How we watch shows and movies has changed greatly over the past decade, and that means big changes for video advertisers.
Adults Prefer Streaming Video Services to Cable
We’ve reached a tipping point – people now use streaming video services more than cable subscriptions. As of May 2017, 67 percent of internet users in the United States use (or at least have access to) streaming services, while only 61 percent have cable at home.
Among Millennials, the numbers are even more extreme: 77 percent opt for streaming services and only 57 percent have cable. Among those older than Millennials (35 and over), streaming service use is still at 65 percent, though cable subscriptions hang on at 62 percent.
Unsurprisingly, Netflix is the reigning streaming video service provider with 48 percent of viewers. Generally, streaming providers were significantly more popular among Millennials than older generations, though Amazon Prime holds 16 percent of all adult viewers. Hulu is more popular among Millennials, but is as popular as Amazon Prime overall.
Why are video streaming services overtaking cable? For 34 percent of viewers, cost was the main reason for signing up with Netflix or another provider. For 29 percent of Millennials, and 21 percent of older generations, the convenience of watching on any device was the reason. Original content was another reason given by 18 percent of viewers, while syndicated content is a draw for only 7 percent.
Interestingly, while cost drives many to opt for streaming video over cable, a surprising number of people are managing to not pay for streaming services at all. About half of adult views in the United States share streaming video service passwords, meaning they use someone else’s service or let others use theirs. Among Millennials, the rate jumps to 60 percent.
Consider also how streaming services have changed our viewing habits. With cable, viewers must wait until a show is on to watch it, and then wait another several days to watch the next episode. With streaming video, viewers receive entire seasons at once and can watch their favorite shows at any time, day or night. Many of us now expect this instant gratification, and wouldn’t think of going back to cable.
Advertising Options on Streaming Video Services
Perhaps one of the reasons Netflix is so popular is its lack of advertisements. Of course, not all services operate on this model. The major streaming video service providers offer options for seeing no ads (for a fee), limited ads (for a lesser fee) or all ads (free viewing).
Some of the folks at USA Today decided to check out these varying degrees of ad exposure on the top streaming video providers, and determine if paying less for limited ads was worth it.
After sitting through 15 commercials in one show and 29 in another, they decided it was well worth the extra monthly dollars to watch ad-free. Of course, they also noted how much better streaming limited ads are than regular television ads: The show with 29 “limited” commercials had 50 ads in the broadcast version.
Over the years, rumors have circulated about Netflix introducing ads to their service. Obviously, this hasn’t yet happened, and Netflix itself gives us no reason to think it might happen in the future.
Just for fun, Exstreamist.com ran numbers and polled viewers to speculate about what would happen if Netflix did decide to show advertisements. Turns out the company would make about $2.3 billion – a nice boost to their annual revenue of $8.8 billion.
Then again, would it be? Exstreamist also learned that 79 percent of Netflix subscribers prefer the fees to seeing commercials, including parents who are happy to avoid the countless ads aimed at their young kids. How many of them would leave (and drain Netflix’s revenue) if commercials interrupted their shows and movies?
Targeted Advertising on Streaming Services
So, we’ve established that users of streaming video services aren’t fond of ads, and are willing to pay extra to avoid them completely.
However, people like free things as well, and services like Crackle and YouTube aren’t likely to go anywhere anytime soon. Knowing this, how can advertisers make the most of opportunities in the streaming video space?
According to the Wall Street Journal (WSJ), ad tech company BrightLine is partnering with Nielsen Marketing Cloud to help advertisers tap into data that can improve ad targeting on connected TVs and other devices.
BrightLine has had this data for years, and some streaming video service providers already use it in their advertising. Until now, the data worked mainly to tell which ads worked best on which devices. With Nielsen, BrightLine will know more about the people using those devices – for example, which of them have kids, or which of them might be in the market for a new car.
Of course, this is going to be great for advertisers, who will be able to reach consumers with more relevant and effective ads. Yet, the consumers may have demands of their own. From WSJ:
Peter Naylor, senior vice president of advertising sales at Hulu, said that it will be key for advertisers testing these ads to make them simple for consumers to interact with while delivering something valuable. He noted that it took a while for both consumers and advertisers to grow accustomed to mobile touch screens, and he thinks TV ads will go through a similar evolution.
How receptive will viewers be? Only time will tell, so stay tuned!