Advertisers Love Connected TV, But Does It Love Them Back?

(MENAFN- Live Mint)

When was the last time you picked up your phone to scroll endlessly through videos mindlessly? Chances are, it was just a few hours (or minutes) before you began reading this story. Advertisers are pouring more attention and money into vertical video than ever before, all in an attempt to reach the widest possible consumer base as Indians stay hooked to that infinite scroll of 30-second videos.

Yet, as chasing eyeballs on social media becomes increasingly expensive and with steadily diminishing returns, advertisers are progressively pouring ad money into connected TVs.

While costs for digital ad spots can vary wildly by an advertiser's industry, size, reach, and how much inventory they are buying, in general, 10-20 second spots on connected TV can be as much as triple the cost of an ad spot on Instagram, and many multiples higher than the ocean of display ads that litter the open internet. Clearly, CTV is premium and charges accordingly, but in the post-pandemic years, the cost of advertising on Instagram and Youtube in India has been growing by anywhere between 15-25% every year, following a boom in e-commerce and direct-to-consumer brands.

CTV ads offer several things social media doesn't as easily-a chance to show off on the big screen, a uniformly more lucrative user base, and a higher chance that your ad will be absorbed with some attention.

YouTube uses the same set of tools to track user data on its mobile and TV ads, as do rival streaming and OTT platforms. But others selling connected TV ads-largely TV makers-are using a variety of tools to harvest user data. These include getting TV buyers to login via email during setup and collecting other data when purchasing the TV set. Besides, leading ad platforms like Samsung Ads also use pixels-a piece of code embedded in their ad platform-that track user data across the internet, match it to the user data collected from the CTV user, and show relevant ads.

There's just one problem: it's hard to do conversions on CTV ads.

CTV brand campaigns, such as mid-roll ads on YouTube or OTT platforms and increasingly on free ad-supported (FAST) TV content, are ideal for building brand awareness. But brand marketing campaigns are almost universally considered to be a more amorphous marketing form and harder to measure, especially when driving outcomes such as clicking on a brand's website, downloading an app, or watching a piece of content by another publisher.

But the leaders in this new but fast-growing advertising medium are taking note. Now, they're creating more kinds of ad inventory designed for the bottom of the funnel.

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Driving action

Consider YouTube, which dominates content consumption on connected TVs in India. This month at its annual Brandcast event for advertisers, YouTube rolled out new kinds of inventory for connected TV ads. This includes shoppable mastheads-banners on the top of a page-immersive mastheads that take over a screen, and other kinds of shoppable ad spots embedded in YouTube videos on CTV. Advertisers can also buy and target urban and rural audiences separately on CTV, a crucial addition as the festive season kicks in.

“I would like to think of this as a market creation phase," Shubha Pai, head of brand solutions at Google India, told Mint in an interview.“There is action from OEMs [original equipment manufacturers, or TV set makers] and we all have a long way to go. The total number of smart TVs is still largely growing for more affluent and urban users, so there is a huge audience base yet to be unlocked."

Still, CTV is an alluring medium as more homes cut the cord and switch to streaming. Besides, CTV publishers can pitch brands and agencies with some urgency, because advertising on traditional or 'linear' TV is dropping fast.

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The rising tide

In 2024, connected TV homes grew to 30 million, up from 23 million the previous year, according to a report by industry body Federation of Indian Chambers of Commerce and Industry (Ficci) and consulting firm EY. Yet, TV ad revenue for the year fell 20% year on year, meaning the traditional TV viewer is shifting to their mobile phone or a smart TV instead. Besides, compared to regular TVs, ad campaigns on connected TVs can be more targeted and come with better attribution. Ficci and EY predict India will have more than 70 million CTV households by 2030. Already, the recent steep cut in goods and services tax (GST) on televisions will likely encourage smart TV sales this year. Linear TV connections are expected to fall by 7.5% by 2027, according to the report, but will still be ahead of CTV at 148 million homes.

