Streamers Are Embracing a Brave New World of Ads. Will Consumers?

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The sci-fi future of advertising has officially arrived. After this year’s NewFronts saw Peacock and Amazon introduce virtual product placement, allowing brands and products to be digitally inserted into content as it streams, Roku and Walmart have partnered for an attempted leap forward in e-commerce, allowing viewers to purchase advertised products directly from their TVs.

“Viewers simply press ‘OK’ with the remote on a shoppable ad and proceed to checkout with their payment details easily pre-populated,” a press release explains. “From there, tapping ‘OK’ on the Walmart checkout page places the order.” This further streamlines Roku’s “shoppable ads” experience, which already allows viewers to click on an ad and have a message about the product sent to their phone.

It also represents an attempt to further monetize the growing connected TV space. As VIP+ has previously reported, consumers are flocking to CTV, which last year overtook mobile as the device with the greatest share of global video impressions, according to advertising and analytics platform Innovid’s 2021 Benchmark Report.

Meanwhile, streaming analytics company Conviva recently reported that the vast majority of streaming viewing time is spent on “big screens” — as in, TVs. Advertisers hoping to reach streaming viewers as efficiently as possible need to look for opportunities on TV platforms, particularly CTV, which is likely a major reason for Roku and Walmart’s big play.

And apparently, this move is only the beginning; as Roku’s press release states, “Future iterations of this pilot will look for opportunities to build deeper commerce experiences that meet customers where they are.” It remains to be seen what that will entail, but one can easily imagine shoppable ads being combined with virtual product placement in the near future, turning all streaming TV shows and movies into virtual shopping experiences.

In other words, a major transformation of the streaming ad landscape has begun, and more changes are on the horizon as Netflix and Disney+ prepare to launch ad-supported subscription plans later this year. It’s still unclear what those plans will look like, though Netflix is reportedly exploring potential partnerships with NBCUniversal, Google and Roku to help develop its ad strategy. With NBCU and Roku’s ad innovations in mind, these reports raise the possibility that those strategies will be implemented on Netflix as well.

It would be a logical maneuver if so. Audiences unsurprisingly prefer ads that are less disruptive to the viewing experience, meaning techniques like product placement are preferred to standard commercial breaks. A recent Morning Consult poll found that most consumers disapprove of ads that interrupt content, but have more favorable opinions of other forms of advertising on streaming. Product placement falls squarely in the middle, with 37 percent approving and 40 percent disapproving of the format.

Virtual product placement, however, presents an additional wrinkle in its potential for personalization. The technology allows different brands and products to be inserted according to consumers’ demographics, location and other data, to facilitate that cherished tool of advertisers, the personalized ad.

Peacock’s virtual product placement, for instance, “aims to find the right moments within top shows for more personalized messaging,” and “ensures maximum brand familiarity by showcasing the right product in the right content, at the right time, on the right screen,” per an NBCUniversal press release. Roku’s partnership with Walmart will also leverage “targeting, optimization, and measurement” in placing shoppable ads.

But personalized ads remain a fraught topic amid the ongoing larger controversy over personal data and privacy in the tech sphere. That controversy is all but certain to spill over into the streaming space as these new advertising methods are implemented. 

A recent survey by Movable Ink showed that while consumers generally prefer personalized experiences with brands, nearly half of those surveyed are concerned about their personal data being sold to other parties or stolen when they share it. Forty percent said they would cancel services or not purchase from the company again in response to a misuse of their personal information. 

Still, it seems that a significant amount of Netflix subscribers would opt for a cheaper, ad-supported plan given the chance. Cowen’s Consumer Tracking Survey found that 41 percent of current Netflix members said they would switch to an ad-supported subscription, and as runaway inflation pushes consumers to cut expenses, lower-cost subscriptions will become more and more enticing.

The survey was less promising for Netflix’s hopes to win new subscribers, however, with more than 53 percent of non-members saying they were unlikely to sign up for an ad-supported account. This data begs the question of whether the respondents would be more inclined to sign up if they knew the ads would not interrupt streaming content. 

As the streaming ad market continues to transform, the trick for streamers will be to strike the right balance of less intrusive advertising that serves consumers, while also managing the privacy concerns that come with it, particularly if they want to win new subscribers. There’s lots of room for innovation in the streaming ad game, but in the current market, there’s not a lot of room for error.