Shared Viewing Could Haunt Connected TV’s Growth, Needham Analyst Suggests

Media Shared Viewing Could Haunt Connected TV’s Growth, Needham Analyst Suggests David Bloom Senior Contributor Opinions expressed by Forbes Contributors are their own. I’m a media/tech/entertainment writer, podcaster, speaker and analyst Following New! Follow this author to stay notified about their latest stories. Got it! Oct 31, 2022, 08:14pm EDT | New! Click on the conversation bubble to join the conversation Got it! Share to Facebook Share to Twitter Share to Linkedin getty Just in time for Halloween, Needham & Company senior research analyst Laura Martin issued a note that could curdle the blood of the many investors, marketers, and streaming platforms and services counting on the shift to connected TV to drive a new boom in video advertising.

Martin – one of the most prominent analysts covering the media, entertainment and technology space – said in her short note that she’d run across a single spine-chilling statistic in a report from Amagi, the big streaming services company, that could weaken prospects for the big shift in ad dollars to connected TV just as more brands are piling in, and investors are shifting their assessments of providers. “From an inbox filled with stats related to the 30 stocks we cover, occasionally we see a data point that haunts us,” wrote Martin in a note distributed this morning. “We can’t shake the feeling that, if that data point turns out to be important, it undermines important economic assumptions we (and often Wall Street) hold as true.

” Amagi noted in an August report that “nearly 80 percent of CTV viewing is shared viewing. ” In some ways, that’s hardly a surprise. Not only did the pandemic ignite interest in streaming on connected TVs, for lots of locked-down, #WFH families it became an opportunity to gather again around the digital hearth after years of atomized and highly personalized viewing on far smaller screens such as phones.

But Amagi’s data point, and Martin’s mining of it, comes as a useful reminder at a key point in the shift of ad dollars to CTV. According to Amagi, only 21 percent of CTV viewing is done alone, while the bulk of all viewing on CTV platforms, 62 percent, involves two people. Three or more people are watching together for the remaining view share.

MORE FOR YOU The Inside Story Of Papa John’s Toxic Culture Cutwater Heaters Look To Warm Up Your Winter Spirits Philadelphia Eagles Vs Houston Texans Thursday Night Opening Odds, Picks & Predictions: Can Philly Cover Largest Week 9 Spread? So, if everybody knows that lots of people watch streaming video together on connected TVs, it’s no big deal right? Except Martin suggests investors should be aware of three potential implications that, at the margins, could haunt the sector in coming years. To begin with, it’s important to remember what a paradigm shift connected TV represents, effectively merging notable parts of everything that preceded it. Linear TV – traditional broadcast, cable and satellite – was all about gathering together to watch a single show on an increasingly big screen.

PC and then mobile/tablet viewing busted up this approach, along the way attracting some $55 billion in annual advertising spend by providing advertisers with a more targeted approach. Connected TV promises to merge the best of both experiences, with the big screens and impactful messaging of traditional linear joined to the highly targeted experiences possible with an interactive connection that knows who’s watching and when. Watching on mobile, tablets and computers is overwhelmingly a solitary experience, making it easy to infer who’s on the other end.

But as CTV screens proliferate with high-quality shows with wide appeal, they tend to draw more than one person at a time to a shared experience. That has potential implications that even the most ardent backers of CTV must figure out how to manage. Martin laid out three possible implications: Wasted views.

Shared screens mean some audience targeting is “wasted” on viewers who may care little about the ad. Whatever that margin of waste is, it may affect pricing power for CTV platforms and services. That could particularly be a headache for services such as Netflix NFLX , which is launching its ad-supported tier this week at ad rates far higher than the industry average.

But if shows are mostly being watched by multiple viewers, defending those hefty CPMs may be difficult for Netflix. Less impact, fewer dollars. Advertisers love those smart CTV screens and the way they can deliver more memorable and impactful ads compared to the pinched possibilities of mobile and even computer screens.

But Martin warned shared viewing “ could” slow the shift of ad dollars from digital video to CTV at a time when the sector is counting on a big influx of dollars. Frequency uncapping. Beyond better targeting, CTV services and platforms are supposed to provide a better ad experience in other ways.

One possible impact is on what’s called frequency capping, which means limiting the number of times a given viewer sees a specific ad. But if multiple people are watching, implementing frequency capping gets that much more complex, Martin suggested. That, again, “could” lead to viewer annoyance with too many repeat ads, and would be another “waste” of ad spending.

That too could slow CTV adoption. Martin offers no solutions to this spooky scenario. And it’s true that for some kinds of advertisers, these issues will matter little.

They may be doing an old-school approach to their messaging, seeking simple reach like classic linear advertising. Or they may be more focused on where their message is seen, rather than by whom. A fast-food chain may just want to reach “everyone with a stomach” in a given market, so individual targeting is unnecessary.

Or perhaps they’re only trying to reach a household, rather than individuals within it. Regardless, Martin brings up a possible set of bugaboos and gremlins the industry will need to address sooner than later, so the industry won’t be haunted for years to come by lost opportunities. Follow me on Twitter or LinkedIn .

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