roku Channel were second and third, respectively, for both ad placements and ad spend. Meanwhile, Paramount+ and Pluto TV, both owned by Paramount Global, which has been expanding its streaming services, came in next to last for ad placements. Likewise, only 2% of respondents said Pluto TV received the largest portion of their 2022 budget, and none said so of Paramount+.
YouTube came in first among advertisers for ad placements and 2022 budget allocation mainly due to its massive audience reach and lack of a paywall. The platform has more than 2 billion monthly logged-in users, according to YouTube, which far outpaces other platforms.
Additionally, while most ad-supported streaming platforms offer similar content in the form of on-demand movies and TV series, original movie and TV programming created for the platforms — in this case, YouTube Originals — and some live TV channels, YouTube stands out as the only platform that offers user-generated content.
“The 500 hours of content that gets uploaded to YouTube every single minute is our single biggest differentiator and competitive advantage,” said Brian Albert, YouTube’s managing director of media partnerships and creative works. “Depending on what you’re interested in, you’re going to find something on YouTube that appeals to your passions and interests.”
Likely of more importance to advertisers than YouTube’s UGC is the platform’s access to parent company Google’s entire first-party search and browser history data through Google’s demand-side platform (Display & Video 360). First-party data reserves are increasingly becoming a crucial selling point to attract advertisers, as privacy concerns and regulations around the use of third-party cookies in programmatic advertising increase and the deprecation of cookies gets ready to start in earnest. Marketers naturally want to buy ad time on a platform that offers tremendous audience reach combined with access to vast first-party data pools for ad targeting.
With an audience size of 48.3 million monthly subscribers as of July 1, Disney’s Hulu came in a distant second to YouTube for ad placements and 2022 budget allocation, with slightly more than half (52%) of marketer respondents saying they placed ads on the platform and less than a quarter (23%) of respondents saying they devoted the largest portion of their 2022 ad budget to Hulu.
While Hulu doesn’t have nearly the audience reach of YouTube, it does have access to all of Disney’s first-party consumer data through the company’s Disney Select platform, which gives Hulu a similar competitive advantage in the race to provide advertisers with immense first-party data reserves. Hulu also taps into Disney’s programmatic ad exchange dubbed DRAX (Disney RealTime Ad Exchange), in which buyers can bid on all Disney ad impressions — thereby appealing to advertisers on both a first-party data reserve basis and a programmatic basis.
In third place for ad placement and 2022 budget allocation was The Roku Channel. Nearly one-third of respondents (31%) said they placed ads on the platform, while only 6% said The Roku Channel consumed the majority of their 2022 budget.
Interestingly, the ad-supported streaming services that came in next to last as platforms where advertisers placed ads — Paramount+ and Pluto TV — are both owned by Paramount Global, which said it was leaning hard into streaming when it rebranded from ViacomCBS to Paramount Global in February 2022. “We see a huge global opportunity in streaming, a much larger potential market than can be captured by linear TV and film alone,” Paramount’s president and CEO Bob Bakish said in a statement at the time.
However, according to Modern Retail+ Research survey results, the company has yet to reap the rewards of its efforts. Only 15% of survey respondents said they placed ads on Pluto TV and only 13% said the same of Paramount+. (Samsung TV Plus tied with Paramount+ at 13%.) Perhaps even more telling, only 2% of respondents said Pluto TV consumed the largest portion of their ad budget in 2022, while none said so of Paramount+.
Despite boasting proprietary offerings that include Comedy Central, Nickelodeon, MTV and VH1, along with other movie and TV programming, at the time of the rebrand, some analysts suggested Paramount’s platforms might not have enough brand awareness to give the likes of YouTube, Hulu and The Roku Channel a run for their money.
For its part, Paramount+ was originally known as CBS All Access and it only entered the ad-supported streaming arena under its new moniker in March 2021. The platform hasn’t had as long to build name recognition, and it’s also still working on building its audience base. In that area, Paramount+ has seen some success. The platform added 4.1 million subscribers in Q1 2023 and another 700,000 subscribers in Q2 2023 to reach approximately 61 million subscribers by the end of the first half of the year, according to Paramount.
