Ad-Supported Streaming Services Impact Marketing Strategies

Consumers Willing to Watch Ads for Free Content

The streaming TV-driven advertising market is exploding as more ad-supported services come online.

In 2021 advertisers in the US are expected to spend $11.36 billion on commercials for streaming TV. That is a significant increase from $8.1 billion in 2020.

The surge is a result of consumers’ willingness to sit through commercials in order to access content for free. Several new services including PlutoTV and Tubi, which is owned by Fox (FOXA), are free to watch. A handful of other ad-supported platforms including Discovery’s (DISCA) Discovery+, Paramount’s (PGRE) Paramount+, and NBCUniversal’s Peacock charge a small monthly fee. WarnerMedia is launching a version of HBO Max which is also ad-supported.

Ad-Supported Platforms Gain Market Share

Ad-supported streaming services are gaining traction with consumers. As of the end of January, ad-supported streaming TV services accounted for 26% of the US market, which is up from 24% a year earlier. The market is also getting significantly more crowded and competitive.

The increased competition is good for consumers but poses challenges to advertisers, which are struggling to figure out how to place their commercials. Companies can purchase ads directly from streaming services or can use an ad-buying platform to buy spots across hundreds of streaming apps.

Challenges for Advertisers

The current state of the streaming TV ad market is reminiscent of the cable TV industry in its early days. Advertisers spent money running ads on new channels without knowing if they would be successful. Despite the current challenges, advertisers are enthusiastic about the possibilities for advertising on streaming services. Streaming services make it easier to target certain demographics at specific times, which can be difficult to achieve with cable TV.

The ad-supported streaming market is rapidly gaining ground. But streaming companies are looking ahead and wondering if consumers will spend as much time watching their content as businesses reopen and more in-person entertainment options become available. These changing trends also raise questions about whether consumers will continue to be willing to sit through ads in exchange for free content.

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