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Straight Talk Consumer and Entertainment Services

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First, let's get the obvious out of the way – yes, mobile already dominates (and will continue to dominate) online in-stream video advertising (TV-like advertising which appears before, during, or directly after online video content, and which Ovum defines as "AVOD"). But much of this is due to the prominence of Google's social-focused YouTube platform, which thrives on user-generated content and leads the market in many (particularly emerging) countries with its mobile-first platform. While uptake, usage, and perhaps even awareness remains limited, Facebook is also pushing further into the mobile AVOD space with its Facebook Watch platform and in-stream mobile video ads. But when these two platforms and the mobile-dominated Chinese market are removed from the equation, a different landscape – dominated by connected TV (CTV) rather than mobile devices – emerges (Figure 1).

 

Figure 1: Connected TV will be the biggest device segment for online AVOD revenue outside of YouTube, Facebook, and China in 2024Global AVOD revenue share by device 2024

Source: Ovum Online Video Advertising Forecast: Broadcaster AVOD, YouTube, and Facebook, 2019–24

  

The fact is, for most premium AVOD players, the CTV screen will be more valuable than the mobile one between now and 2024. Here are three key reasons why:

  • Consumers want to watch premium content on the biggest screen available. According to Ovum's Digital Consumer Insights 2019: Media and Entertainment survey, due for publication in 4Q19, 60% of consumers that watch premium online video content such as movies, drama series, and documentaries use their smart TV – or smart device connected to their TV – most to watch such content. Just 17% of respondents use their smartphone the most for watching premium online video, although smartphones are the most-used device for watching social video and user-generated video.

  • Penetration of connected TV devices and better connectivity is growing. The number of connected smart TVs in active use globally will more than double, to 1.6 billion in 2024, when over 80% of consumer fixed broadband connections will be above 30Mbps and easily capable of supporting 4K video streaming. Though barriers remain higher in emerging markets, such as India, TV manufacturers and platform owners are making moves to bring down both the costs of smart TVs, and the amount of data required to watch online video on them. And, as most smart TVs in such regions will be connected via mobile hotspots, the emergence of 5G won't just drive mobile video consumption, but CTV viewing too.

  • More premium OTT platforms will turn to ads for monetization. Many are turning to hybrid monetization models that combine subscription and advertising revenue in a bid to maximize profitability while content costs soar. Meanwhile, prominent broadcasters will continue to launch and pay greater attention to their ad-supported OTT catch-up apps, which will find an ideal home on (smart) TV screens where ads command higher prices.

While mobile video strategies will remain important for players across the TMT sector, prioritizing the CTV experience will be crucial for those looking to run ad-supported, premium OTT video services. This will involve innovating with new ad formats, modes of interactivity, and measurement solutions specifically designed to increase the value of CTV advertising for viewers and advertisers.

Competition for premium, brand-safe content will also continue to grow, especially as players such as Facebook and YouTube look to expand their presence and value on CTV devices alongside a proliferation of premium AVOD players. And, finally, although Google is continuing to grow its CTV presence through Android TV, and Facebook has launched its own Portal TV device, the movement toward CTV viewing could lead to a shift of power in the online video ad market toward Amazon, Roku, and other TV device manufacturers making bold moves into the burgeoning CTV ad space.

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