Talking TV: Which Brands Are Flocking To AVOD Ads?
Advertising intelligence platform MediaRadar recently found brands spent more than $369 million on OTT platforms in the first quarter of 2022.
According to its findings, the five top spenders in Q1 included Berkshire Hathaway, Capital One, Microsoft, State Farm, and Verizon, accounting for over $49 million and 13% of the quarter’s total OTT investment.
In this Talking TV conversation, MediaRadar CEO Todd Krizelman explains which brands and categories are dominating AVOD streaming so far and where spending is likely to go by the end of the year.
Episode transcript below, edited for clarity.
Michael Depp: Advertising intelligence platform media radar says that brands invested more than $369 million in ad spend on OTT platforms in the first quarter of 2022. Just who is it that spending on AVOD platforms, and where are they gravitating? I’m Michael Depp, editor of TVNewsCheck, and this is Talking TV, the podcast that brings you smart conversations about the business of broadcasting.
This week, that conversation is with Todd Krizelman, MediaRadar’s CEO and co-founder. In just a minute, we’ll be talking about advertising on OTT, how that space is evolving, and what that means for broadcasters who have launched their own fast channels and apps into the space. Welcome, Todd Krizelman, to Talking TV.
Todd Krizelman: Thank you for having me.
Michael Depp: Todd, your data says that brands spent over 369 million in Q1 on AVOD advertising. Can you put that in perspective? I know that’s a dip from Q4 of last year, but basically, what are the trend lines?
Todd Krizelman: Well, look, I think we see year over year we see improvements in spend. I think the biggest trend we see, Michael, is just that there are more AVOD channels winning business. You know, a full year ago in Q1 of 2021, Hulu was really the primary winner from any format from advertising. And in that in that time, right by the time we got to march, we had Paramount+ launching, then Peacock, then by summer, HBO Max.
And I think there is an evolution of maturing where these other platforms are. And it’s not that Hulu is becoming worse, it’s just that the others are becoming better at selling ads. So that’s been the biggest change, is that we’re seeing more advertising on these different platforms.
Michael Depp: So how closely do the brands and categories that we see advertising in OTT line up with what we see in spot TV? Is it a pretty direct correlation?
Todd Krizelman: So, it’s similar, but there are there definitely are some differences. I’ll give you an example. Direct to consumer companies like Casper or, you know, any of these D to C companies are more likely to be leaning into OTT because OTT or CTV has the characteristics of direct marketing and digital marketing in that you can really click through and follow people and see if they purchase. So, there’s more of an emphasis on direct marketing from these D to C companies than we would see in linear for sure, in spot.
Michael Depp: OK. Well, that’s interesting. Well, let’s talk about categories here. What are some of the biggest categories currently making AVOD buys?
Todd Krizelman: Sure. When we look at them, there are six categories that drive disproportionate amount. No. 1, pharma, we see very significant spend. Media and entertainment remain the No. 2. And media and entertainment are really tremendous. I want to make sure everyone knows what I mean when I say media and entertainment. That’s other streaming, that’s video games, that’s music. Right. So, there’s a lot in there that’s movies. But all of that in total, that’s the second highest category.
I want to go back. No. 1 was finance, not pharma. On my screen the colors were almost identical, apologies. So, finance No. 1, and finance is everything from big banks, but also in finance is insurance, which is a submarket but a big piece of that.
Michael Depp: Are we talking about a GEICO, Progressive?
Todd Krizelman: Yes, that’s exactly right. Not health insurance. So, in this case, we’re talking about the GEICOs of the world and then technology. Then automotive. Then restaurants and bars in most states. In most cases, we’re talking about QSRs. So, fast foods, quick service restaurants. And then finally out of that, top six is pharma.
Michael Depp: Interesting. So, what about sports betting? Is that that figuring in at all?
Todd Krizelman: So, it is although it’s not disproportionate, you know, to the market. When we looked at the Super Bowl this year, obviously, all of us noticed this major increase in sports betting. And those campaigns are large across Q1, but they’re not affecting the categories disproportionately.
When we look outside of these tentpole events, where these brands are really built, these brands are, you know, building up. So, as an example, sports betting is a part of media and entertainment. But when we tease it apart, it’s not like it’s a third or something. It might be 10% to 15%.
Michael Depp: So, you categorize that under media and entertainment.
Todd Krizelman: We do.
Michael Depp: There’s a bit of a different taxonomy here than we might use with spot television, it sounds like. So, if we can drill into that media entertainment category a little further, can you cite some companies that you might categorize that way?
Todd Krizelman: Certainly, DraftKings is a good example of someone who falls under that. But we do, break it out. In that category within media and entertainment is sports betting, video games streaming. And so, we make it easy for anyone to do the breakout as necessary.
Michael Depp: With the streaming advertising, you wouldn’t see streamers advertising for other streamers on their AVOD services?
Todd Krizelman: So, that’s a great question. None of them technically allow it, but we do observe a small amount that exists on most of them. So, you will sometimes see a, you know, a competitive ad placed on someone’s own streaming platform. The reason in other cases is because someone might not sell all of their own inventory.
