COMMENTARY

What Will Brands Gain from The Newest Advertising Channels?

• by Lydia Martin , Op-Ed Contributor, 8 hours ago

A lot has been happening in the advertising market recently, which makes an interesting analysis for everyone involved. Following the publication of Q3 earnings at the end of October, we have seen a noticeable deceleration among some of the biggest players in the digital advertising market.

This includes Snapchat, which reported the slowest rate of quarterly growth ever, and Meta, which saw revenue down 4% YoY.

Most precariously, Twitter’s financial position appears to be in dire straits, with the social media channel losing over $4 million a day as a result of advertisers dropping from its platform. 

Simultaneously, new platforms have emerged where advertisers can look to test and invest. The most talked-about of these is Netflix’s “Basic With Ads” proposition, which was introduced in the U.K. last week, but Disney+ has been hot on its heels with the announcement of a new ad-supported tier launching in December.

Apple is also growing its advertising proposition, with rumors of a self-service platform in development and reports that the tech giant is exploring buyers for advertising space on Apple TV+. 

So why have we seen declines in some of the biggest advertising tech players in the industry -- and at the same time the emergence of new ad opportunities among other platforms?

To a great extent, it comes back to data. Without robust data and tracking capabilities, the value of big tech social media platforms depreciates significantly.

We have seen this play out for Meta since Apple’s iOS upgrade last year, which demanded that apps including Facebook and Instagram gained permission from users to track their data.

We now know that only about 16% of all users give this permission, which has had a significant impact on Meta’s ability to personalize -- and therefore its value to advertisers. 

The same explanation helps us understand the rise of opportunities across the likes of Netflix, Apple, and broadcast television networks. ITV’s new ITVX offering is one example, and most recently from Channel 4 (a British public TV/digital service), digital first-brand Channel 4.0. These platforms have been gathering rich, attentive audience data via quality content since their inception.

Understanding this in combination with the current economic climate -- which in Netflix’s case has seen nearly 1 million UK households cancel their subscriptions -- monetizing data is a logical strategy for platforms to unlock new revenue streams. 

It is then worth considering what implications these new opportunities have for brands?

Do new advertising video-on-demand (AVOD) platforms, for example, unlock new audiences? The short answer is yes.

Netflix reportedly expects its upcoming ad-supported subscription plan to reach about 40 million viewers worldwide by Q3 2023. By 2027, 60% of global Netflix subscribers are expected to be on the ad-supported tier.

More broadly, the quality of Netflix inventory and the attention it commands cannot be underestimated for advertisers who want to appear against premium video content, to engaged viewers. 

The sticking point for advertisers that are eager to test in this space -- aside from the eye-opening CPMs, which at $60 exceed Super Bowl commercial prices -- again comes down to data.

Looking at the overlap in viewership between Netflix and Amazon Prime, for example, we see that of 26.6 million U.K. Netflix subscribers, 88% (23.2 million) watch YouTube on a weekly basis or more frequently.

Given the significant differences in price and targeting opportunities between the two channels at this stage, brands must therefore interrogate the reach vs. cost efficiency of activating on new advertising platforms before diving in.