Total CTV advertising expenditure in the UK reached around £930 million last year, according to estimates published by strategic advisory firm Spark Ninety in a new report released today, up from around £515 million in 2019. For the time being, broadcaster video on-demand (BVOD) and YouTube continue to account for the majority of this spend – though Spark Ninety says that could change in the coming year as new inventory hits the market.
Back in 2019, BVOD accounted for roughly £300 million of ad spend in the UK, and YouTube accounted for £110 million, together receiving 80 percent of CTV ad spend. Meanwhile dynamic ad replacement (DAR, the likes of Sky’s AdSmart) made up £85 million, and other VOD services made up the final £20 million.
In 2021, the picture wasn’t substantially different in terms of where the money was distributed. BVOD services received £520 million, and YouTube’s CTV ad revenues reached £210 million, together making up 78 percent of total CTV ad spend. Other VOD services marginally increased their share, with revenues reaching £45 million, and DAR revenues climbed to £115 million. Meanwhile ‘Device UI’ ads (ads run on CTV platforms’ user interfaces, often used to advertise CTV apps) carved out space for themselves with £40 million of spend.
But Spark Ninety predicts that the picture could look quite different in a few years time. The introduction of ad-supported tiers on Netflix and Disney+, as well as increased consumer adoption on non-broadcaster-owned VOD platforms and free ads-supported streaming TV (FAST) channels, is expected to bring a lot of new, quality inventory to the market. The introduction of ads on Netflix and Disney+ alone could increase premium VOD inventory volumes in the UK by between 17-28 percent over the next 2-3 years.
This flood of new inventory may drive overall prices down in the short term, although increased demand from small and medium-sized enterprises (SMEs) could counteract that drop.
SVOD ad revenues likely to eat into linear
Spark Ninety’s report also explored the market dynamics shaping the development of CTV advertising in the UK. One particularly interesting insight is that we’re more likely to see spend on SVOD services’ ads come from linear TV and non-CTV digital budgets, rather than eating away at other CTV services.
The reason for this is the differences in how linear TV and CTV are commonly traded in the UK. Linear TV is still frequently traded on share-based deals, where agencies agree to spend a proportion of the linear budget with each media owner, whereas with CTV buyers commit to specific volumes of inventory.
So while agencies can’t reduce their BVOD spend without compromising those CTV volume deals, they can maintain their share-based deals if they reduce the overall amount they’re spending on linear. Hence, it’s easier to pull budget from linear than from BVOD.
However Spark Ninety’s report also found that growth in CTV advertising could catalyse a review of legacy broadcaster-agency trading arrangements, like share deals, as stakeholders increasingly see them as “anachronistic and unambitious”.
Among the other major market dynamics picked out by Spark Ninety were the strength of media owners and gateway platforms (the likes of Roku, Samsung, and LG).
Broadcasters, given that they dominate the space and are few in number, are controlling programmatic distribution, by limiting sales through external programmatic platforms and/or negotiating deals to protect their revenues and data. Open auctions are still low in volume, and generally limited to digital-first services. Meanwhile gateway platforms are increasingly leveraging their distribution and promotion power to grow their slice of ad revenue, and are playing an increasingly large role in the UK.
While deals between various players are common, the overall result is still a fragmented marketplace when it comes to data and measurement, limiting the efficacy of some of the more advanced data offerings. However, Spark Ninety’s report noted that the potential to significantly grow overall CTV revenues may well drive change on this front.