OTT Ad Revenue Down 8% Year-Over-Year

Streaming faces mounting short-term struggles on multiple fronts – substantially increasing content costs, platform-hopping enabled by shared credentials, and budget-conscious consumers amidst recession worries. These services still command enormous advertising interest and investments, although this cash flow now shows some cracks.

MediaRadar analyzed ad spend on six top streaming platforms: Discovery+, Hulu, Max, Paramount+, Peacock, and Pluto TV. The analysis shows these OTT platforms have generated $1 billion in estimated ad revenue year-to-date 2023. This lags 8% behind the $1.2 billion generated through October 2022 with each month seeing a YoY decline.

Key 2022 Advertisers Pulled Back Their OTT Ad Spend

Retail, finance, and technology were the top OTT ad categories during Q4 2022. Together they combined for $135 million in ad spend.

However, these three categories have sharply cut OTT ad investments this year. Collectively, retail, finance, and tech spent $293 million on OTT advertising through October 2023, down 30% compared to the same period last year.

The insurance category faced the steepest drop. They reduced OTT ads by 74% January to October year-over-year. GEICO, State Farm, and Progressive all significantly decreased ad spend. Meanwhile, general retailers like Target and Walmart trimmed OTT spend by 17%.

These categories still make up a substantial portion of OTT ad revenue. Retailers represent 13-14% of spend on Hulu and Pluto TV. Finance has contributed 10% of ad dollars for Paramount+ in 2023.

Restaurants and Pharma Increase OTT Spend in 2023

While other categories pulled back, restaurants and pharmaceutical advertisers increased OTT ad spend.

Fast food chains led rising ad spend from restaurants, up 38% on OTT year-over-year. McDonald’s, Subway, and Wendy’s are among the brands running holiday-themed ads on streaming services to connect with viewers. Restaurant spend makes up 13% of Hulu’s OTT ad mix this year.

Pharmaceutical companies also boosted spending, with OTT ad investments up 66% over the last holiday season. AbbVie, GSK, and Pfizer are using streaming to promote prescription and over-the-counter medications for the holiday cold and flu season.

Streaming Still Presents Engaging Ad Opportunity

Despite some advertiser pullbacks, OTT still offers a valuable channel for brands. With many consumers unwinding with streaming services and binge-watching their favorite shows, OTT ads can resonate and drive purchase interest.

Retailers are able to connect with audiences through OTT before key holiday shopping days. Pharma brands can promote cold medicine ahead of predicted illness spikes, while restaurants can tout holiday meal deals and catering options.

Even though economic conditions, over-saturation, and lack of differentiation have tempered OTT ad growth this year, the media remains essential for connecting with streaming-first audiences. 

MediaRadar Arms You with Ad Intelligence

These OTT ad spending insights are made possible by MediaRadar’s cross-channel ad intelligence platform. Tracking brands across TV, print, online, and radio, MediaRadar gives marketers the competitive intelligence needed to optimize ad investments and maximize ROI.

See for yourself how MediaRadar can expose competitor spend, creative trends, and audience analytics to improve your marketing and branding strategy. Sign up today for a free demo.

That growth didn’t surprise us. The stay-at-home orders during the pandemic propelled OTT advertising into the mainstream. 

What did surprise us, however, was OTT advertising’s recent bump in the road. Despite streaming’s growth—the number of OTT users worldwide increased by 37% between 2018 and 2021—ad buys on Discovery+, Hulu, HBO Max (Discovery+ and HBO Max recently merged into one service, Max), Paramount+, Peacock, and Pluto TV fell by 8% YoY through April 2023.

Contributing to that decrease were advertisers promoting Insurance (Berkshire Hathaway, State Farm, and Progressive), Laundry products (P&G and Reckitt), and Credit Cards (Capital One, Citigroup, and JPMorgan Chase). 

But despite hitting a bump in the road, OTT advertising is still alive because plenty of brands are still spending—here’s a look at a few of them. 

Pharma’s embrace of digital includes OTT 

One of the most significant increases in OTT spending came from an unlikely source: Pharma advertisers. 

Through April, Pharma advertisers collectively increased their investment in OTT ads by 97% YoY to $37mm, with the three top spenders—AbbVie, Nutraceutical Wellness (hair growth OTC), and Pfizer—accounting for 40% ($14.9mm) of that investment. 

The increased investment from Pharma advertisers comes in tandem with their embrace of digital channels, including YouTube. The shift comes as the healthcare industry adopts technology, and advertisers evolve to meet the habits of today’s consumers and healthcare professionals (HCP).  

We can also link the uptick in spending to strategic shifts inside these companies’ walls. 

Advertisers at AbbVie, for example, are fighting to recoup potential lost revenue as they lose patent protection of their best-selling drug, Humira, and biosimilars hit the market. 

At the same time, advertisers for Pfizer increased their OTT budget at the same time as new Global Chief Marketing Officer, Andreas “Drew” Panayiotou, taking the helm and evolving the company’s marketing strategy.  

That said, the increased investment in OTT doesn’t mean Pharma advertisers are abandoning traditional tactics. In Q1, nearly 190 Medical & Pharma companies spent more than $2b on broadcast and cable TV, up 13% from Q1 2022. 

QSR Advertisers Beef Up Their Investment in OTT

QSR advertisers spent $33.5mm on OTT through April, representing a 64% YoY increase, thanks to investments from advertisers at Ilitch Holdings (Little Caesars), Roark Capital Group (Arby’s, Dunkin’, etc.), and Yum! Brands (Taco Bell, etc.), who collectively spent $17.5mm (52% of the investment in OTT from QSR advertisers). 

