The Time Bomb Ticking Beneath the CTV Advertising Boom
For the major players in the connected TV advertising game, the next few years could represent both the best of times and the worst of times.
Good news first: The format is booming amid the continued migration of consumers — and, accordingly, ad dollars — from linear TV to streaming, as well as the increasing uptake of ad-supported streaming formats.
A new report from Omdia last month predicted global CTV ad revenues among the largest streaming hardware and OS players will more than double in the next five years, from $6.65 billion in 2024 to $13.5 billion by 2029.
Roku alone is projected to account for more than a third of that total, generating more than $5 billion in CTV ad revenue in 2029, up from an expected $2.8 billion this year — and ahead of its closest competitor, Samsung, by $2 billion.
This comes in the wake of multiple years of struggle for Roku, whose massive stock surge during the pandemic streaming boom was followed by a widespread sell-off amid declining revenue growth and profitability.
The company’s fortunes have improved in recent quarters, however, bolstered by what its most recent earnings report calls “initiatives to accelerate Platform revenue growth.”
These “initiatives” are, essentially, multiple strategies to improve and expand monetization, particularly through advertising, on its OS platform and FAST service, The Roku Channel. One such strategy, announced earlier this year, is a partnership with programmatic advertising giant The Trade Desk, which investment group Macquarie described as “a potentially serious needle-mover” for Roku.
“Roku’s advertising fill rate is only ~50%, meaning it is looking for more sources of demand. The Trade Desk … should bring more demand to fill [Roku’s] supply more effectively than its ad sales team and its own sub-scale [demand-side platform] can do,” Macquarie analysts wrote in an April research note, shortly after the deal was announced.
In exchange, The Trade Desk (and advertisers using its platform) will receive audience behavioral data and automatic content recognition (ACR) data from Roku, “so that The Trade Desk customers can better understand and optimize their campaigns for TV streaming viewers,” according to a press release.
In other words, Roku is pushing even further into targeted and programmatic ad territory, in the hope that improved personalization will result in larger ad revenues. Not for nothing, it’s also expanding where these ads are placed within its platform: Roku has been ramping up advertising on its home screen in particular, the better to target viewers as soon as they enter the Roku ecosystem.
Which brings us to the bad news: Roku, and the CTV market at large, are attempting to lean more heavily on personalized advertising — just as doing so may be about to become much more complicated.
The U.S. government has been ramping up its scrutiny of digital privacy in recent years and appears to be gathering momentum on this front. The Federal Trade Commission last month published a scathing report on privacy practices — or the glaring lack thereof — in the tech sector, with a major focus on targeted advertising.
“The lack of transparency and lack of consumer awareness and understanding poses concerns and suggests users do not understand how much privacy they are giving up, largely to facilitate targeted advertising, when using the services of the Companies,” the report notes.
It’s going to be a long road to walk to stricter privacy regulations, of course. The FTC can’t tackle the issue alone; action would be required from Congress, which is unlikely to proceed smoothly even with bipartisan consensus on this issue.
Still, progress is underway, with the most robust federal legislation to date on digital privacy introduced in the (Republican-majority) House in June. And ad-tech platforms are already preparing for a more restrictive digital landscape; last December, advertising trade group The 4A’s published a report outlining how “businesses can proactively mitigate the impact of future privacy changes.”
As noted in the 4A’s report, the complex web of stakeholders in the CTV ad business — hardware manufacturers, OS providers, streaming platforms, advertising platforms, advertisers — makes it all the more difficult to ensure compliance with privacy regulations.
And given the ad industry’s struggles to navigate this maze of interests even without robust regulations in place, there will be some major legwork required to keep the pipelines running smoothly should legislation come to fruition.
Nor is the marketplace likely to become less complex. The Trade Desk is reportedly at work building its own smart TV OS, which will undoubtedly complicate its relationships with other CTV players, including Roku. Meanwhile, Amazon disrupted the AVOD space by introducing ads to Prime Video earlier this year, a move that drove down streaming ad prices and created a new aggressive competitor for platform ad dollars.
Amazon now plans to increase ad loads on Prime Video in 2025, along with new-to-the-platform advertising formats such as shoppable ads (a no-brainer for the e-commerce giant). And it, too, is focused on using ad targeting and personalization to bolster its advantage, leveraging reams of consumer data from its online shopping platform.
Thus is the CTV ad industry attempting to build a towering business on shifting sands, rendering its foundation very shaky indeed. Companies like Roku, after all, make the vast majority of their revenues from their advertising businesses and from monetizing consumer data. If that data can no longer be monetized, their paths to profitability become much narrower.
Again, any major privacy regulations will take time to manifest, but anyone with a stake in the CTV ad game should be preparing for a future in which the wealth of user data they’ve grown accustomed to is no longer available. Given digital advertisers’ panic over the potential loss of cookies, one would think they’d want to avoid a similar scramble.
