As viewers continue to increase their use of digital video including connected TV (CTV), social media and short-form, ad investment is primarily following consumer attention. According to IAB’s 2021 Video Ad Spend & 2022 Outlook, ad investment in CTV is growing the fastest within digital video. However, CTV budget allocation continues to significantly lag viewer time spent with the channel. And despite its advantages, CTV comes with its own set of challenges, largely stemming from channel fragmentation.

The study, now in its ninth year, explores why CTV ad dollars aren’t keeping pace with viewer time spent, what’s driving CTV’s growth and the key challenges and opportunities within CTV and digital video. 

To quantify the size and growth rate of the digital video market, IAB, in partnership with Standard Media Index and Advertiser Perceptions, has included in this study the first-ever total US digital video ad spend estimates for 2020 and 2021 and projections for 2022. Here are the study’s four key findings. 

1. Due in large part to CTV, digital video ad spend is experiencing substantial growth, though ad dollars aren’t keeping pace with consumers. 

Digital video ad spending increased 49 percent YOY in 2021 to $39 billion. That figure is expected to increase by 26 percent in 2022 to reach a total of $49.2 billion, according to IAB’s estimates. 

As the fastest-growing video channel, CTV is considered by 76 percent of buyers to be a “must-buy,” the study finds. Spend increased 57 percent in 2021 to $15.2 billion and is expected to grow by an additional 39 percent this year to reach $21.2 billion. Plus, between 2020 and 2022, CTV ad spend is anticipated to increase by a whopping 118 percent.

According to Ayzenberg associate media director Kris Patel, there are a number of reasons for the swift growth.

“Targeting and analytics make CTV a great advantage when it comes to video advertising that reaches an audience as large as and sometimes larger than linear TV,” says Patel. “Because the data and analysis are not panel-based information—it is platform-based digital view information—media planners, buyers and analysts are able to determine optimal marketing mix, audience segments that perform better than others, and user engagement via other platforms like social media.”

This year, the amount of money allocated to CTV today isn’t proportionate to the 36 percent of total time spent with linear TV and CTV combined.

2. CTV’s growth is due to multiple factors, including KPI delivery, data usage, transparency and the fact that it doesn’t rely on third-party cookies. 

Additionally, compared to linear TV, CTV provides a number of advantages for buyers, who rate CTV as 57 percent more effective than linear TV at delivering website/sales actions and 46 percent more effective at delivering brand perception. CTV also offers buyers the ability to leverage first-party brand data (65 percent), location data (61 percent) and shopping data (50 percent) – all unavailable within linear TV buys.

It also provides more transparency into where ads run than that provided by other digital video types. Fifty-nine percent of buyers reported being “very clear” on where their CTV ads ran as opposed to 50 percent for social video and 43 percent for other digital video.

Given buyers’ ongoing privacy concerns and CTV’s mitigation of them, 73 percent of video buyers anticipated reallocating dollars from linear to fund their third-party cookie/mobile ID depreciation CTV spending increases.

3. CTV’s challenges stem mainly from channel fragmentation-related issues.

Over 33 percent of buyers report that the challenges inherent in CTV are caused by difficulties associated with: 

  • the measurement of incremental reach across platforms/publishers (48 percent)
  • the management of frequency across platforms/publishers (43 percent)
  • the lack of transparency/interoperability within walled gardens (42 percent)
  • fragmentation of programmatic supply paths (35 percent)

Additionally, fragmentation-related difficulties further prevent video buyers from using sales and business outcome KPIs within their CTV buys. These buyers regularly cite sales lift as their ideal KPI for CTV despite not leveraging it due to measurement complexity, sub-par tool functionality and data lag, notes IAB.

Leo Hernandez, director of media at Ayzenberg, says this isn’t surprising.

“This is nothing new—new media, new challenges. As we develop new opportunities to connect with consumers, brands need to assess the pros/cons before activating on CTV as they would with augmented reality (AR) or virtual reality (VR) or the metaverse. If we consider paid TV (cable) in its infancy, it too faced fragmentation concerns (the ratings/audience were consistently below those of broadcast, for example). The optimal approach to new media opportunities is to maximize the individual tactic with discipline and understanding. What are the limitations in reach and how can it help with generating consumer responses in awareness/branding/behavior/message retention?”

“Media is grounded on the scientific method,” Hernandez says. “When executed correctly we analyze the opportunity, generate a theory, test the theory, and review the results. Media opportunities will continue to evolve; marketers should not be focused on what these new media cannot do, but rather consider what these opportunities can do for your brand and determine if that is consistent with their objectives.”

4. Buyers are addressing CTV challenges by preparing for a converged linear TV/CTV market and leveraging creative and targeting tactics.

Eighty-eight percent of buyers expect a converged linear TV/CTV marketplace in the foreseeable future – a marketplace that would make the management of cross-platform and cross-channel video buys easier. 

Sixty-six percent of linear TV/digital video buyers currently have a single planning team for the two channels while 25 percent expect to have one in the future, according to IAB.

Buyers are also executing an array of creative and targeting tactics including leveraging multivariate creative to mitigate over-frequency and creative burnout (64 percent). And as many as 52 percent of buyers report increasing their use of contextual signals in place of open exchange-based audience targeting.

CTV will become more widely adopted as emerging ad formats are themselves adopted and finetuned. Of the users of emerging formats, influencer-based and shoppable are performing well across the funnel. Given that buyers have expressed CTV’s KPI delivery rate across the funnel is higher than linear TV, these emerging formats are ripe for CTV.