While the launch of new sandwiches, including the Steakhouse Garlic Ribeye Sandwich, undoubtedly spurred spending, the increases in 2023 likely have more to do with the recent appointment of Rita Patel as Brand Chief Marketing Officer (CMO). 

Patel said, “Arby’s is a truly differentiated brand with a maverick approach to marketing.” She continued, “I’ve learned so much during my time with Buffalo Wild Wings [owned by the same company as Arby’s] and look forward to applying those learnings in my new role.” As Patel settles in, other strategies and tactics from her tenure at Buffalo Wild Wings, which is owned by the same company as Arby’s, may take hold. 

Meanwhile, advertisers for Taco Bell increased their investment in OTT as they continued their quest to stand out in the market by any means necessary, which has so far included acquiring the Liberty Bell (not really), Major League Baseball, and a space station. 

Auto advertisers aren’t intimidated

The past few years have been a whirlwind for the auto industry. 

In 2021, vehicle sales in the U.S. fell by ~15%, marking one of the biggest declines in decades. The industry has steadily worked its way back to pre-pandemic levels, but fears of a recession are now putting car purchases on hold for many, especially Millennials and Generation Z. 

Still, the industry is showing some resilience, with vehicle sales expected to grow by 1mm this year—and that’s enough promise for auto advertisers to spend on OTT. 

Overall, advertisers promoting Import Models (+110% YoY), Pickup Trucks (+73%) and SUVs (+11%) spent nearly $20mm on OTT ads through April, accounting for 73% of the investment from Auto advertisers. 

Spending from Auto advertisers on OTT comes despite caution to kick off the year. Despite being long-time players during the Super Bowl, Auto advertisers throughout most of the industry were noticeably absent during this year’s Big Game. 

Eric Haggstrom, Director of Business Intelligence for Advertiser Perceptions, says, “This [the lack of Super Bowl advertising] has less to do with the Super Bowl itself and more to do with individual issues within the automotive industry.” He continued, “The auto industry has been battered by supply chain issues, inflation eating into consumer budgets, and rising interest rates that have made car payments dramatically more expensive.”

Oh, How the Mighty Aren’t Falling

So, is OTT advertising dead? Far from it. 

The OTT video advertising market is expected to reach a volume of more than $205b this year. 

While the reduction in spending may be surprising, streaming services are too ingrained in society for a freefall. In reality, advertisers are likely reducing their budgets in response to the ongoing economic uncertainty causing consumers to cut streaming out of their budgets.

For more insights, sign up for MediaRadar’s blog here. 

Meanwhile, eMarketer predicted that 1.8 billion people would subscribe to OTT platforms like Netflix, Hulu, and HBO Max in 2022—and not just one of them. The average household used an average of 6.8 streaming services in March 2022.

Unsurprisingly, advertisers have taken notice of the growth. According to Statista, OTT advertising will have a market volume of $205.1 billion this year.

Every major OTT player is responding accordingly—even Netflix recently launched an ad-supported tier.

But what do these ads actually look like?

Here are three examples:

3 Innovative OTT Ad Types to Add to Your Campaigns

Everyone knows about pre- and post-roll ads. The mid-roll variety, too. All three formats are common across YouTube and exist in OTT’s advertising ecosystem.

There’s more out there, though, and the other ad formats can help you stand out.

Binge Ads

In 2020, Kellogg Cereal Company was one of three brands to partner with Hulu to test the new Binge ad format. Maker’s Mark was part of the test, too.

According to Gail Horwood, Chief Marketing Officer, Kellogg’s North America, the decision to invest in the innovative ad format come down to “a laser focus on consumer occasions.” She said this focus is “one lever we pull when making marketing decisions at Kellogg.”

Here’s how Hulu’s Binge ads work: Once one of Hulu’s nearly 50 million users reaches a third episode, a message informs them that the next episode will be ad-free (this message could be “presented by Sparkle,” for example). The ad will also include a unique offer from the brand.

Hulu uses data on its users to predict when they’re likely binge-watch a show. When this threshold is met, Hulu will serve “contextually relevant messaging from our brand partners that acknowledges a binge watching session has begun.”

The release of Binge ads comes as brands chose to target a big frustration point for their viewers and remove interruptive ads from streamed content.

Hulu also launched Pause Ads in 2019, which provide a “non-intrusive, viewer-initiated ad experience that is both delighting to views and effective for brands.”

Unlike traditional ad formats that play during content, Pause Ads are don’t interrupt the storytelling experience. Instead, they appear with a viewer pauses content they are watching.

QR Codes

Other brands worked to make intrusive ads less irritating by making them interactive and rewarding.

Burger King, for example, ran an OTT ad with a QR code that moved around the screen. Those who scanned the code got a free Whopper.

The idea was that viewers would be more inclined to pay attention to ads and visit the nearest Burger King if they saw and interacted with something new.

QR codes in ads are nothing new—advertisers jumped at the new opportunity to engage consumers in new ways the second smartphones offered the capability. They fell out of favor, though—at least until recently.

NBCUniversal introduced Shoppable TV commercials with scannable QR codes, while Pepsi incorporated QR codes in its packaging. And you can’t mention QR codes without bringing up Coinbase’s viral Super Bowl ad in 2022. The ad was so popular that it crashed the company’s app.

