The Lure and Dangers of CTV for Ad Tech
Publisher development teams, long accustomed to monetizing their companies' websites by making them available for display advertising (ad banners, online video, etc.) are now tempted by the siren call of Connected TV (CTV), which would see them monetizing TV content and their associated ads -- significantly increasing revenue yield and growth rates. Is this a natural strategic evolution for media publishers, or does this represent a strategic trap that will lead to embarrassment and failure?
Display and CTV have only one thing in common: they both monetize publisher assets, and it is monetization that provides the temptation for a strategic shift from display to CTV. Is this a reasoned path to increase shareholder value, or is it a mindless strategy driven by greed?
Shakespeare had it right when he wrote, "How quickly nature falls into revolt when gold becomes her object." Display and CTV have so little in common that a shift from one to the other is hardly a strategic evolution. Instead, it's a shift from an open, low-risk business for many players to a highly protected, high-risk business that has few players and even fewer winners.
In the display business, publisher websites are accessed by users through browsers like Chrome, Firefox, Edge or Safari. Ad banners and online videos of advertisers are displayed after advertisers "win" the technologically automated bidding process for the site and its audience, paying the highest auction price. Over the years, the online bidding process has evolved technologically, permitting all potential advertisers to be "invited to the party," participating in an unbiased and instantaneous auction process. The display business is an open one -- any advertiser can participate and bid; the winner of the open auction displays its banner ads or videos.
CTV is entirely different. With CTV, the publisher is a content provider rather than a platform for ads. The content has to be accepted by distributors like Roku, Chromecast, Samsung TV, LG Ads, Vizio, Sony, Apple TV and Amazon Fire for further distribution to streaming app channels like Pluto, Tubi, YouTube and others. Some CTV content providers are so large that they have their own channels -- think Paramount+ (ViacomCBS content and 20 million subscribers) and Peacock (NBC Universal content and 33 million subscribers). However, content owners who are thinking of getting in the CTV business are significantly smaller than these giants.
CTV is like a set of Russian dolls -- content is housed on a platform that is then hosted on another platform, and then on another, and so on -- the platforms are nested within one another. I could own and operate a channel called "Taylor Farmer's Camping Gear Reviews" (I enjoy hiking and camping in the great outdoors), but to get it on the air at Pluto, for example, I might have to have it hosted by Amazon Fire and rendered on a smart TV.
All power resides with the distributors that control these platforms. For example, a 2020 carriage disagreement between Roku and Fox almost blacked out Super Bowl LIV on Roku devices. Channels risk removal if they fail to adequately refresh their content and give viewers something new to watch. One angry email from a distributor about the need for content refreshing will send content acquisition teams scurrying.
This means that content owners do not control distribution, and they cannot troubleshoot or optimize their performance because it is under the control of the platforms. At best, one can develop relationships with these platforms, but there is actually little one can do to control the outcome. The imbalance of power is overwhelming.
The highly different structures of display and CTV can be easily understood, but the key players confound themselves (and others) by relying on acronyms that mask, rather than reveal, the essential differences of these businesses. The clique of industry insiders who rely on using the language of FAST, MVPD, AVOD, SVOD, VAST, SSAI, DSP, SSP, CPM, OTT and CTV are poised to make common-sense strategic errors, particularly if they think that their mastery of acronyms and their successful participation in display gives them a leg-up in attacking and mastering CTV.
CTV is controlled by a very small handful of publishers, self-dubbed the "Publisher Oligarchs," and they have so much scale and power that they completely throw off industry dynamics and pricing, making it impossible for smaller channels to compete on a profitable basis.
At the end of the day, there is a high barrier to entry for profitable CTV operations. Those many publishers who flourished in display -- and are tempted to take the plunge into CTV -- will be chastened by the difficulties they will face. This is not to say that it is impossible -- strategic challenges beg to be overcome through creative thinking -- but first the odds must be calculated, and they are very long, indeed.
This column was written by Taylor Farmer. She is a strategic consultant specializing in ad tech and programmatic advertising. Her career experience includes positions with 360i, Criteo, Index Exchange, Nativo and ViacomCBS.
Cartoon at top by Paul Noth, The New Yorker, The Cartoon Bank. With permission
Image provided by Michael Farmer.
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