Once advertisers have settled on which ad platforms to place ads, they’ll obviously want to measure the success of the campaigns they’re running on those platforms. To do that, marketers consider a range of metrics, from watch time to impressions to click-through rates.
Among the marketers Modern Retail surveyed, watch time/view duration/average completion rate was the No. 1 success metric that advertisers considered for the top three streaming services where they placed the majority of their ads. Forty-eight percent of respondents said this constellation of attention metrics was most important for Hulu, 45% percent said so for YouTube and 40% said the same for The Roku Channel.
It’s not overly complicated to understand why watch time/view duration/average completion rate came in as the top success metric for advertisers on almost all platforms, and particularly on the services where advertisers placed the majority of their ads. Put simply, no one wants to spend money on ads that aren’t being watched.
Casey Terrell, CMO at Krystal Restaurants, said an important part of achieving completed views is to strike the right balance of providing ad content that engages customers without annoying them. “I want you to see my message, but I don’t want to infuriate you with 30 seconds of having to look at my brand spot,” he said. “It’s very subjective, but we try to get research and clicks.”
“The other side is the type of content you’re putting [your ad] in front of — pre-roll, especially on YouTube,” he added. “If [the viewer is] trying to get to content that’s [time sensitive] or really important … seeing pre-roll in front of it will really upset customers. … You can really upset customers if you don’t think about it that way.”
Cheryl Gresham, who is currently CMO at Verizon Value and who was CMO at Verizon’s Visible at the time of our interview, said her company monitors how many of their video ads are skippable versus non-skippable, in addition to assessing how well customers receive the ads.
“It’s something we watch closely,” Gresham said. “For us, with such low brand awareness, we have to ensure that we have a certain amount [of ads] that are non-skippable. However, we use a lot of social listening to see if we’re breaking through with people. Is the message resonating with them, or is it upsetting them?”
Ad-supported streaming platforms have an equal, if not greater, interest in making sure viewers stay engaged with advertisers’ content for the duration of ads in order to retain their valuable ad dollars. YouTube’s Albert said his company takes numerous factors into consideration when assessing a campaign’s success.
“We will look at a range of metrics and signals to try to measure user satisfaction, things like view through rates, skip ads, satisfaction surveys,” Albert said. “It does really come down to striking the right user experience balance, so that we’re keeping this ecosystem in harmony between viewers, advertisers and creators.”
Jenny Burke, evp of advertising strategy at NBCUniversal, said Peacock conducts research to understand how long viewers stay engaged not only with ad content, but with platform programming too. “We do ad impact studies as well that are more traditional, through the purchase funnel from brand awareness down to purchase intent, and how our formats perform vis-à-vis the marketplace,” Burke said.
“In 2022, we were at 98% completion rates for our ads,” she added. “[In terms of] engagement … our subscribers are doing more than 20 hours per month and advertising is a piece of that, right? If advertising wasn’t done well, viewers wouldn’t [complete] that same amount of time.”
In March of this year, Tubi announced its Alternative Audience Measurement tool as part of a larger marketing integration. The tool lets advertisers measure their campaigns using Comscore Campaign Ratings and VideoAmp Audience Measurement and, according to Tubi, gives them the ability to test a variety of partners and to measure reach, frequency and attribution on Tubi.
“While viewer engagement is a key metric for advertisers, we also weigh in on various viewer conversion and retention metrics,” said Mark Rotblat Tubi’s chief revenue officer. “Our goal is to maximize the value exchange between our viewers and advertisers so that it’s a positive and beneficial experience for both.”
Impressions turned out to be the top success metric — or of equal or more importance as watch time/view duration/average — on platforms where marketers devoted a mid-range of their ad placements. Fifty-seven percent of respondents said impressions was their main metric of success on Pluto TV; 44% said so for HBO Max (Ads) [now Max], Discovery+ and Amazon Freevee; and 38% said the same of Peacock and Tubi.