While the aforementioned examples weren’t delivered on OTT platforms, they illustrate the resurgence of QR codes, which may translate to Netflix, Hulu, HBO Max, and other platforms.

Ad Selector

Hulu’s Ad Selector allows users to control their ad experience by picking which ad they want to see. (See below.)

Hulu users will see two or three ad options from which they can select. If they don’t pick one, Hulu will randomly play one.

While Ad Selector isn’t as new as Binge Ads, it reflects the premium Hulu puts on the user experience—a sentiment other OTT platforms will have to adopt if they want to attract ad dollars.

Hulu: A Catalyst for OTT Advertising Innovation

Hulu’s been making moves in the OTT advertising world for some time. In 2020, the streaming giant a self-serve ad platform to help small-to-medium businesses to buy ads. Given OTT’s nascent status and relatively complex ecosystem, advertisers were undoubtedly appreciative.

Hulu continues to innovate. Most recently, it did that with Binge Ads and GatewayGo, the latter giving users the chance to interact with the advertisers and receive personalized offers.

While much of the OTT advertising innovation is coming from Hulu, it’s also forcing the hands of its competitors. For the likes of Netflix, HBO Max, and Disney+, their ability to sustain growth—from both a user and advertising standpoint—will rely in some part on their ability to evolve their ad offerings in the best interest of everyone evolve. That’s good news for all.

For more insights, sign up for MediaRadar’s blog here.

It reads: Discovery+ and HBO Max merge to form the next streaming giant.

The merger, announced by Warner Bros. Discovery (the parent company of Discovery+ and HBO Max) in Q3, will roll out across the US next summer. 

The launch of this new platform, which comes on the heels of an equally attention-grabbing headline about Netflix advertising, has significant implications for users and advertisers. 

What are those implications, and what will things look like in the world of OTT advertising’s newest player?

Ad spending data from the past year (August 1, 2021 – August 31, 2022) give us a pretty good idea.

The State of Advertising on Discovery+ and HBO Max  

It remains to be seen how Warner Bros. Discovery will approach OTT advertising, especially as users threaten to cancel their subscriptions because of the rising ad loads elsewhere.

That said, with ads already a part of the go-to-market strategies of Discovery+ and HBO Max, the yet-to-be-named platform will inevitably have them, too—and advertisers will be eager to test them out.

Between August 1, 2021 and August 31, 2022, 450 companies spent more than $237mm on Discovery+ and HBO Max ads, with the allocation nearly even across the platforms (52% for HBO Max and 48% for Discovery+). 

The average monthly investment was also close, with Discovery+ and HBO Max receiving $8.8mm and $9.5mm every month, respectively. 

Although Warner Bros. Discovery isn’t struggling to attract advertisers to either of its owned platforms—it generated a combined $237mm between August 2021 and August 2022—the decision to merge was rooted purely in a desire to grow even more. 

According to JB Perrette, the company’s CEO and President of Global Streaming and Interactive, “Putting all the content together was the only way we saw to make this a viable business.” 

As Netflix and Disney+ gain market share, strategic shifts of this magnitude are sometimes necessary to stay competitive. 

Ad strategies leading up to the decision undoubtedly gave them much-needed confidence. 

Although 56% of advertisers were exclusive to Discovery+ (DISH, GSK, Wayfair, Cracker Barrel, Red Robin and Oliver Garden) and 19% were exclusive to HBO Max (Fidelity, Marriot, Hims and Hers, L’Oreal, and Unilever), the 25% who invested in both accounted for 73% of the total ad investment. 

This small-but-mighty group of advertisers views both platforms in a favorable light, which should continue to shine once the new platform goes live. 

Ad revenue should come with that (assuming there aren’t any radical changes to its content or advertising strategy). 

The merger could also be a “white flag” for Discovery+. 

While both platforms generate ad revenue, and Discovery+ could likely survive as a standalone platform, top advertisers overwhelmingly prefer HBO Max. 

For example, of the $20.5mm invested by insurance company advertisers, 74% of those dollars went to HBO Max. 

At the same time, of the $15.7mm invested by quick service restaurant (QSR) advertisers, 59% went to HBO Max.

Warner Bros. Discovery could have seen this as a sign that long-term success and sustainability were only possible with HBO Max.

Overall, the merger should pay dividends for all parties involved. 

Users will get a one-stop shop for the content they love, while advertisers will get streamlined ad tools to launch, optimize, and measure campaigns across two historically siloed ecosystems. 

These will likely be selling points as the media giant looks to woo advertisers and users away from other platforms. 

The Future State of Advertising on Discovery+ and HBO Max 

Just like the future of Netflix advertising remains clouded in mystery, there’s uncertainty around what this new-look ecosystem will look like once it goes live.

Thankfully, historical spending can give us a good idea of what it’ll look like and how advertisers will respond. 

Lighter Ad Loads 

In an online world saturated with ads, Discovery+ and HBO Max have both put a premium on their users. 

While many of its contemporaries have perpetually increased their ad loads to drive revenue, these platforms have done the opposite—and that’s far from a surprise.

When HBO announced ad-supported pricing in June 2021, Julian Franco, Vice President of Product Management at HBO Max, said, “HBO has previously been a walled-off garden for the last 50 years…Stories are better received if you limit the disruptions during them.” 

Ads are, of course, disruptions in every sense of the word.

Between January 1 and March 31, 2022, Discovery+ and HBO Max had the lowest ads per show and hour among their major competitors. 

It’s fair to assume that the new platform will take a similar approach to ad loads.

