Equities

Streaming Ad Surge: CTV Ad Spending Growth Benefits Streaming Companies

Streaming services to see ad revenue surge with innovations like shoppable ads and AI targeting, benefiting stocks like Amazon.

By Athena Xu

4/4, 03:14 EDT
Amazon.com, Inc.
Netflix, Inc.
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Key Takeaway

  • Ad spending on Connected TV (CTV) is projected to grow at double-digit rates until 2028, benefiting streaming companies.
  • Amazon praised for its use of consumer data in advertising, with its stock reaching the highest level since November 2021.
  • Innovations like biddable programmatic buying and shoppable ads in streaming services signal a more integrated ad experience.

Streaming Ad Surge

The landscape of streaming services is undergoing a significant transformation, reminiscent of the traditional TV model they once aimed to disrupt. According to market-research firm eMarketer, ad spending on Connected TV (CTV) is projected to grow at double-digit annual percentage rates until 2028. This shift indicates a lucrative trend for streaming companies, as they stand to benefit from the increasing influx of ad spending on digital media.

Wedbush analyst Alicia Reese recently reiterated her Outperform ratings on Amazon.com, citing the company's effective use of consumer data to attract advertisers. Reese praised Amazon for its "leading first-party data and ability to deliver insights to advertisers to inform targeting and measurement," which she believes positions Amazon to capture a larger market share. Following this optimism, Amazon's stock reached its highest level since November 2021.

Sports and Programmatic Buying

The migration of live sports broadcasting from traditional linear and cable platforms to CTV is expanding the total addressable market for streaming services. Reese highlighted the significance of this shift, noting that streamers tend to be more engaged viewers, making them attractive targets for advertisers. This trend is underscored by recent announcements from NBCUniversal and Walt Disney, which are introducing biddable programmatic buying for their ad inventory, including for high-profile events like the summer Olympics and content across Disney+ and Hulu services.

Macquarie analyst Tim Nollen emphasized the potential of "biddable programmatic buying" on premium CTV inventory, including sports. He also mentioned the upcoming introduction of shoppable ads and AI tools designed to enhance ad relevance, signaling a future where ads are not only more prevalent in streaming services but also more integrated and interactive.

Ad Innovations and Viewer Experience

As streaming companies innovate with ad formats and targeting, the viewer experience is set to evolve. The introduction of shoppable ads and the use of AI for improving ad relevance are poised to make advertisements a more integral part of the streaming experience. These advancements aim to make ads less intrusive and more relevant to viewers, potentially mitigating some of the annoyance associated with increased ad presence on streaming platforms.

Street Views

  • Alicia Reese, Wedbush (Bullish on Amazon.com and Netflix):

    "She is optimistic that ads are gaining traction on Netflix because it is now able to make better use of consumer data, allowing it to provide more accurate data on metrics such as return on investment. That makes advertisers more confident that their ad dollars are being spent effectively." "Reese highlighted Amazon’s 'leading first-party data and ability to deliver insights to advertisers to inform targeting and measurement,' which she believes will help it win more market share."

  • Tim Nollen, Macquarie (Bullish on CTV advertising strategies):

    "'Biddable programmatic buying will expand on premium CTV inventory, including sports,' noted Macquarie analyst Tim Nollen. 'Shoppable ads and AI tools for ad relevance are coming too.'"