As consumer viewing habits continue to expand, the demand for connected TV (CTV) advertising has steadily increased. This year, 230 million Americans (roughly 67.8% of the population) will use a connected TV. With less than half of U.S. households (about 56M) watching linear TV each day on average throughout the second half of 2022, CTV is outgrowing linear/traditional TV.
If 93% of linear ads reached only half of U.S. households in the 2H 2022, how are you planning on reaching the other half of these U.S. households? This is why CTV needs to be part of your holistic video strategy if you’re a retailer.
The Impact of Economic Uncertainty on TV Ad Spending
According to Ned Davis Research, the latest economic forecasts agree that it’s no longer a question of if, but when, a recession will happen. In fact, one research analyst recently put the likelihood of a global downturn at 98%.
Marketers, however, must continue to let customers know about their products and services and encourage them to convert. With marketers needing to justify media spend, CTV offers measurable and targeted advertising opportunities that traditional linear TV cannot match. Plus, with programmatic bidding on CTV, advertisers can reach their desired target audience with lower costs and often low to no minimum spends.
Per Analytics Partners, companies that increased ad spend during a recession saw success in the long run. 60% of brands that increased their media investment during the last recession saw ROI improvements.
The Modern Marketer’s Dilemma: Justifying Ad Spend on CTV
In 2023, marketers are balancing multiple priorities in light of two trends: the growth of CTV advertising and economic uncertainty impacting ad budgets.
For brands, this shift in viewing habits — and the need to follow their audience — presents both challenges and opportunities. While it may be more difficult to capture a large audience during primetime hours, there are also new ways to reach and engage viewers through CTV.
That’s because CTV is highly targetable, fully measurable and can be optimized to focus on specific metrics like ROAS, cost per visit, incrementality or cost per acquisition.
Research from Magnite shows that 23% of CTV viewers made a purchase after seeing an ad, reinforcing how investing in CTV can drive sales. In addition, CTV offers a more cost-effective alternative to traditional TV advertising since brands can reach highly targeted audiences without needing costly media buys.
A holistic video strategy allows brands to generate a positive ROI while controlling their costs, as well as prove incremental reach and sales lift. But how does this apply to retail media networks (RMNs)? Let’s dive in.
How Brands That Use RMNs Can Prove Incrementality and ROAS With CTV
By taking a performance-driven approach to CTV advertising, brands can better understand the effectiveness of their campaigns and make data-driven decisions to improve their ROI. This approach is similar to always-on performance channels like paid search and social media, where advertisers constantly monitor and optimize their campaigns to achieve specific performance goals.
Overall, the combination of various or ACR targeting capabilities, performance measurement and cost efficiency makes CTV a valuable channel for brands looking to reach and cost-effectively engage their target audience.
Incrementality — another measurement for CTV — is defined as the measure of lift that a specific marketing channel or tactic brings to a campaign above native demand, which captures the increase in conversions or revenue (your core KPIs) that would not have occurred without specific marketing efforts.
Though CTV has traditionally been used as an awareness tool in media strategies, advertisers now can measure the real value of their investment beyond reach and brand awareness to run along lower-funnel RMN tactics.
How to Measure CTV Incrementality
Measuring incrementality for CTV has traditionally relied on a kind of black-box data science, and advancements in technology have made it more transparent and accurate. One approach to measuring CTV incrementality is randomized control versus exposed testing, where a target audience receives a brand’s CTV ad, while a randomized control group does not. This approach does not require upfront planning or large budgets and supports evergreen, always-on incrementality measurement.
So, how does this work?
1. PSA Ads
This classic test and control methodology compares an audience exposed to branded ads to an audience exposed to generic public service accountments.
2. Audience Holdout
The audience is separated into two distinct groups at the time of the bid. A test group is exposed to branded ads. The control group is not exposed to any ads.
3. Ghost Ads
Similar to audience holdout, but with the introduction of machine learning algorithms.
How Incrementality Reporting Helps Measure the Impact of CTV Ad Campaigns
Attribution models brands are now able to track using CTV include:
- Website visits
- Online purchases
- Amazon online purchases
- Foot traffic
- After-ad influence
- CPG purchases
- Offline conversions
- Brand lift
- Creative and measurements
According to eMarketer, there will be three distinct growth drivers in retail media advertising: Moving up the funnel, omnichannel sales attribution and in-store retail media.
With upper-funnel tactics such as CTV growing for RMN brands, incremental sales and ROAS continue to be the main success measurement.
By measuring the impact of CTV campaigns within RMN buys on KPIs such as leads, sales and ROAS, incrementality reporting helps brands maximize the returns they generate with CTV.
With the ability to go beyond simple age and gender demos and leverage deep demographic data from RMN first-party customer data sources, advertisers can measure closed-loop CTV reporting. This evolution has expanded the focus of CTV campaigns from incremental reach to measuring incremental conversions and revenue driven by CTV.
Ultimately, incrementality reporting helps brands better understand the effectiveness of their CTV campaigns and make data-driven decisions to optimize their performance for maximum ROI.
CTV is a highly effective performance channel due to its advanced audience targeting and measurement capabilities. By using deep demographic data from first-party sources, advertisers can enable targeting that reaches their unique customer segments. This makes CTV a great option for brands looking to test and validate “incrementality” before committing more resources.
The Case for CTV Advertising for RMNs
Overall, CTV’s advanced targeting and measurement capabilities — combined with the ability to test and measure incrementality — make it a powerful tool for marketers looking to maximize the returns generated by their campaigns.
Because RMNs are still in their infancy, it’s important to test what’s working. Incrementality has traditionally been leveraged in longer-form “always on” video advertising. However, with advancements in measurement, incrementality can be measured within shorter-form campaigns and alongside KPIs such as ROAS.
With most TVs being streaming-capable and the introduction of advertising on HBOMax, Disney+ and Netflix, CTV reach is stronger than ever. Media budgets are being stretched, and brands are viewing CTV as a strong replacement for linear TV with the ability for closed-loop attribution allowing ROAS measurement that traditionally was not achievable with linear TV.
As a result, we recommend including CTV within the omnichannel media strategy with set KPIs for incrementality alongside ROAS for RMNs.
Your Go-to Partner for RMNs and CTV Advertising
If you’re looking to build your own RMN, consider partnering with Goodway.
We’ll help you launch a custom-built RMN that is scalable, easy to manage, provides closed-loop measurement, and offers real-time, transparent data and full performance insights you can prove incremental ROAS to your brand customers. Plus, we can help deploy CTV ads on any publisher, platform or device.
Astrid Mills is a director of strategy and planning for retail media networks at Goodway Group. She specializes in turning customer trends and data into compelling insights, strategies and plans that drive meaningful and measured brand and business results.