With lighter ad loads, however, the pressure will be on JB Perrette and his team to consistently churn out hits—but that’s never been a problem for them before.

Superior Content

HBO Max has ​​87.6mm viewers, growing at 20.5% YoY. 

Discovery+ lags with just 24mm users as of March, but it still has a loyal following thanks to content from big-time players like Animal Planet, TLC and HGTV. 

Despite a strong foundation from which to build, Warner Bros. Discovery has its sights set much higher. 

That target is 130mm global streaming subscribers by 2025 and $1b in earnings. 

To get there, the new platform will have to be a roaring success and add roughly 40mm users in two years (keep in mind, the platform doesn’t go live beyond the US until 2024). 

If anyone can do it, though, it’s Warner Bros. 

With widely popular series like “House of Dragon” (the prequel to “Game of Thrones) and “Succession,” the content teams know what it takes to create hits.

If they can replicate that over the long haul, users will follow—and advertisers will follow them.  

That said, the type of content may look different. 

David Zaslav, CEO of Warner Bros. Discovery, said, “Our focus will be on the theatrical…And when we bring the theatrical films to HBO Max, we find they have substantially more value.” 

If Zaslav flips the script, which is intriguing given the recent cancellation of its $40mm “Batgirl” movie, it’ll be interesting to see how ads come into play. 

The Same Advertisers

If we’ve learned anything about the state of OTT advertising, certain advertisers are always itching to invest—those in finance, media, retail, QSR, technology, and restaurants/bars. 

In 2021, most of the ad investment in HBO Max and Discovery+ came from advertisers in these industries. 

It seems reasonable, then, that the same advertisers will flock to the new platform as the company streamlines its ad tools.

Other advertisers that may flock to the platform could come from automotive, pharmaceutical & medical, food, beauty, and services, as they’ve been big investors on other OTT platforms between Q3 2021 and Q2 2022. 

As Netflix rolls out ads, Warner Bros. Discovery will watch how advertisers respond.

In the short term, advertisers will likely proceed with caution, especially those with smaller budgets.

As Netflix proves itself, however, ad dollars will follow, assuming prices aren’t through the roof. 

It’s a safe bet that advertisers will approach this merger the same way—although they may be more willing to dive in, given the company’s proven advertising track record. 

Warner Bros. is Making Moves

News of HBO Max and Discovery+ coming together was already the start of a major shakeup in the OTT world, but it could be just the start. 

As Warner Bros. Discovery looks to gain ground, mainly on Netflix, Disney and Amazon, an acquisition may be on the horizon—this time involving Peacock.

While most of the streaming world is establishing itself, Peacock has lagged significantly, largely due to a late arrival and showing up without a revenue-generating machine. 

According to one executive with knowledge of the situation, “Obviously, Peacock sucks…I think that’s Zaslav’s endgame.”

For clarification, “that” refers to the acquisition.

If Warner Bros. goes down that path, it likely adds millions of global users, a content library that includes The Office and Sunday Night Football, and of course, some ground on its rivals. Oh, and a ton of ad dollars, too. 
For more insights, sign up for MediaRadar’s blog here.

Boy, was he wrong. If anything, the reason people get tired these days is because they’ve been starting at the “plywood box” too much.

To say TV and related technology, like OTT (or “over-the-top”/streaming services) is popular would be an understatement. 

This year, 1.88b people will use OTT services like Netflix, Peacock, Discovery+ and Paramount+. 

It’s no wonder with this big of an addressable audience that OTT has become so attractive to brands.

In 2021, OTT ad spending reached $1.3b.

Recently, however, some of these OTT providers have reported a decrease in subscribers, leading to new creative investments in advertising and a drive to stand out from (rising) competition.

Here are a few key storylines that came out of our Q1 data on OTT advertising.

Netflix Fights Back Against the Competition (and a Declining Subscriber Base) with Print Ads

Um, what? 

Netflix has long since ruled the roost in the OTT world. However, the crown may be slipping; Netflix reported it lost 2k subscribers in Q1—the first time it’s lost subscribers in a decade—and expects to lose another 2mm in Q2 as people cancel their subscriptions following a price hike, show cancellations and the possibility of ads.

In the past, Netflix could weather these storms with its market dominance; if people wanted OTT, it was Netflix or one of the few other options.  

That’s not the case anymore. 

Today, the abundance of OTT services makes it harder for Netflix and its competitors to gain market share—just ask Quibi.

Despite declining numbers, Netflix still has more than 220mm paying subscribers. But the likes of Amazon Prime Video, Hulu and a host of others, namely those from big media companies—think Peacock, Discovery+ and Paramount+—are forcing it to fight back for the first time in its history. 

One of the ways Netflix is fighting back is with ads—and their Q1 strategy shows they’re not going for the typical route.

In Q1, Netflix spent 43% of its ad dollars on Print and another 37% on TV, making it by far the biggest spender on traditional formats. 

Why does this matter?

For starters, Netflix is significantly more popular with younger generations than it is with older ones, so a traditional-first ad strategy that leans heavily on Print misses the mark in every sense, given that younger people overwhelming prefer digital devices.

While Netflix appears to be opening its eyes to Digital (more on that below), its fondness for ad formats of the past, especially Print, likely has to do with its desire to get those from older generations to open their wallets. 

According to a survey in mid-2021, just 44% of Netflix’s subscribers are above the age of 65, while 75% are between 18 and 34.

In Netflix’s eyes, more Print ads are the answer to go after people who aren’t paying for its service. 

