From ATV to CTV – significance, differences and forecasts

Increasing digitalization has long since arrived in TV as well. Internet-enabled televisions, or smart TVs, are becoming increasingly popular. According to the representative Convergence Monitor 2022 study, the number of Internet-enabled TV sets has risen to just under 61 percent (by comparison, in 2021 the figure was still just under 55 percent). This development is also interesting for advertisers, because new formats such as addressable TV (ATV) and connected TV (CTV) open up new potential for more targeted advertising.

ATV and CTV – What does that mean anyway?

Addressable TV (ATV) allows advertising to be placed on a TV set connected to the Internet in the classic, linear TV program. On the one hand, it is possible to use an ATV spot in the linear commercial break to cross-fade the media companies’ own advertising. On the other hand, the advertising can be placed after the switchover process.

The Connected TV (CTV) channel, on the other hand, comprises the playout of advertising that is broadcast via the Internet in an on-demand content/app environment on a TV set. Internet reception is provided by the TV set itself (smart TV) or by external devices (e.g. Amazon Fire TV Stick or game consoles).

The CTV market has grown strongly in recent years. This has been accompanied by an increase in the number of market participants and new platforms offering video content in the area of Connected TV. This has led to the development of various offering models, which can basically be categorized into three different areas:

1. Ad-funded (AVOD) models are purely ad-financed models. No monthly fee is charged for use, but users are shown advertising content. Examples include Amazon Freevee and Rakuten TV.
2. Hybrid models offer two options: If users are willing to pay a monthly fee, they are not shown any advertising. If they do not want to pay anything, they have to accept advertising. On the Joyn or DAZN platforms, for example, users can choose between a free and a paid variant.
3. There are also subscription-funded (SVOD) models. These are free of advertising on payment of a monthly fee. In these models, there is no free variant for users. Netflix or Disney plus are just two examples of SVOD models.

ATV vs. CTV – What is the difference?

In order to efficiently set up media planning, it is important to clearly differentiate between Addressable TV and Connected TV. In advertising planning, it is crucial to take into account that they differ in terms of both the advertising environment and the possible formats in which advertising is played out.

On ATV, advertising can only be played in the environment of the linear TV program. There are two possible formats: Playout after the switching process or playout in the linear advertising block.

Advertising in CTV, on the other hand, takes place on video-on-demand platforms or in live streams.

In most cases, advertising is played directly “in stream” – either as a pre-, mid- or post-roll ad. In addition, special formats are also possible, for example as an overlay or with a call-to-action and other dynamic elements such as adding a geolocation.

A major advantage of ATV is that the reach from linear TV is linked with the advertising targeting possibilities of the Internet. The existing target group of linear TV programming can be more specifically addressed via ATV’s new channels. While linear TV is played out nationally, ATV can now be used for regional and target-group-oriented addressing. However, it is not yet possible to determine the exact placement of the spot in the advertising block, as is the case with media planning on linear TV.

While ATV reaches only users of linear TV programming, CTV taps into another target group, namely those who can no longer be reached via linear TV. With CTV, too, advertising can be played to specific target groups and can be placed according to socio-demographic data, among other things. By setting targets, wastage can be minimized.

Current developments and forecast

Both ATV and CTV offer exciting opportunities when it comes to advertising playout. But there are also challenges that need to be considered. For example, the measurability of addressable TV still has room for improvement. While the usual key figures such as impressions on a weekly, daily and hourly basis, VTR or station mix and program distribution are comprehensible, there is still a lack of standardized reporting provided by the marketers and of advertising impact measurements.

Younger target groups in particular are more difficult to reach via linear television. According to Kantar’s 2021 digitalization report, as many as 25 percent of 20- to 29-year-olds no longer use linear TV. Since ATV’s reach is limited to that of linear TV, it is worthwhile for advertisers to think about integrating CTV into media planning when addressing younger target groups.

In general, online video usage has increased: According to Kantar’s Convergence Monitor 2022 study, 76 percent of respondents between the ages of 14 and 69 say they consume moving images online at least once a month. According to the study, paid streaming services (2nd place) are still being used more than free services (3rd place). In view of the constantly rising prices in all areas, it remains to be seen whether this will develop in favor of free services.

However, it can already be observed that companies which have previously relied on a pure SVOD model (such as Netflix) are now considering hybrid models. The reason for this is often a stagnating or even falling number of users due to, for example, the ever greater choice of alternatives on the market. For example, from Q4, 2021 to Q2, 2022, Netflix recorded a decline from just under 221 million users to just under 220 million (source Statista https://de.statista.com/statistik/daten/studie/196642/umfrage/abonnenten-von-netflix-quartalszahlen/).

This opening up of pure SVOD models (without the option of advertising placement) to hybrid models is creating new advertising placements that advertisers should take into account in their media mix in the future. Because in the future, it will be a matter of putting together a hybrid moving image mix that ensures a sustainable contact dose in the various age segments via different video offerings.