“Reach for CTV is now coming from tier-II and tier-III towns, where richer customers are keen on buying bigger and better TV screens," Russhabh R. Thakkar, founder and CEO of supply-side platform and adtech firm Frodoh, that specialises in connected TV, told Mint in an interview, pointing out that affluent families in smaller cities are willing to invest in larger than average pricey TVs of up to 65-75 inches.

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All about conversion

What will it take to transform CTV from a top-funnel, brand awareness-only channel into one that can drive outcomes? The need of the hour is more innovative ad inventory that can convert what works on mobile phones to the big screen.

YouTube already dominates digital video advertising and leads the market in connected TV. Yet, per the Ficci-EY report quoted above, only about 9% of all time spent on the platform in India is via CTVs-mobile phone consumption still dominates. Running clickable ads is easier on a mobile screen, but YouTube wants to make that easy on connected TVs, too.

“We want to make every surface more shoppable," Google India's Pai told Mint. YouTube launched QR (Quick Response) codes to encourage clickthrough rates on ads, directing users to an app download or a website, for example. Rival JioHotstar also followed suit with QR codes in ads playing in livestreams and other sports.

Innovation like this is crucial because viewers are more forgiving of ads on the TV screen than they are on their mobile phones.“Compared to mobile, the view-through rates on skippable ads are much higher on TV," Frodoh's Thakkar said.“This is because we have been raised to expect long ads on TV content. That behaviour is ingrained in us as viewers."

In fact, he added, for some premium brands such as Jeep and Lenskart, viewers are more willing to click on an ad and follow through, even on connected TVs. YouTube's Pai also cited Korean carmaker Kia as an example of a successful conversion ad campaign on the platform, where viewers seeing an ad on the big screen clicked through and signed up for test drives of Kia's latest model.

Bridging gaps

Now, as retail media, ads on quick-commerce and e-commerce platforms slowly eat into older forms of digital advertising, YouTube is trying to bridge the gap between mobile and TV.

This year, it will double down on its vertical format YouTube Shorts on connected TV. While Shorts has been available on CTV for a while, it runs ads differently from regular horizontal videos. Apart from vertical video ads in between an endless stream of Shorts, advertisers can also embed shoppable links inside a vertical video. These are conversion-focused ads that redirect viewers to brands and products that may feature in a vertical video already. In this manner, YouTube Shorts is attempting to bridge the gap between influencer/affiliate marketing and performance marketing, much like Instagram Reels.

Besides, OEM makers like Samsung and LG are growing FAST TV on their TV's custom platforms, syndicating more content and offering more ad inventory. Much of this FAST content, however, is still restricted to free TV news channels, older movies, and some general entertainment from around the world. Industry experts say for now, suppliers of FAST TV are more concerned about fill-rates than improving the kind of ad inventory they offer.

Perhaps everyone in the CTV business can take cues from the 'old' television it is in a hurry to replace. Some old-timey innovations-such as a countdown timer to when an ad break will end-are relics of the golden age of TV movies and soaps. But, as Frodoh's Thakkar argues, these were the cues that attracted advertisers and prompted them to pay more to place their ads as strategically as possible, down to the last 5 seconds. Perhaps, to make CTV more than just another void in the vast universe of advertising, advertisers and publishers can look to the past for inspiration.

Key Takeaways

• Connected TV advertising is excellent for brand visibility but struggles to prove its worth in driving direct sales and measurable actions (conversions).
• Ad revenue is rapidly moving from traditional linear TV to Connected TV, with India projected to have 70 million CTV homes by 2030, including significant growth in Tier-II and Tier-III cities.
• Platforms like YouTube are tackling the conversion problem by introducing new ad formats like shoppable mastheads, embedded links, and QR codes to bridge the gap between the TV screen and the viewer's smartphone.
• Consumers are conditioned to accept longer, non-skippable ads on television, leading to higher view-through rates on Connected TV compared to mobile, which gives advertisers a more engaged audience.
• The future of Connected TV advertising involves integrating mobile-native formats like vertical video (YouTube Shorts) and creating a seamless path from discovery on the big screen to purchase on a second device.

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