CMO Series - How Cable-Cutting Is Transforming Video Marketing

By: Allen Ginsberg  | 12/18/2019

In this month's installment of the CMO series, Allen Ginsberg is contributing his thoughts on the growing state of OTT media and how advertisers are handling this change. New to the series? Start from the beginning here!

Consumers are cutting the cord with cable in record numbers. Over-the-top (OTT) media like Roku and Apple TV have now surpassed cable in delivering video to viewers. And this growth isn’t slowing down. A steady stream of content providers is seeking and gaining significant audiences through developing proprietary apps of their own. So, with traditional TV audiences on the decline, how is this affecting advertising, and what’s an advertiser to do?

Keep in mind, the change isn’t just how content is being delivered. By now delivering programming directly to consumers, media companies are in many cases reducing or altogether eliminating advertising in favor of a promising subscription model. Launching just last month, for example, Disney+ projects they will already have 60 million subscribers by 2022, which at $6.99 per month amounts to over $5 billion annual revenue — without a dollar from ad spend.


Yet on a national scale, the traditional TV marketplace appears to remain healthy — at least from a media perspective. Why? As ratings continue to decline among major networks, there is less available inventory, raising the CPMs (cost per thousand impressions) of many programs. That’s cost per impressions increasing, not impressions for the cost.

Marketers continue advertising with traditional primetime and other dayparts for a variety of reasons. Some fear change. Others say TV can still build “reach” quicker than other options. And while many marketers experiment, they’re unable or reluctant to walk away entirely from what had worked for decades. 

In the meantime, many marketers are finding a path in the OTT revolution. OTT devices (Roku, Apple TV, Firestick, etc.) allow for the insertion of video in ad breaks, and marketers are beginning to realize this can offer much greater audience targeting versus traditional TV ad buys.

That market is growing. OTT-based advertising hit $2.7 billion in revenue in 2018, which represents a year-over-year growth of 54%, according to estimates from Magna Global. The two current market leaders in OTT advertising, Hulu and Roku, have already built sizable ad businesses. Hulu reached $1.5 billion in ad revenue in 2018, a growth of 45% year-over-year. Roku, meanwhile, generated roughly $416 million in the same period. A number of major companies such as Campbell’s Soups, Experian and have been experimenting with OTT video with significant success. Most of these dollars have been moved out of traditional TV.

As consumers continue to cut the cord, many more opportunities for targeted video will become available. A wide range of new technology players from traditional to new entrants is making their way into the marketplace. Various TV media companies are also investing in ad-supported OTT. CBS, for example, has a network of both free and ad-supported streaming services. These combine to generate “hundreds of millions” in annual ad revenue for CBS, and this represents just one more piece of a much larger shift that will continue to change the landscape of video advertising in the years to come.


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