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    Explainer

    What Advertisers Need to Know About Market Fragmentation

    Abstract

    • The Connected TV market is fragmenting, which carries both benefits and challenges for advertisers
    • All of the major streaming services launching or previously launched have announced ad-supported offerings
    • 82% of all U.S. households have at least one internet-connected TV, and the average consumer subscribes to four services
    • 73% of consumers prefer ad-supported content that either removes or lowers the subscription cost
    • Market fragmentation can help advertisers save money, discover new creative methods, and attract more customers to the CTV ecosystem

    What is Market Fragmentation?

    Marketing fragmentation is the concept that, as a market grows in popularity and scope, it eventually breaks into various and diverse segments to serve distinct customer groups. In this market, no single company or organization has enough influence to influence the industry single-handedly and customers break out into distinct sub-markets that pursue options based on their needs, tastes, responses, or behaviors.

    Examples of markets fragmenting to serve distinct and unique audiences include social media (Facebook, Tik Tok, LinkedIn), online dating, broadcast and cable television, and now Connected TV.

    How the CTV Market is Fragmented

    Connected TV’s rise to marketing dominance has been well documented. Once a fledgling platform that was supported by just one or two mainstays has now evolved into a premier advertising and content channel with hundreds of channels and fierce competition. As more consumers cut the cord and embrace streaming services, media companies have increasingly launched new channels to chase them – almost all of which feature some form of ad-supported option.

    The last two years have seen some of CTV’s most popular services launch, including HBO Max, Disney+, and Peacock, and legacy streaming services like Netflix have now announced ad-supported offerings to keep up.

    At the same time, there are more OTT devices that stream content than ever before. From video game consoles to smart TVs to third-party devices like Amazon Firestick or Roku, today’s consumer has more choices than ever before to find and stream content on their TV – and advertisers have more options to reach them. Leichtman Research finds that 82% of all U.S. households have at least one internet-connected TV – and the average household subscribes to four streaming services.

    This exponential increase in services and devices has fragmented the market. What was once a simple media transaction is now a potentially confusing conundrum for advertisers who struggle to find the right way to reach and measure their audiences across so many ecosystems.

    The increased number of apps, OTT devices, and subscription services can also overwhelm consumers, many of whom are starting to experience “subscription fatigue” and being more selective with what services they sign up for. A recent poll found that 73% of consumers prefer ad-supported content that either removes or lowers the subscription cost – and streaming services have been more than willing to accommodate this request to generate higher subscription numbers.

    The Top Three Things You Need to Know About Fragmentation

    It’s a sign of a healthy CTV landscape: As mentioned above, market fragmentation has happened to other industries once they’ve reached the point of maturity, including social media and linear TV. As CTV’s viewer count grows, audiences are demanding more – and services are arriving to accommodate them, like networks that exclusively show horror programming or educational content. This in turn leads to more subscriptions and a growing audience who are continually drawn to CTV for new, exclusive content and unique channels.

     It can be cost-effective: A fragmented markets mean a buyer’s market, similar to the early days of social media advertising when multiple platforms competed for reach. 24% of marketers have identified a cost-effective CPM as their reason for transitioning from linear TV to CTV advertising, and while that number may rise as more streaming services like CNN+ fold or get consolidated, it still provides a great opportunity for advertisers to reach their target audience for less investment.

    It will continue to fragment: New opportunities for publishers appear almost daily, and markets are both expanding and evolving as services start to acquire and merge. There is already a channel dedicated to almost any subject imaginable, and more will continue to appear to accommodate new topics and hobbies. Roku introduced a self-publishing platform that will make it easier for anyone to create and launch a streaming app, monetized through advertisements, and this model is likely to be emulated.

    Best Practices for Navigating CTV Market Fragmentation

    Develop an audience-first approach: One of the best solutions for market fragmentation is to create an audience-first strategy. This approach follows your audience across different networks and apps, creating a glue that connects the pieces of the fragmented market and binds them back together. A key tactic in this strategy is to leverage technology that buys media based on your audience – and not the programming itself. 

    Embrace innovative solutions: As CTV ads become more commonplace, brands must work harder to stand out to the consumer and capture their attention. A recent study by eMarketer found that when compared to a standard pre-roll, advanced creative experiences on CTV drove an 8% better completion rate. Now that advertisers are getting more comfortable with the CTV format, we will continue to see a rise in more clever and creative ad strategies.

    Find adequate technology solutions: Leading CTV advertising platforms can eliminate the headaches of dealing with multiple vendors by automatically pursuing customers across a variety of channels. These solutions target the customers themselves and serve ads based on their distinct tastes and target demographic, rather than stick to one network or show. This not only prevents guesswork for customer viewing habits, but it can also return marketers’ precious time, energy, and resources – and save money.

    Leverage the omnichannel consumer: Part of CTV’s allure is its ability to connect with other advertising tactics and channels. By creating and deploying retargeting campaigns, you can continue to keep your brand top-of-mind as you serve ads to customers on websites they browse. This is a great strategy for not just stitching together a fragmented market but converting bottom-of-funnel sales prospects as well.  

     What the Industry is Saying

    Currencies that have been used historically with linear have many gaps when it comes to Connected TV. There are many devices that either aren’t measurable or devices that might be measurable in some cases aren’t depending on the activation path. This creates so much fragmentation and a complex landscape for buyers to navigate.”

    Kristin Williams,
    Senior Vice President of Strategic Partnerships, Magnite

    “I think we’re going to see a lot more interactivity capabilities, shoppable content and some really unique ad units continuing to come into play in the marketplace.”

    Allison Clarke,
    Head of Client Development, Vizio

    “Traditionally, you had an agency’s reach and frequency tool that was powered by Nielsen that could look at all of the different sort of places where video reached. [Advertisers are now] reliant on the vendor’s technology to be able to say, ‘who am I reaching and how does that interact with who else I’m reaching elsewhere?’”

    Rob Cukierman
    General Manager of Measurement, CTV, and Product Partnerships, LoopMe

    Recommended Reading

    Want to learn more about market fragmentation, what industry insiders think, and how brands are navigating it? This required reading list from industry thought leaders will help.

    •  CTV Fragmentation: What You Need to Know (the viewpoint)
    • CTV Data Is Massively Fragmented: Here Are Three Ways The Industry Is Stitching It Back Together (AdExchanger)
    • CTV is Exploding, But Can Marketers Capitalize on its Promise? (Marketing Dive

    Conclusion

    While market fragmentation might sound concerning and surprising to advertisers, the opportunities that are presented and what this says about the overall CTV market should be an exciting prospect for brands. Advertisers will benefit from thinking strategically about CTV’s rise in popularity, the new ad-friendly landscape, and how they can stand out from a fragmented market that will continue to expand and grow into exciting and new arenas.

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