CTV: The Next Major Investment Opportunity in Streaming

CTV: The Next Major Investment Opportunity
Cheyne Gateley/VIP+

It was a big week for Madison Avenue, with the annual TV upfronts taking place in person for the first time in three years. 

While most of the recent themes surrounding streaming and cross-platform advertising were front and center again this year, connected TV’s presence continued to grow at the event. YouTube, a major CTV player, crashed the upfronts for the first time this year. And it was great timing given how much of a growth story CTV has been in the streaming landscape. 

It is undeniable that streaming is the present and the future; both content execs and ad buyers firmly understand that reality. However, the streaming landscape has changed dramatically over the past couple of years, and so has the investment strategy in streaming. 

While streaming platforms’ relevance is as important as ever, from an investment standpoint, betting on companies like Netflix and Disney aren’t reaping the rewards like they used to. Perhaps the real investment opportunity lies in connected TV.  

Amid a brutal year for Wall Street overall, media stocks have been hit particularly hard. Netflix stock tanked more than 70% so far in 2022, Disney was down 33%, and Comcast dropped 15%, as of market close Wednesday. And CTV companies Roku and Vizio haven’t been doing too hot, either, sinking 59% and 57%, respectively, this year.  

However, these major pullbacks for connected TV players could be an opportunity for those seeking inexpensive entry points, especially as the data is signaling optimism for the group ahead. 

Last year, CTV overtook mobile as the device with the greatest share of global video impressions, according to advertising and analytics platform Innovid’s 2021 Benchmark Report. CTV accounted for 46% of global video impressions in 2021 compared to 40% in 2020.  

As more consumers flocked to CTV, U.S. advertisers followed the money. CTV was the driving force behind 2021 digital ad spending and grew 57% to $15.2 billion, according to IAB’s 2021 Video Ad Spend & 2022 Outlook report. IAB projected that CTV ad spend will be the fastest to grow within digital media again this year, jumping 39% in 2022. 

Interestingly, the IAB report also found that even as CTV continues to steal viewership time from linear TV, ad dollars aren’t necessarily keeping up with that major shift. The report found that only about 18% of total video ad dollars were going to CTV in 2022. As Disney+ and Netflix introduce ads over the next 12 months or so, that will present another major financial opportunity for CTV.  

Smart TV usage is on the rise and was the fastest growing CTV device type when it came to total viewing households and viewing hours, according to Comscore. Streaming sticks and boxes like Roku and Amazon Fire TV still make up the largest segment of CTV devices; however, the total number of households watching content on smart TVs rose 17% from February 2021 to February 2022. 

Vizio’s first-quarter earnings results May 12 reflected the growth in smart TV usage. Vizio’s ad-supported streaming product Platform Plus grew 97% to more than $102 million in Q1. In addition, of the 15.6 million customers who have SmartCast-enabled TV sets streamed a total of 4 million hours of content on its platform, which was an increase of 14% compared to the year-ago period. And average revenue per user (ARPU) rose 64% to $23.68. 

Supply-chain constraints have been weighing on TV shipments, but Vizio management said they are optimistic that the company can grow TV shipment volume this year compared to last year. 

Even as CTV players like Roku dominate the market, competition is ramping up. In February, VIP+ put together an extensive report analyzing the competition and opportunity in the CTV landscape around gaining platform revenue. Since that report, others have jumped into the race. 

Traditional media giants Comcast and Charter announced at the end of April that they would be forming a joint venture to launch a nationwide streaming platform that will be distributed across branded 4K streaming devices and smart TVs. At first, many were skeptical that the two companies were jumping on the bandwagon too late, as the market was already dominated by the likes of Roku and Amazon. 

Whether or not that is the case, the news underscores the abundant opportunity that lies in CTV, which is being referred to as the next major phase of the streaming wars. It’s all about expanding reach and penetrating as many homes as possible. Comcast and Charter’s CTV play is a big way they accomplish that. Perhaps betting on the content arms race among the streaming platforms and services like Netflix and Disney is a foolish move when you could be investing in the distributors instead.