Impressions, which measure how often viewers are exposed to the initial in-stream portion of a video ad, can help drive the shift of TV ad dollars to streaming by providing a commonly understood measure of ad-supported streaming’s performance in the language of ad views. Platforms are keen to offer this data as proof of scale as they seek to grow their streaming businesses and to woo advertisers away from traditional TV, using it to paint a richer, often demographic-based picture of their audiences. Impressions give an assessment of how many — and which types of — people are viewing ads on a particular streaming service, allowing marketers to determine how far a streaming platform, and a campaign, are reaching.
Roku, for example, already provided impression-level data for marketing mix models that break down campaigns by designated market areas — i.e. groupings of U.S. cities and ZIP codes like New York, Honolulu and Montgomery-Selma, Alabama — that TV and radio advertisers historically refer to when measuring campaigns.
But, in April 2022, Roku struck deals with four marketing tech providers — Analytic Partners, Ipsos MMA, IRI and Nielsen — to expand that data set. “What we’re trying to provide is a little bit more information on creative type, daypart, more granular view of DMA so that you can get even down to the ZIP code to provide a little bit more granularity into those models for each one of those measurement partners,” said Asaf Davidov, head of ad measurement at Roku.
While watch time and impressions are important metrics to help advertisers measure audience reach, they don’t quantify how many people took action after seeing an ad. That is where clickthrough rates come in. Clickthrough rates measure the total ratio of impressions to clicks, or in the case of streaming, how many viewers took action when watching an ad by doing things like scanning a QR code with their smartphone, speaking into a remote control to request more information about a product or to make a purchase — or simply clicking on a button.
Overall, clickthrough rates were less important to advertisers than watch time and impressions. They were most important to advertisers on platforms that ranked lowest in advertisers’ 2022 ad placements and ad spend, such as Samsung TV Plus, Pluto TV and Paramount+.
Interestingly, no survey respondents said clickthrough rates were an important success metric on Amazon Freevee or Peacock, and only 7% said they were on The Roku Channel, although all three platforms said they’ve put effort toward expanding their shoppable ad offerings in the last 12 months.
Visible’s Gresham said success metrics can be different for brands with lower consumer awareness and that traditional key performance indicators don’t always tell the full story. “A lot of times my KPI, my CPM or my view-through rate will be 20% more effective by moving [A to B], and that’s important, but what’s most important is how does that connect back to my cost per order, my cost per add to cart?” Gresham said.
“Last year, our media team was testing out a new partner and the KPI they had been given was site visits. The new partner was driving a ton of site visits so everybody was high-fiving and saying great job … but when you pull it through to add to cart and cost per order, it was zero,” she added. “We learned that site visits wasn’t the right KPI and quickly pushed on changing the KPIs. So, it was a hard learning, but a great learning.”
Advertisers are generally of one mind when it comes to the biggest challenges they face when placing ads on ad-supported streaming services: Most advertisers said the expense of buying and placing ads on platforms is the largest roadblock they encounter.
More than half of marketer respondents selected cost of media as their top challenge on all platforms, excluding Amazon Freevee and Pluto TV, where lack of scale was their main barrier. Peacock skewed more heavily toward cost than other platforms, with three-quarters (75%) of respondents saying cost of media was the top challenge they faced at Peacock. The next platforms where cost of media was a main hurdle were Hulu and Discovery+, both at 56% of respondents, followed by YouTube and The Roku Channel at 53% each.
Considering many of the services’ select programming, the pricing premiums aren’t entirely unexpected or unwarranted and, as long as programming remains consistent, are only likely to increase. But some agency executives are frustrated by high CPMs coupled with lack of measurement.