On the surface, that seems like a logical approach but only financial reports in the coming quarters will decide if it was the right way to allocate its ad dollars.

Digital is coming 

Despite a big investment in Print and TV, Netflix still had money lying around—20% of its budget in Q1—to spend on Digital. 

Of those digital dollars, 65% went to Video, while Display and Facebook got 23% and 7%, respectively. The remaining 5% went to Native, OTT, Podcasts and Snapchat. 

The most notable change from Q1 2021 was its investment in Facebook ads, which represented 30% of its budget during the first three months last year.

So, if one’s to believe that its traditional-heavy strategy is about going after older generations, the sizable decrease in Facebook goes against that given that Facebook is the social platform of choice for older generations. 

Instead, Netflix appears to be banking on Video, in combination with Print and TV, to help it rebound.

While it’s strange to see Netflix in this position, it’s hard to question its strategy. 

Does Netflix have a plan? 

Almost certainly, but it’s unlikely that a revamped ad strategy will be the answer to its woes.

For Netflix, rekindling its subscriber base will likely require a big investment in content, an effort to stabilize prices and a renewed commitment to staying free of ads (something that’s looking less likely).

Come One, Come All

OTT accounts for just 3% of total digital ad spend per month.

While that may be surprising given the popularity of OTT, it’s likely because OTT’s historically been dominated by subscription services with no ads or light ad loads. 

It’s also likely has something to do with OTT’s nascent status in the advertising world and relatively unproven capabilities compared to more mature alternatives. 

Still, during Q1, nearly 1.4k companies, including Berkshire Hathaway, Capital One and Microsoft, bought OTT ads for more than 3k brands.

In Q1, these companies combined to spend more than $369mm.

Looking deeper into the data, we see that 6 categories, including Pharma, Restaurant/Bar, Auto, Tech, Retail, Media & Ent, and Finance, accounted for 72% of ad spending. (These are the same categories that have been top spenders the past 3 quarters.)

The fact that advertisers in a variety of industries are investing in OTT demonstrates the widespread appeal of this advertising ecosystem, which bodes well for the OTT services as it tries to convince advertisers to move some of their budgets to their way. 

Paramount+: The OTT Service of Choice for People Who Love Ads

There’s more that goes into the longevity of these OTT services than pricing and content. 

Ad loads play a role, too.

On the one hand, more ads mean more revenue. 

On the other hand, more ads mean a worse experience for subscribers. 

For this reason, most of the OTT services take a relatively similar approach to ad loads:

• Discovery+: 4.6 Ads Per Show and 7.0 Ads Per Hour
• HBO Max: 4.1 Ads Per Show and 7.4 Ads Per Hour
• Hulu: 7.1 Ads Per Show and 11.1 Ads Per Hour
• Peacock: 5.4 Ads Per Show and 9.5 Ads Per Hour

Paramount+ does things differently:  

• Paramount+: 18.6 Ads Per Show and 26.8 Ads Per Hour

The difference between Paramount+ and others is surprising given the intense competition for subscribers. 

With all else being equal, a poor experience with a ton of ads could easily be enough to turn someone away. 

So, why’s Paramount+ taking this approach? 

It likely has to do with its attempt to attract more advertisers and improve sales. 

Despite all the ads, however, Paramount+ is growing, adding almost 7mm subscribers in Q1. 

The continued growth of the platform could signal that OTT subscribers will put up with more ads in exchange for better content and lower prices. 

The success of Paramount+’s approach could also be a message to other services that more ads are acceptable, which could lead to ad loads rising in the future. 

OTT Advertising: A Huge Opportunity for All 

Don’t mistake the fact that OTT accounts for 3% of total advertising spend as a sign of weakness. 

While it may be hard to remember, there was a time when advertisers were just dipping their toes into Facebook. 

OTT advertising is here to stay. 

For OTT services, ads will continue to be a tool they use to grow. 

For brands, ads will be a way to get in front of a growing addressable audience with immersive experiences on the big screen. 

For these reasons, don’t be surprised if we’re looking back in a few years and asking ourselves, “Can you believe OTT accounted for such a small percentage of total ad spending in the early 2020s?”

(And maybe, also, “Can you believe there was a time when I didn’t have to see 30 ads while streaming a movie?”)

For more insights like this, sign up for our blog.

Like most new streaming platforms, Discovery+ is built on an ad-supported model. On launch day, advertising partners included Kraft Heinz, Lowe’s and Toyota. 

But has this initial growth and interest from big brands been enough to lure other advertisers to Discovery+?

Discovery+ Woos Consumers with the World’s Best Real-life Entertainment Offering

Discovery+ boasts more than 60,000 episodes from Discovery’s iconic brands, like HGTV, Food Network, TLC, plus the BBC’s Natural History collection and A&E Networks’ Group Nine. 

Discovery also announced that the platform would be the new streaming home of the Olympic Games in Europe and Eurosport’s premium sports offering. Discovery+ would also include content from the Magnolia Network, the next adventure in the life of the widely popular HGTV stars Chip and Joanna Gaines. 

“With Discovery+, we are seizing the global opportunity to be the world’s definitive product for unscripted storytelling, providing households and mobile consumers a distinct, clear and differentiated offering across valuable and enduring lifestyle and real-life verticals,” said David Zaslav, President and CEO of Discovery, Inc.

What Does Discovery+ Promise Brands? 

Given the growing popularity of OTT advertising—OTT ad revenue increased by more than 1265% between 2010 and 2019—there was no doubt that Discovery+ would fight for some market share. But how would it attract advertisers away from more established streaming platforms? 

