Brands are increasingly shifting their advertising budgets to streaming TV channels because of the ability to target specific audiences more effectively than with traditional television. Here's a breakdown of how they make more money:
Audience Targeting and Data: Streaming services collect detailed data on user viewing habits, demographics, and interests. This allows brands to serve highly personalised and relevant ads to specific viewers, increasing the likelihood of engagement and purchase.
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Higher Average Revenue Per User (ARPU): Some streaming services, like Netflix, have found that their ad-supported tiers generate a higher ARPU than their standard subscription tiers. This is because the revenue from advertising, combined with the lower subscription fee, surpasses the revenue from the standard subscription alone.
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Cost-Effective for Smaller Brands: The "pay-as-you-go" and campaign-based nature of streaming TV advertising makes it more affordable and accessible for smaller brands that previously couldn't afford the large upfront commitments of traditional TV advertising.
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Diversification and Reach: With traditional digital channels becoming saturated, connected TV (CTV) offers a new, less-crowded space for advertisers to diversify their ad spend and reach a large audience.
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Lower Production Costs: The demand for fresh ad content on streaming platforms has led to a shift away from expensive, year-long campaigns.6 Brands are now producing more frequent, authentic, and cost-effective video ads, often with the help of AI and creative services.
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Filling Ad Gaps: Streaming services can use "house ads" to promote their own content or premium subscriptions to fill unsold ad inventory. This is a no-cost way for them to either convert users to a paid tier or keep them engaged, which in turn makes the platform more valuable to other advertisers.