January 16, 2024

Falling Prices for CTV Ads Foreseen

By Jay Bemis | Advertising Systems Inc.
Connected TV, an increasingly popular programmatic ad buy in 2023, may well continue its meteoric rise in 2024 — thanks to Amazon Prime Video’s plans to slash its CTV ad rates soon.

Amazon plans to launch Prime Video with ads at the end of January with CPMs (the cost to reach 1,000 users) for ads priced in the low- to mid-$30 range, according to a recent Adweek report.

That lower-30s price range will be much lower than the $50 to $60 CPMs that such rivals as Netflix and Disney+ unveiled in late 2022, and it’s proof that competition amongst the streaming giants may well cause streaming costs for ads to fall.

“For Amazon, $30 CPMs is about more than just undercutting the competition,” eMarketer/Insider Intelligence said last week in analyzing the anticipated move.

“Its ad-supported subscription model gives it a significant leg up against other streaming services, and the lower price point will entice a large number of new advertisers to its platform.”

For Amazon Prime subscribers, the move means they must deal with more ads while watching Prime Video, because ad-supported streaming will become the default for all Prime members. However, they will have the option to stream without ads for an additional $2.99 per month, on top of their $14.99 per month for a Prime membership.

In late 2022, Netflix and Warner Brothers Discovery drew much flak for charging record-high CPMs. But since then, Netflix has reportedly curbed its average ask to $39 to $45 CPMs, because of lower-than-expected initial results for its advertising business and a bunch of new competitors, eMarketer says.

Added eMarketer in its analysis: “In short, competition has been good for streaming CPMs, lowering the cost of entry and allowing more advertisers to tap into streaming services’ large, walled gardens of audience data.”

How Football Is Playing Its Part in This

Prime Video’s lowered CPMs will be in line with prices for its Thursday Night Football inventory, eMarketer says.

TNF was a lure for Amazon in 2022 to get more Prime subscribers — or for current subscribers to keep their current monthly membership going — because many NFL fans enjoy Thursday Night Football as the season heats up in the fall and early winter.

Peacock seemingly made a similar move to get more subscribers for its streaming service last week when it landed a playoff game featuring the Kansas City Chiefs and Miami Dolphins “exclusively on Peacock.”

That meant fans from both teams who lived outside the immediate KC and Miami metro areas had to decide if they wanted to get the streaming service so they could enjoy their teams’ first-round playoff action. (The game was carried on NBC Universal affiliates in KC and Miami without additional cost to fans in those immediate areas.)

The “exclusively on Peacock” factor, though, marked the first time that an NFL playoff game was only available nationally on a streaming service, rather than a traditional TV network or ESPN.

Granted, a Peacock subscription costs a mere $5.99 per month, and a subscriber can cancel at any time. But Peacock obviously hopes the exclusive NFL playoff game between KC and Miami will lure its newest subscribers to continue watching the platform after 30 days — thanks to a lure of movies, TV series from NBC Universal and other sports that Peacock offers.

And, perhaps it’s no coincidence that last summer’s “Oppenheimer,” a highly rated movie that’s expected to grab a bevy of Oscar nominations soon, begins streaming on Peacock on Feb. 16 — or, shortly after Chiefs-Dolphins fans must decide if they want to continue paying 6 bucks a month for their newest streaming service.

Why Connected TV Has Become a Popular Ad Buy

Why has connected TV become such a popular buy for advertisers the last couple of years?

There are several reasons that a marketing expert will cite for you:

  • A Shift in Viewing Habits: Consumers have increasingly cut cable subscriptions and spent more time with over-the-top video, particularly video streamed to CTV devices. In 2023, 88% of U.S. households owned at least one internet-connected TV device.
  • Targeted Advertising: CTV offers improved targeting, measuring and attribution capabilities, allowing for higher conversion rates and enabling ambitious brand awareness and performance goals. It provides a personalized advertising avenue, fostering a direct connection between brands and consumers.
  • Growth in Ad Spending: CTV ad spending has grown rapidly. In 2021, U.S. advertisers spent $14.44 billion on CTV, an increase of 59.9% over 2020, according to eMarketer. It raised that forecast for 2022 to $19.1 billion, and it now expects that more than $30 billion will be spent on CTV ads by 2025.
  • Programmatic Buying Options: The rise of programmatic CTV inventory has given advertisers more flexibility and scaled targeting options compared to linear, or traditional, television.
  • Ah, Yes, the Pandemic: The pandemic accelerated all of these trends as people increased the amount of time they spent streaming video.

Amazon’s $30-CPMs move for streaming advertisers “is about more than just undercutting the competition,” summarized eMarketer last week.

“Its ad-supported subscription model gives it a significant leg up against other streaming services, and the lower price point will entice a large number of new advertisers to its platform.”

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