“Pricing is high, and it’s high in my opinion when the lack of insights are not as robust,” said Natalee Geldert, head of brand media at digital agency PMG. “So I feel like advertisers … when we go to plan, those CPMs or those rates have premiums on them, and my question is why, when on the backend of the campaign I might not be able to have the depth of the reporting in order to realize the impact of having that premium rate.”
Perhaps in response to those concerns, or in accordance with the law of supply and demand, some major ad-supported streaming services recently lowered their rates during this year’s upfront negotiations, according to agency executives.
Some executives estimated that the amount of ad dollars committed to streaming in this year’s upfront increased by roughly 5% to 10% compared to last year, but per the agency executives, major ad-supported streamers rolled back their ad prices by the same 5% to 10% range (“more like 10% for more premium products,” said one agency executive).
This year’s upfront market overall was softer than last year’s given the economic downturn, and sellers were more concerned with securing an overall volume of dollars as opposed to pushing up their prices-per-ad. Moreover, sellers simply had more streaming inventory to sell. “We’ve seen that pricing come down as they grow some scale,” said a second agency executive.
However, if the cost of acquisition grows in the future, as it has in the past, marketers and advertising executives will have to make tough decisions about where to place ads, according to Visible’s Gresham. The rise of innovative ad formats that prompt viewer action and emphasize quick ROI, such as shoppable ads and ads with scannable QR codes, may help executives more readily make those decisions.
“We always have to tie it back to the sales,” Gresham said. “We have got to grow. And the accountability and the pressure that CMOs have for the budget — the fiduciary responsibility of not spending $1 unless that dollar is going to return, and more — we’ve got to be really, really critical and really honest with ourselves on the decisions we’re making and the way we’re spending our dollars.”
Another area of concern for some advertisers is brand safety, particularly on YouTube. Thirty-three percent of respondents said they had concerns about brand safety on YouTube, the largest percentage of respondents to say so for any platform. Marketers have always been cautious about their media placements appearing alongside content that could negatively affect their brand, but in YouTube’s case, those concerns are amplified by the platform’s user-generated content.
With hundreds of thousands of hours of UGC uploaded to the platform daily, it is seemingly impossible, even with the help of automation — and despite being accredited for brand safety by the Media Ratings Council — for YouTube to ensure all advertiser content is placed next to appropriate video content. Indeed, UGC, the main factor that distinguishes YouTube from its competitors according to YouTube’s Albert, could be one of its biggest challenges, depending on the campaign.
Interestingly, instead of cost of media, marketers found lack of scale to be the top challenge facing them on two of the 13 platforms assessed in this report. Fifty-six percent of respondents said lack of scale was the top challenge they encountered on Amazon Freevee and 43% said the same of Pluto TV.
While no clear trend regarding lack of scale emerges when analyzing only two platforms, in general, it makes sense that smaller ad-supported streaming platforms have less audience reach. Amazon Freevee, the rebranded IMDb TV, notably hasn’t publicly shared audience numbers.
Additionally, many ad-supported streaming platforms are nascent offerings, with lower numbers of users signing on to the ad-supported versions initially. Netflix Standard with Ads, for example, which launched in November 2022, was falling short of ad-supported viewership guarantees made to advertisers as of December. As a result, Netflix allowed advertisers to take their money back for ads that had yet to run, according to several agency executives. The specific shortfall amounts varied by advertiser, but in some cases, Netflix had only delivered roughly 80% of the expected audience, the executives said.
“They can’t deliver. They don’t have enough inventory to deliver. So they’re literally giving the money back,” one agency executive said at the time.
However, that may be changing. Netflix’s president of worldwide advertising, Jeremi Gorman, said during the company’s May Upfront presentation that Netflix’s ad-supported tier had almost 5 million global monthly active users at the time.
If and when the smaller and newer platforms are able to grow their audience numbers, that will seemingly serve to reduce one barrier advertisers say they face from ad-supported streaming services. The more prevalent challenge of cost of media is likely to remain for the foreseeable future — or at least for as long as advertisers are willing to pay platform premiums.