More than one third (36 percent) of US advertisers have increased their CTV spend this year, according to Advertiser Perceptions, up from 29 percent in December. At the same time, 31 percent have paused or reduced their spending on linear TV, 10 percent more than in December.
Based on over 300 buy-side interviews conducted in February 2023, the research suggests advertisers are becoming more conservative about where they are spending, in the face of mounting pressure to prove return on investment (ROI).
As a result, 55 percent of advertisers are pulling money out of under-performing media, including print, radio, traditional outdoor and linear TV. Those budgets are being redirected predominantly to social media, where 42 percent have increased spending, followed by CTV at 36 percent.
“Connected TV is an obvious logical area for advertisers to be reallocating those dollars, because they get the benefits of traditional TV ads, but with the targeting options and measurement abilities of digital alongside that,” comments Nicole Perrin, SVP, Business Intelligence at Advertiser Perceptions.
With that extra targeting comes a trade-off in terms of reach, and there are large brands for whom linear TV continues to deliver ROI. Perrin cites an advertiser for a leading fast food chain who was interested in reaching “every American with a stomach,” making the targeting capabilities of CTV less valuable than the scale of linear.
Nevertheless, higher-spending advertisers ($25+ million per year) were more likely to invest in CTV than social media; for lower-spending advertisers the opposite applies. CTV mirrors linear TV in that regard, remarks Perrin: “Not really a huge channel for smaller advertisers, a very important channel for large advertisers. ”
That said, CTV makes it easier for smaller businesses to advertise than linear. Perrin notes that CTV spending is “likely to be more liquid”, avoiding the hefty upfront commitments of linear TV. “They’re using a channel that’s more likely to be activated programmatically, where they can move money around more easily and not be locked in to spending a lot that they might no longer want to spend.”
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The results show that ad spend was most negatively impacted in Q3 2022, followed by a return to spending in Q4 for the holiday season, before pulling back again in Q1 2023. This explains why advertisers lowered their retail media spend this year, having invested heavily in the channel over the holidays.
However, the inverse is true of social media, which witnessed a pullback at the end of 2022 upon Twitter’s takeover by Elon Musk. “That reason went away in February,” says Perrin. Indeed, GroupM last month told clients it no longer considers Twitter a high-risk environment. Other advertisers would beg to differ, with Ben & Jerry’s yesterday announcing an end to spending on Twitter over the proliferation of hate speech.
But according to the Advertiser Perceptions research, the brand safety issue was “a Q4 blip”. It indicates that over half of advertisers currently spending on social media will spend more on the channel this year than in 2022. The same is true for connected TV, with 53 percent of CTV advertisers planning to up their investment this year. The study found that only 8 percent of CTV advertisers plan to decrease their spending.
There was also rising acknowledgement that consumer spending is falling; 43 percent reported such a reduction in February 2023, compared with 36 percent in December 2022. When asked about the macroeconomic environment, the responses were more mixed. “We’re seeing a stable level of ambivalence among advertisers as far as how the economy is,” observes Perrin. “I think that advertisers are in a little bit of a holding pattern. There are people who are not willing to make a big commitment in terms of spend right now.”
This chimes with yesterday’s forecast from Dentsu, which predicted “a flat year for ad spend” – alongside a 15 percent rise in CTV spend, while overall TV investment drops 3 percent. But TV spend is due a lift in Q4, according to Dentsu, as the purse strings loosen for the holiday period.
And Perrin points to a more positive second half of the year, when annual comparisons should reflect more generously on ad-reliant businesses. “Ad sellers had a weak second half of last year, so it’ll be easier for them to show some positive growth in the second half of this year,” she explains. “I think the second half of the year will look a little bit brighter than the first half.”