The answer: “A suite of streaming advertising solutions that provide interactive, advanced advertising products that drive engagement, reach younger demographics and amplify advertisers’ messages across the company’s streaming platforms.” 

This suite consists of eight different types of ad products: 

• Green-Light ads
• High-Light ads
• Lime-Light ads
• Stop-Light ads
• Showcase ads
• Spot-Lite ads
• Marquee Collections
• Search-Light ads

As an added benefit, advertisers can access OneGraph, a tool that can help them connect the dots across all of Discovery’s linear and digital platforms. 

MediaRadar Insights on Discovery+

Since MediaRadar began tracking* Discovery+ advertising on August 1, 2021, the platform has had more than 540 advertisers, growing at an average monthly rate of 15%. 

Since data collection began, advertisers have spent approximately $29 million on ads, putting it as the lowest-earning platform in terms of ad revenue. 

Though Discovery+ brings in less revenue than competitors, the company is strong at bringing in revenue from certain industries—especially Retail and Food. 

Retailers dominate the platform’s inventory, with 22% of all of 2021 Discovery+ advertising coming from companies like T.J. Maxx. This is more than 2x more than any other channel.

Additionally, Discovery+ sells 5x more Food advertising than the 4 other major ad-supported OTT platforms we reviewed. It is the only platform where Food makes the one of the top five categories.  Food products range from cereal to soup.

Discovery+ Ad Dollars and Brands are Increasing

Of the 211 brands advertising on Discovery+ in December 2021, 80% of them (168 brands) weren’t advertising when tracking began in August, indicating that Discovery+ is catching the attention of more brands.

In December 2021, MediaRadar observed that the platform had a 90% month-over-month increase in ad dollars.

Digging into December’s Top 5 categories, we found that:

• Food rose to 10% of the month’s ad buys.
• Retail still reigned at 22%.
• Media settled in at 11%.
• Restaurants and Tech both made up 9%.
  

Top Advertisers on Discovery+:

• Kraft Heinz Company showcases some of its brands such as Kraft Mac & Cheese, Grey Poupon and Lea & Perrins. 
• TJX Companies advertise some of its brands like Marshall’s, Homegoods and T.J. Maxx. 

Discovery+ Ad Analysis:

Discovery+ is in the mid-range of ad loads compared to other OTT platforms. This could result from the “Spot-Lite Ads” rewarding binge viewers with reduced ads or “Lime-Light Ads,” which are limited commercial interruption offered as part of the platform’s streaming advertising products.

Discovery+ has an almost perfect split between 15- and 30-second ad spots.

Are Discovery+ Ads a Smart Buy in 2022?

When advertisers think of OTT, many tend to steer toward Hulu because of its large addressable audience and proven advertising capabilities.

So, is a newcomer like Discovery+ worth the ad dollars?

To get to this answer, we must look at the OTT landscape from two angles: its current and future state. Right now, OTT is popular among consumers; however, that hasn’t translated to more ad dollars, especially from smaller brands that don’t have large budgets to spend on newer ad ecosystems. In fact, OTT only accounts for 3% of all digital ad spend.

For brands, this means there’s an opportunity to make the first move. This is especially true for Discovery+, which had the second fewest advertisers (542) during our tracking period (only HBO Max had less with 414). 

In addition to less competition, the low ad load creates a better experience for consumers, which could make them more receptive to ads and more likely to engage.  

Overall, allocating ad dollars to Discovery+ in 2022 could make a lot of sense. We know that the platform’s unique content already attracts 173 million consumers per month. 

But with the upcoming merger with HBO’s owner WarnerMedia (owned by AT&T), the media industry is expecting a massive change in the ad-supported OTT ecosystem. The new bundle will provide an even greater opportunity for advertisers as soon as April. 

More advertisers will undoubtedly invest in the platform—does it make sense for you to shift some of your budget before your competitors do?

See where your competitors are spending, how much and what creative they’re using. Use these insights to build your next campaign strategy. Discovery+ might be at the top of your list. 

Stay tuned for our OTT Trend Report coming out soon to give you more insights on the streaming market.

*A Note on Methodology: Overall, MediaRadar’s data covers both standalone streaming platforms and TV Anywhere viewing from top linear networks. Standalone streaming services are sampled from the ad-supported streaming packages, across profiles in the 18-34 and 35-49 TV demos.

Though linear TV still makes up over half of viewing time, time spent streaming hit an all-time high in December.

Advertising-based platforms have a huge opportunity to bring in more revenue. Analysts expect a 50% jump in OTT ad spending between 2021 and 2022 (from $8 billion to $12 billion.)

It’s one thing to know how much advertisers are spending. It’s another to know who’s spending and why. This is why we’ve compiled an OTT & TV Anywhere 2021 Trend Report.

Our upcoming trend report on OTT Insights from 2021 will highlight which ad-supported streaming services are winning in ad sales, what industries drive ad sales, trends in ad load and duration and more. 

Ahead of the full report, we put together the most critical insights for media companies seeking to win more sales. Plus, we’ll dig deep into the strategies of the most successful ad-based streaming platforms on our blog starting next month. 

Top streaming services rely on ad revenue from the same industries

Advertising-based video on demand (AVOD) and hybrid platforms (channels that make money from a mix of advertisements and subscriptions) have a lot to offer advertisers. 

