Analysis by Standard Media Index, a trusted source of global advertising spend and pricing intelligence, shows that while 22% of U.S. television advertising budget is being directed to OTT and 78% to linear, some advertising categories significantly over-index towards OTT. The categories devoting the largest share of budget to OTT include ‘Apparel & Accessories’ at 61% to OTT, Travel Services at 36% for OTT, Entertainment & Media at 36%, Technology at 31% and CPG at 26%.
“Audiences are shifting and dollars are following, and major categories are strengthening their OTT mix,” is how Ben Tatta, President, New York, US, at Standard Media Index, explains the figures. “Linear and OTT complement each other well, so a key question going forwards is what the right mix is.”
Standard Media Index (SMI) captures $90 billion of ad spend data from the world’s largest media buying groups and leading independents, based on actual billings. This invoice level data represents over 90% of national brand spend in the USA, it says. GroupM and IPG Media were recently added to this roster. The company has also created a metric that converts linear TV prices into an effective CPM so they can be compared with CPM rates for digital video including OTT. The company used this data recently to investigate the impact of streaming on the ad spend picture in the U.S.
It becomes clear that if you want to understand the impact of OTT on ad spend you need to dig deeper than the headline average mix for all advertising categories (22% going to OTT versus 78% to linear) and consider individual categories. It is also worth understanding where OTT services are getting most of their ad money from.
For example, Tatta crunched the numbers to illustrate the relative importance of different ad categories for different streaming services, using the example of higher CPM earning OTT sports outlets such as ESPN, CBS Sports and NBCSN. This showed that ‘auto’ accounts for 24.1% of sports OTT services ad revenue whereas auto accounts for 13.4% of linear TV sports ad revenue. And ‘prescription drugs’ provides 22.7% of the ad revenue for OTT sports but 3.1% of linear TV sports ad revenue. These figures are from October 2020 to April 2021.
“That tells you that certain advertising categories are gravitating towards OTT at different levels,” Tatta said. “Auto and prescription have shifted their investments pretty significantly and are over-spending [on sports OTT] compared to what they are spending as a percentage basis with linear [sports TV].”
SMI has found that in the streaming space, it is the ability to supply targetable niche audiences that drives the highest CPM rates. In linear TV it is the ability to simply drive reach that attracts higher ad rates.
All TV is demanding unprecedented premiums, according to Tatta. Using its cross-screen pricing intelligence suite (which compares linear and streaming ad rates, like for like) SMI says linear TV eCPMs were $17 in broadcast primetime during October 2020 to April 2021. That compares to $15 for digital video. However, OTT, stated as a subset of digital video, raises $22 CPMs.
“The OTT rates have a lot to do with the fact that it is brand safe content, commercial grade programming, in authenticated services with authenticated impressions, and it is targetable, with the reach of television. It is the best of both worlds,” Tatta observes. “The other message here is just how efficient television is – it is tremendously efficient.”
SMI shared its data at The Future of TV Advertising U.S. earlier this summer. Tatta showed the impact of the pandemic and lockdowns on ad spend and showed how ad spend in OTT bounced back immediately after the March 2020 collapse, whereas linear TV spend took months to recover. Streaming was partially helped by a rush of money into ad networks and exchanges where buyers could activate campaigns at scale in short timeframes.
Looking at January to May 2021 ad spend compared to the same period last year, SMI figures show that overall media spend is up 22%, with digital up 41% and ad spend within OTT now 55% higher. What SMI calls pureplay OTT services are tracking ad spend at 70% above the same 2020 period.