Good news first: The format is booming amid the continued migration of consumers — and, accordingly, ad dollars — from linear TV to streaming, as well as the increasing uptake of ad-supported streaming formats.
A new report from Omdia last month predicted global CTV ad revenues among the largest streaming hardware and OS players will more than double in the next five years, from $6.65 billion in 2024 to $13.5 billion by 2029.
Roku alone is projected to account for more than a third of that total, generating more than $5 billion in CTV ad revenue in 2029, up from an expected $2.8 billion this year — and ahead of its closest competitor, Samsung, by $2 billion.
This comes in the wake of multiple years of struggle for Roku, whose massive stock surge during the pandemic streaming boom was followed by a widespread sell-off amid declining revenue growth and profitability.
The company’s fortunes have improved in recent quarters, however, bolstered by what its most recent earnings report calls “initiatives to accelerate Platform revenue growth.”
These “initiatives” are, essentially, multiple strategies to improve and expand monetization, particularly through advertising, on its OS platform and FAST service, The Roku Channel. One such strategy, announced earlier this year, is a partnership with programmatic advertising giant The Trade Desk, which investment group Macquarie described as “a potentially serious needle-mover” for Roku.
“Roku’s advertising fill rate is only ~50%, meaning it is looking for more sources of demand. The Trade Desk … should bring more demand to fill [Roku’s] supply more effectively than its ad sales team and its own sub-scale [demand-side platform] can do,” Macquarie analysts wrote in an April research note, shortly after the deal was announced.
In exchange, The Trade Desk (and advertisers using its platform) will receive audience behavioral data and automatic content recognition (ACR) data from Roku, “so that The Trade Desk customers can better understand and optimize their campaigns for TV streaming viewers,” according to a press release.
In other words, Roku is pushing even further into targeted and programmatic ad territory, in the hope that improved personalization will result in larger ad revenues. Not for nothing, it’s also expanding where these ads are placed within its platform: Roku has been ramping up advertising on its home screen in particular, the better to target viewers as soon as they enter the Roku ecosystem.
Which brings us to the bad news: Roku, and the CTV market at large, are attempting to lean more heavily on personalized advertising — just as doing so may be about to become much more complicated.
The U.S. government has been ramping up its scrutiny of digital privacy in recent years and appears to be gathering momentum on this front. The Federal Trade Commission last month published a scathing report on privacy practices — or the glaring lack thereof — in the tech sector, with a major focus on targeted advertising.
“The lack of transparency and lack of consumer awareness and understanding poses concerns and suggests users do not understand how much privacy they are giving up, largely to facilitate targeted advertising, when using the services of the Companies,” the report notes.
It’s going to be a long road to walk to stricter privacy regulations, of course. The FTC can’t tackle the issue alone; action would be required from Congress, which is unlikely to proceed smoothly even with bipartisan consensus on this issue.
Still, progress is underway, with the most robust federal legislation to date on digital privacy introduced in the (Republican-majority) House in June. And ad-tech platforms are already preparing for a more restrictive digital landscape; last December, advertising trade group The 4A’s published a report outlining how “businesses can proactively mitigate the impact of future privacy changes.”
As noted in the 4A’s report, the complex web of stakeholders in the CTV ad business — hardware manufacturers, OS providers, streaming platforms, advertising platforms, advertisers — makes it all the more difficult to ensure compliance with privacy regulations.
And given the ad industry’s struggles to navigate this maze of interests even without robust regulations in place, there will be some major legwork required to keep the pipelines running smoothly should legislation come to fruition.
Nor is the marketplace likely to become less complex. The Trade Desk is reportedly at work building its own smart TV OS, which will undoubtedly complicate its relationships with other CTV players, including Roku. Meanwhile, Amazon disrupted the AVOD space by introducing ads to Prime Video earlier this year, a move that drove down streaming ad prices and created a new aggressive competitor for platform ad dollars.
Amazon now plans to increase ad loads on Prime Video in 2025, along with new-to-the-platform advertising formats such as shoppable ads (a no-brainer for the e-commerce giant). And it, too, is focused on using ad targeting and personalization to bolster its advantage, leveraging reams of consumer data from its online shopping platform.
Thus is the CTV ad industry attempting to build a towering business on shifting sands, rendering its foundation very shaky indeed. Companies like Roku, after all, make the vast majority of their revenues from their advertising businesses and from monetizing consumer data. If that data can no longer be monetized, their paths to profitability become much narrower.
Again, any major privacy regulations will take time to manifest, but anyone with a stake in the CTV ad game should be preparing for a future in which the wealth of user data they’ve grown accustomed to is no longer available. Given digital advertisers’ panic over the potential loss of cookies, one would think they’d want to avoid a similar scramble.