Audiences are increasing their viewing time on streaming platforms, and unlike linear TV, streaming platforms can offer programmatic and interactive advertising features. These innovative ad tech capabilities are more data-driven and measurable than linear TV offerings. 

On top of these benefits, streaming audiences are more tolerant of the ads they are served. According to SpotX, 60% of American connected TV viewers prefer ad-supported content compared to paid ad-free services.

The top ad-supported streaming services include:

• Discovery+
• HBO Max
• Hulu
• Paramount+
• Peacock

Across this set of advertisers, we found these companies serving almost 500 thousand ads in the second half of 2021. Most of these advertisements can be categorized across five major categories. 

60-72% of advertisements placed on OTT channels fall within the following categories:

• Media & Entertainment 
• Retail
• Technology 
• Financial & Real Estate 
• Pharma

Why is this important? The top 5 OTT channels are all dependent on the same 5 industry categories. 

However, some channels are better at winning sales from certain categories than others. For example, Discovery+ wins over retail brands more than any other brand, while HBO Max has found a sweet spot with financial and insurance brands.

A consistent trend we’ve seen is the decrease in house ads across channels. After these younger platforms launched, we saw them placing ads for their own programming 3-10% of the time. 

Over time, this portion of house ad sales has become smaller, indicating that channels are getting better selling ad space externally.

Ad load and duration trends reveal experimentation

Even though these businesses are improving their ad sales numbers, they are still navigating a new market that doesn’t have standard practices. 

Each platform has different ad load and duration patterns. 

The ad load of Paramount+ is twice as long as the nearest competitor, while Peacock & HBO Max have the lightest ad loads.

Most video ads on these platforms are either 15 seconds or 30 seconds. But each platform has a unique way to split up these ad slots. 

As platforms continue to grow in sales numbers, while finding the right balance of consumer tolerance and revenue, the industry will change quickly. 

Keep up to date with the latest data and insights by subscribing to receive most recent trend reports and blog posts. 

Flexibility may not be the key word in marketing these days, but professionals still need to drive the most return with their budgets. Targeted, automated purchasing helps them do just that.

We’ve seen a surge of advertisers begin buying programmatically this year. As we dove into the subsets of buyers and their buying behaviors, we identified two major trends. 

We encourage you to subscribe to our blog for the latest data surrounding the advertising industry. We will provide daily updates as COVID-19 continues to make its mark on the US economy.

1. DTC spending keeps climbing

We all know that direct-to-consumer brands were uniquely positioned to benefit from the pandemic. Distinguishable brands already had their online stores up and running, and their digital marketing strategies in place.

Even though they were in an advantaged position, accuracy and efficiency became even more important in the increasingly competitive eCommerce market. 

As a result, brands increased programmatic spending, often in new premium programmatic formats. DTC companies typically increased their ‘experimental budget’ to 5-15% during the pandemic to see what worked best. 

Brands, like Poppi and Olly, for example, shifted significant portions of their marketing budgets to Amazon DSP.

“The endless digital shelf has provided new opportunities for companies to expand their brand,” said Allison Lewis, vp of commerce media at Wunderman Thompson Commerce, per Digiday. “Creating a robust media strategy that includes Amazon is vital to continue to grow as a digital brand.”

According to our data, DTC companies have spent $879 million on programmatic in 2021 so far (Jan – May), which is up 26% from 2020. In the same period last year they spent $697 million.

Even as foot traffic in brick and mortar stores increases, DTC programmatic spending is not levelling off. 

2. TV advertisers may use OTT to guide Addressable TV campaigns

Addressable TV is the dream of TV advertisers—delivering relevant ads based on household targeting, rather than program targeting. 

And it’s expected to surge over the next two years. eMarketer predicts that this format’s spending will increase 75% to $3.6 billion by 2022. 

This shift comes at a time when streaming is starting to cool off (slightly). According to a recent report from Omdia, consumers have hit their ceiling for how many streaming services they’re willing to use—and yes, this includes AVOD services. 

Pay TV is “largely stable and SVOD continues to grow.” But when it comes to ad-supported streaming, the report stated that “a significant number of users are eschewing AVOD and instead increasingly consuming content via paid alternatives.”

While OTT grabs headlines and is full of potential, TV advertising still dwarfs the young format that has very limited inventory. 

Interestingly, we’ve even seen OTT spending decrease. OTT advertisers have spent $55mm in 2021 YTD (Jan – May), which is down 40% from 2020 in which they spent $91.4 over the same period.

Though spending has decreased, it’s worth noting the number of brands increased slightly YoY (2.3k in 2020 vs 2.6k in 2021). This suggests that OTT advertisers may be using programmatic to test the efficacy of their campaigns, and then strategically place spend where their programmatic efforts were successful.

OTT advertising may influence the way TV advertisers run their cross channel campaigns, but it hasn’t become a mainstay for brands yet.

For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy.

The player moving quickest these days is AT&T, owner of HBO Max. 

AT&T’s been working towards a merger between WarnerMedia and Discovery to create a new $150 billion content unit, Warner Bros. Discovery. And it launched HBO Max’s ad-supported tier earlier this month.

This is all against the backdrop of increasing competition among streaming platforms. We’re not referring to the number of players in the market—those days are gone. Instead we’re talking about their ability to meet consumers’ expectations of higher quality and fewer ads than linear TV, while delivering for advertisers. 

OTT was largely an experiment for brands last year when we looked at how many brands were on OTT but not TV. But HBO Max is doing its own thing, which might impact which brands buy on OTT instead of TV.

