Just in time for Halloween, Needham and the Company’s senior research analyst Laura Martin released an article that could stop the blood of many investors, advertisers, and distribution platforms and services that count on the shift to integrated TV to drive a new boom in video marketing.
Martin – one of the most prominent analysts covering the media, entertainment and technology space – said in his brief note that he would run away from a report from Amagi, a large streaming services company, which could weaken the prospect. It’s a big shift in the dollars invested in connected TV just as more brands are piling up, and investors are changing their evaluation of providers.
“From an inbox full of statistics related to the 30 stocks we cover, sometimes we see a data point that worries us,” Martin wrote in an article published this morning. “We can’t shake the feeling that, if this data is significant, it undermines important economic assumptions that we (and often Wall Street) hold as fact.”
Amagi noted in an August report that “almost 80 percent of TV is watched equally.” In a way, that’s not surprising. Not only has the pandemic awakened interest in broadcasting on connected TVs, in many closed areas, #WFH has become an opportunity for families to reunite in the digital space after years of atomic and highly personal viewing on small screens such as phones.
But Amagi’s data center, and its Martin mining, comes as a useful reminder of the central position in shifting advertising dollars to CTV.
According to Amagi, only 21 percent of CTV viewing is done alone, while the majority of all CTV platforms, 62 percent, involve two people. Three or more people watch together for the remaining viewing share.
So, if everyone knows that many people are watching video streaming together on connected TVs, it’s no big deal right? However, Martin advises investors to be aware of three potential issues The implications may, in the long run, haunt the sector for years to come.
To begin with, it is important to remember that the paradigm shift represents television, combining effectively the significant parts of everything that preceded it.
Linear TV – traditional broadcasting, cable and satellite – was all about coming together to watch one show on the big screen. PC and mobile/tablet viewing has eclipsed this trend, driving $55 billion in annual advertising spending by providing marketers with a more targeted approach.
Connected TV promises to combine the best of both experiences, with large screens and traditional linear messaging combined with a targeted experience made possible by active communication that knows who is watching and when.
Watching on cell phones, tablets and computers is a more private experience, making it easier to see who’s on the other end. But as CTV screens expand with high-quality shows with broad appeal, they tend to draw more than one person at a time for a shared experience. That has potential implications that even CTV’s most ardent supporters must figure out how to manage.
Martin outlined three possibilities:
- Dismissed ideas. Shared screens mean that targeting certain audiences is “wasted” on viewers who could care less about advertising. Whatever that waste limit is, it could affect the pricing power of CTV’s platforms and services. That can be a headache for services like Netflix
, which kicks off its ad-supported phase this week with ad prices well above the industry average. But if the shows are watched by a lot of viewers, securing those high CPMs can be difficult for Netflix.
- Small impact, few dollars. Advertisers love these smart CTV screens and how they can deliver more memorable and impactful ads compared to the hidden possibilities of mobile phones and computer screens. But Martin cautioned against a shared view “i know” slow shift of ad dollars from digital video to CTV at a time when the segment is counting on large dollar inflows.
- Regular releases. Besides better targeting, CTV’s services and platforms should provide a better advertising experience in other ways. Another potential impact is so-called frequency capping, which means limiting the number of times a given viewer sees a particular ad. But if more people are watching, implementing frequency capping becomes more difficult, Martin said. That, too, “can” it leads to annoying viewers by repeating too many ads, and it will be another “waste” of advertising spend. That, too, could slow the adoption of CTV.
Martin offers no solutions to this unusual situation.
And it is true that for some types of sellers, these factors will be less important. They may be taking an old-school approach to their messaging, wanting to reach as easily as an old fashioned online ad.
Or they may pay more attention there Their message is seen, not to whom. A fast food chain may want to reach “everyone with a stomach” in a given market, so individual targeting is not necessary. Or maybe they’re only trying to reach a particular household, rather than the people in it.
Regardless, Martin brings up a possible set of bugaboos and gremlins the industry will need to fix sooner rather than later, lest the industry be plagued for years to come by lost opportunities.