U.S. households are adopting ad-supported streaming services at a faster rate than strictly subscription-based options, according to data from Comscore.
Comscore’s 2022 State of Streaming analysis found a 29% increase in U.S. homes streaming AVODs in 2022, versus a 21% increase in the same period for SVODs.
James Muldrow, VP of Product Management at Comscore, in a statement pointed to the growth of ad-supported services and more price conscious consumers in the face of continued inflation.
“While both ad-supported and subscription-based streaming services are growing in the U.S., we’re seeing that consumers are being more mindful of their budgets and leaning towards ad-supported services,” stated Muldrow. “This makes sense as inflation continues to hit consumer’s wallets. The time is ripe for traditionally subscription-based streaming services like Netflix to consider launching an ad-supported tier to enhance their growth trajectory.”
Along with Netflix, which could intro an ad-supported tier as early as the fourth quarter, streaming giant Disney+ is also poised to launch an ad-supported offering in the U.S. by year end before expanding to international markets in 2023.
The faster adoption rate for AVOD signifies a shift in the market and consumers’ tolerance of advertising in the streaming environment. An earlier June study from DeepIntent and LG Ads Solutions found that 64% of CTV watchers would rather see ads than pay more for a subscription service. Viewers also have a better impression of CTV ads, with 57% of respondents saying those they see on streaming services and apps were more relevant than ads on linear TV.
And introducing ad-supported options means revenue paths for streaming giants that are looking for growth opportunities. A June MoffettNathanson report estimates Disney+ could generate $1.8 billion of advertising revenue in the U.S. by 2025, while Netflix’s ad-supported tier could bring in $1.2 billion by then.
Still, as more AVOD options are available advertisers want to ensure that their campaigns are actually reaching eyeballs, and while there’s no shortage of audience tuning into streaming - issues have recently come up regarding CTV ad delivery.
According to the Comscore analysis a whopping 79% of Wi-Fi-enabled homes are watching streaming content on CTV devices, with each spending about 122 hours per month viewing – marking 19% growth from March 2021. Netflix captured the most CTV hours watched per month at 43, followed by YouTube at 39 and Hulu at 33 hours.
However, a report from GroupM this week disclosed that a decent percentage of CTV ads are playing to a blank screen as connected TV dongles and devices continue to stream content (and serve ads) even after viewers have turned off the TV and stopped watching.
The joint study with iSPot quantified inflated CTV ad delivery counts, revealing that on average 8-10% of overall streaming impressions play when the TV is shut off, primarily through connected TV devices (native apps on smart TVs don’t seem to have this issue). To that point 17% of impressions delivered only through CTV devices such as dongles, gaming consoles and sticks were delivered to a blank screen.
“One of the most important findings was that there are dramatic variances in rates of continuous play, driven by the combination of TV set model, streaming device, and publisher app being used,” said Adam Gerber, executive director of Investment Strategy for GroupM U.S., in a statement. “This is one of many measurement challenges facing the industry as consumption continues to fragment across device, time and location.”
Gerber continued to say that the results bring more urgency for the need of a unified industry initiative to set standards and measurement solutions.
Disney is one of the companies that’s committed to working at an industry level with agencies, advertisers, and standards-setting bodies to build a streamlined measurement framework and best practices to ensure ads are only counted when they’re delivered to people watching with TVs turned on. Others working on the problem include Fox and Tubi, LG Ads Solutions, NBCUniversal, Paramount, Vizio, and Warner Bros. Discovery.