Why the HBO Max With Ads matters in the AVOD landscape

HBO Max has 10,000 hours of premium content to rival other AVOD contenders like Peacock and Hulu. Content ranges from HBO original content, Warner Bros. Studios films, Turner Classic Movies, DC’s Extended Universe and more. 

Between household TV series to some of the most recognizable movie titles of all time, HBO Max has a staggering amount of content. 

HBO Max currently has slightly more paid subscribers than Peacock and Hulu each (around 42 million). But its M&A activity, international expansion plans and new ad tier signal that it’s aggressively trying to scale to the size of Disney+ or potentially Netflix. By 2025 AT&T believes HBO Max will have over 120 million subscribers. 

But, unlike Netflix and Disney+, it offers a AVOD tier with “a commitment to the lowest commercial ad load in the streaming industry.” 

HBO Max is making OTT ad purchasing more accessible, but inventory is limited

HBO Max isn’t only contending for the best ad experience for consumers. It’s opening up options for more advertisers. 

At first glance, it wouldn’t seem like it with its limited inventory. 

HBO Max’s ad-supported tier limits inventory to four-minutes of ads per hour of showtime, roughly half that of Hulu’s, which could be five minutes per a half-hour show. 

This “elegant” ad model is still slightly unclear to buyers, but the streaming service isn’t making exclusive deals with large sponsors (when Peacock went live, it had ten exclusive partners). 

Instead, they’re open to the entire marketplace.

“They are actively going in a completely different direction,” said one media buyer to Adage. Others noted that upfront commitments were fairly modest. 

Though the details remain unclear, it seems that HBO Max is selling to a more diverse set of partners than early AVOD businesses. (The irony here is that HBO via cable doesn’t sell ads aside from their content… it’s hard work to keep up with networks these days.)

This makes us wonder how this will impact the number of brands who advertise on both TV networks and their corresponding streaming service and how this new channel will impact the brands that exclusively advertise on OTT.  

MediaRadar Insights

Streaming services are in a race to the fewest amount of ads of streaming. At the same time audiences are adding more streaming to their viewing diet.

This makes us ask how much ad inventory does that leave for brands? And how does TV ad spending compare to OTT?

While streaming viewership is increasing, we’re nowhere close to the fall of TV advertising.

• In 2021 so far, there’ve been 3,500 advertisers who’ve spent $369mm on OTT.
• 47% of those advertisers have also spent on television. While these advertisers spent $313mm in OTT from January to May, they also spent $16.7 billion in TV over the same period.
• From these advertisers using both formats, their spend in OTT accounts for 85% of all OTT spend, and their spend in TV accounts for 73% of spend from January – May 2021.

Brands who don’t spend on television spent $55.8mm in OTT from January to May 2021.

• These brands include traditionally large brands (think Boeing and Instacart), but a large majority of them are small brands (Brown’s Car Stores, Omega Engineering, Ziply Fiber).

The evolution of TV and streaming continues to unfold month-by-month. Premium advertising spots are opening up for more advertisers, but details are largely hazy when each service has its own processes and limited inventory options.

Need more OTT opportunities? Reach out to us for a free demo. Access data on brand spending, buying patterns and the key contacts you’d like to reach. 

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Analysts at eMarketer predict a 50% jump in OTT ad spending this year. This comes at a time when third-party identifiers are being phased out and first-party data is gold. 

With the right ad tech partners, brands can layer their first-party data with consumer streaming data to make sophisticated buyer segments. 

But this buying strategy is still relatively young and programmatic OTT buying is often a new process for brands. We dug into the most recent data to identify trends within the space and notable programmatic buyers. 

OTT Gives Advertisers Data-Driven TV Content, But Programmatic Supply is Limited

Advertisers have wanted to leverage the scale of TV and the precision of digital for years. And now ad supported video on demand (AVOD), with the partnerships of ad tech providers, can deliver this combination.

The challenge is that the supply for programmatic buying on CTV is small. Most inventory is bought up by upfront deals and across private marketplaces. This leaves only a sliver of the supply for DSP-traded inventory. 

“The majority of the premium inventory is ending up in walled gardens, either controlled by the TV networks or Roku and Hulu,” said Jamie Power, chief data officer of Cadent, to AdExchanger. 

Early adopters owned by major ad tech companies (e.g. Comcast, Magnite, and The Trade Desk) hold on to the inventory not owned by Hulu, Roku, Amazon and Google. Other companies compete for the leftovers—which makes up about $9.5 billion of advertising spend.

Not all of the inventory has been consolidated, but this relatively small supply cuts into a DSP’s ability to serve ads and deliver results for their partners. 

The process of shifting linear buyers to programmatic OTT isn’t simple—and the entire ecosystem is evolving. Questions remain over things like the ad tax, pricing and whether IP addresses count as PII, but it’s certain that consumers are streaming and brands are wanting more advanced and efficient capabilities to target them. 

MediaRadar Insights 

How many brands are already buying OTT ads programmatically?

In April there were 1.6k brands buying OTT advertising at large. Of those brands, 63% (1k) were buying ads programmatically.

Though 63% of advertisers were buying programmatic advertising, their spend accounted for 12% ($9mm) of all OTT ads ($74mm). 

Programmatic represents only a small portion of all OTT spending. Similar to other programmatic advertising, brands are buying small ad spots directed at segmented audiences.

Brands who only bought programmatic OTT advertising in the month of April include: 

• Toyo Tire
• Microsoft
• Regions Securities
• Harry’s USA
• Chick-Fil-A

For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy.