COMMENTARY

Where did the $25 billion of 2023 US CTV ad spend actually go?

• by Dave Morgan , Featured Contributor, 2 hours ago

There is no question that the connected TV advertising market in the US is big, growing fast and is a major disruptor – and likely complement – to its older, still much larger, legacy sibling, linear TV advertising.

When people talk about how big the CTV ad market is in the US, they tend to throw around numbers like $25 billion for this past year, and project $30 billion-ish for 2024. It’s hard to know where those numbers come from first, but eMarketer, which tends to be viewed as a bible in the business these days by practitioners and analysts, has published numbers along those lines.

However, when you dig a bit into the numbers, some things just don’t make sense. First, let’s try to figure out what each of the major CTV platforms are doing in capturing CTV ad spend.

eMarketer’s January 2024 “Guide to Connected TV” projects Hulu at $3.84 billion and YouTube at $3.29 billion as #1 and #2 in the US market. Parsing Roku’s public numbers, $2.5 billion seems to be pretty close and Amazon’s 2023 CTV numbers suggest something under the $1.5 billion range. For  Netflix and Disney+, eMarketer projects $830 and $750 million respectively in 2024, each up significantly from 2023.

The remaining major TV companies, Warner Bros Discovery/Max, NBCU/Peacock, Paramount/ParamountPlus/Pluto and FOX/Tubi probably capture around $2 billion as a group. The major CTV manufacturers, VIZIO, Samsung and LG probably capture just in excess of $1.5 billion collectively.

If you add up all of the numbers above, you get approximately $16 billion. If $25 billion was spent on CTV ads in the US in 2023, and the major players who account for 95+% of CTV viewing according to Nielsen’s Gauge got something in the ballpark of $16 billion, where did the other $9 billion go?

CTV Long Tail? Nope. Not only does Nielsen confirm that the big players listed above constitute almost all CTV viewing, but all of the companies with CTV viewing data concur. Small publisher CTV viewing in the US is under 10% and has much lower pricing than the large, premium players, so they can’t (legitimately) be capturing billions of dollars of ad revenue.

MFA’s & Outstream? Probably. As we’ve learned from analysis from groups like the VAB, Adalytics and the ANA, “made-for-advertising” sites are being programmatically inserted into the buying supply chain across all media types. No reason not to expect it is impacting CTV ads. We also learned that many publishers and platforms have mislabeled (fraudulently?) their “outstream” web video ads as “instream” to capture the significant premium CTV ads command over web video.

Mysterious margin capture. As they say in the world of adtech, “In mystery there is margin,” and there is a lot of opacity in the CTV ad world. First, there is margin being captured by SSP’s, DSP’s, ad verification and data targeting, but a decent chunk of that is already reported in the supplier/platform revenue numbers, since many of them get paid gross and then pay out the tech and data vendors.

Also, agencies are certainly taking a good piece, but their client agreements are typically only paying them low/mid single digit percentages of spend. But since we're not so naive, we know that there are lots of methods for agencies to capture more money if they want.

Is it possible that 40% of CTV ad spend is disappearing in the nooks and crannies of the adtech world? It might be. If so, I suspect that the large suppliers will increasingly go direct, cutting out the middleman and the margins.

Or, instead, maybe the gross market projections are not right.

Maybe the CTV ad market is significantly smaller than many like to think it is? What about that? The amount of $16-20 billion is nothing to sneeze at, and maybe it's much more realistic, particularly when trying to understand how each company is doing. Maybe the players listed above have more market share than they’re being given credit for.

What do you think?