So, certain streamers allow either third parties to stream or they allow a certain amount of inventory to be sold by a partner who provides the content. And in those cases, in giving up that inventory, they give up some control about what’s placed. But again, I don’t want to frame it as like there’s a lot there’s just a little bit. Presumably, these are mostly accidents.
Michael Depp: So, in this neighborhood of $369 million-plus, who are the biggest spenders, company-wise, that we’re talking about here?
Todd Krizelman: So, for example, in automotive and I bring this up only because it’s an example of how sometimes people who are not the biggest in sports or in linear or end up very large in OTT. Hyundai Motor Group for their buys of both their Hyundai product and Kia products. You know, they were No. 1 in the automotive category. You know, certainly we see other names in there, like Toyota has an enormous bet also. But it’s not a case where it’s not identical proportionally to what we would see in regular television, for sure. Like some brands, Michael, have leaned into OTT to own that audience a little bit more.
Michael Depp: What are we talking about in terms of the number of new categories and individual advertisers who are dipping a toe into the AVOD waters? Are the existing advertisers largely making the bigger buys, or is it that there’s also a lot more people coming on board?
Todd Krizelman: No, it actually remains still a relatively small market. I think the numbers are still relatively small. You’re talking about, you know, sub 5,000 per quarter. So, between 4,000 and 5,000. So, it’s a much it’s still a smaller number than we would expect out of out of linear.
Michael Depp: There are a lot of local television stations, really, most of them at this point, who have launched FAST channels on apps. What insights can you share into local advertisers here?
Todd Krizelman: We see a lot of parallels between local affiliate television and local OTT. So, we see local auto groups investing and becoming early adopters. We also see university systems. We see hospitals, major events taking place in a city. But definitely there is some sophistication that we observe. That is, the buyers who are the most sophisticated are the most likely to be leaning in first.
The good news is many local advertisers are using the creative that they already have on hand. There’s no new creative needed. That’s the good news. If there’s any negative, is there is some friction getting used to a new platform. I thought it was interesting, Hulu has recently introduced, and it’s still in beta, invite only. They allow anyone to place ads self-service and that’s Hulu trying to get local advertisers so someone could go in and say self-service.
Hey, I want to figure out how to buy on an OTT platform in a local way. The bad news is I think local affiliates end up competing against Hulu or I mean, that’s just the nature of the market. It’s becoming more competitive.
Michael Depp: That sounds like Facebook, you know, sort of self-service. I mean, how Facebook’s permeated a lot of local markets by making it quick and easy. I think it’s a bit of a different thing, though, to set up a social media ad versus uploading a spot.
Todd Krizelman: You know, I’ve used I’ve used it and I think it’s elegant. I think it’s double-edged. I think it is more competitive. And I think it is going to be very similar to Facebook entering the local markets, which they’ve been very successful doing over the last 10 years. On the other hand, I think the good news it is it is conditioning and training local advertisers how to do it and that it can work. And so, look, I think it’s double-edged, but for sure, the largest advertisers in the local market are going to be the earliest adopters to try OTT and CTV first.
Michael Depp: Well, I think if self-service platforms start taking off, that’s going to worry a lot of local spot sellers about being disintermediated from that process. I would think that would give them some cause for concern. So, looking ahead, $369 million this quarter down from a little bit higher last quarter with the holiday spending. What are your best prognostications as to where we can see these numbers going by next quarter and by the end of the year?
Todd Krizelman: We don’t see any slowdown in the market right now. Not yesterday. Not last week. You know, there’s so much discussion. While we’re watching the stock market tank over the last week, we’re getting a lot of calls, people saying, hey, are you seeing any slowdown? And we really don’t.
While there are broader mixed signals in the national stock market, for example, we saw Facebook was way off in their report in their earnings this last week. We also saw Snapchat up, Google up and a number of others who, who even I saw that Paramount or formerly ViacomCBS came out with very positive streaming numbers on both Pluto TV and on Paramount.
So, look, I don’t think we see any slowdown coming based on the models we’re running right now. I think like anyone else, you read about inflation, and we do these models with our own analysts where we’ll say, all right, well, what is what portion of the market is being most impacted by inflation? And a lot of it is around energy and automobiles. And that’s starting to soften just over the last few weeks. There’s inflation everywhere, but it’s actually quite concentrated in in certain categories.
We don’t see dips in areas with high inflation. So, we don’t see airlines or petroleum companies, sort of people who are under enormous pressure from inflation are not dialing back on their investments at all in marketing. So, I think we’re bullish about it. But I would also say I’m enough years into my career where it’s hard to make a prognostication for this holiday season. You know, better or worse from last year. I think it’s too early to call.
Michael Depp: Well, do you think it’ll crack $400 million?
Todd Krizelman: I do, yes.
Michael Depp: Well, that’s all the time we have. I’d like to thank Todd Krizelman of MediaRadar for being here today. And thanks to all of you for watching. See you next time.
Todd Krizelman: Thanks, everyone.