As part of the latest Global Ad Trends report, WARC Media spoke to Germaine Montagne, Head of Marketing at measurement company TVision, about trends in connected TV viewing.

What trends are you seeing in the consumption of subscription video on-demand (SVOD) and advertising video on-demand (AVOD) media?

Ad-supported connected TV (CTV) definitely has the momentum right now, and had it even before Netflix and Disney+ announced their ad supported tiers.

Our data shows consistent growth in ad-supported CTV viewing. According to our just-released ‘State of CTV Report’, in H2 2022, 48% of time spent on CTV was spent with ad-supported apps. MVPDs (Multichannel Video Programming Distributors) accounted for an additional 18%. Only 26% of time spent on CTV, premium SVOD apps – whose usage we’re seeing continue to decrease. As a point of comparison, SVOD apps accounted for 35% of all CTV viewing at the start of 2021.

Ad-supported subscription services and FAST apps are experiencing increased adoption rates. Case in point: YouTube has now supplanted Netflix as the leading app based on share of time spent viewing. Share of time spent with YouTube was up 7% since H1 2022, while Netflix was down by 10%. Pluto, Tubi and The Roku Channel all also experienced significant increases in share of time spent viewing.

Are there audiences more likely to favour free ad-funded video platforms?

Our data shows that FAST apps viewers are generally older than the average for CTV viewers. High income audiences spend less time on FAST. Women spent more time viewing all CTV, including FAST than men. However, women pay less attention to FAST than they do to general CTV.

Nearly universally, viewers pay less attention to FAST apps than CTV in general. This makes sense within the context of how viewers engage with CTV content. Premium CTV content (new original programming) generally engages audiences better than syndicated content. A larger portion of FAST libraries are syndicated content as compared to content on SVOD apps.

Could it be that the recent rise of AVOD and FAST reflects shorter-term cost-of-living pressures, or is it a more lasting change in the market?

The transition away from SVOD to ad supported and FAST apps has been several years in the making. As referenced above, SVOD viewing peaked in Q1 2021, and has steadily decreased since. So it’s unlikely that the move to ad supported is a short-term issue related solely to inflation.

Over the last few years we have seen viewer behavior while watching CTV begin to closely mirror linear TV viewing behavior, where ads are an accepted part of the agreement between the network and audience.

Ad-supported apps and FAST channels have also been able to fine tune and improve the ad experience for viewers, delivering a more linear-like experience in terms of frequency and ad repetition. As the experience improved for viewers, they have become more willing to watch ads on CTV. In fact, our most recent data shows that the ad attention for CTV (34.1%) is closing in on linear TV ad attention, at 36%.

What impact do you expect Netflix and Disney+’s ad-funded tiers to have on the split between AVOD and SVOD viewing?

Netflix and Disney+ together represent more than 19% of all time spent viewing CTV. As more viewers migrate to the ad supported plans for both of these apps, it’s hard to imagine SVOD regaining a stronghold on CTV. The future of CTV viewing is clearly ad supported.

That said, Netflix already has high-market penetration. How quickly they build ad-supported audiences may depend on whether they focus on converting existing subscribers, or aim to attract new subscribers with more affordable subscription tiers.

If Netflix and Disney+ are able to grow ad-supported audiences quickly, they will offer the market an easy access to incremental reach for their campaigns – providing advertisers can understand how these apps extend reach.

What does this mean for brands looking to reach CTV audiences?

As mentioned above, Netflix and Disney+ will eventually give brands new opportunities to reach large audiences on CTV and, in fact, the high co-viewing rates of these apps will ensure that their audiences will be even larger than the number of ad-supported subscriptions foretell. For example, person-level insights available through our panel show that Disney+ has a VPVH (viewers per viewing household) of 1.6 and Netflix has a VPVH of 1.4. This means that the average impression on Disney+ should be expected to reach 1.6 people – extending the value delivered to advertisers.

The problem for advertisers – and what may be at the center of why advertisers’ CTV investments do not yet match the popularity of CTV audience viewing – is that it is incredibly difficult to accurately measure the success and value of a CTV campaign.

With a lack of standard metrics, it is difficult for marketers to make apples-to-apples comparisons across their CTV campaigns (including walled gardens like YouTube). Household-level data, and the lack of transparency that comes with programmatic CTV ads makes it especially difficult for advertisers to measure their campaigns’ effectiveness and value. Once advertisers are able to effectively measure across all apps, we expect to see an even more significant increase in CTV advertising.

WARC Media’s latest Global Ad Trends report, Media models in flux, is now available on WARC.