The week after Labor Day traditionally marks the start of the fall election season, with campaigns racing to get their message to the airwaves ahead of the November midterms. And this time, cable cutters will not be spared from the advertising onslaught.
Campaigns on both sides of the aisle are expected to spend $1.2 billion on streaming ads this midterm, according to recent estimates from analytics firm Kantar. “Connected TV is really the big story in political advertising this year,” said Grace Briscoe, senior vice president of client development at Basis Technologies, a Los Angeles-based advertising and marketing software company. “Every campaign we work with, up and down the ballot, even the small state legislative races [and] mayoral races, they’re all looking to explore connected TV.
It’s a welcome respite for the streaming industry, which has seen its ad spending slow due to supply chain shortages, late pandemic uncertainties and inflation concerns. Soaring political ad spending also gives political campaigns a chance to target audiences that have long eluded them, and it sets those operations up for a rapidly approaching post-cable future.
“Between one in three millennials and up to half of Gen Z adults say they no longer have linear TV services,” said Dallas Lawrence, Samba TV SVP, who worked in Washington, including the White House, before joining the ad. the technology and streaming industry. “These voters are 100% unreachable by traditional TV campaigns, and they’re heading to the polls in ever-increasing numbers.”
Streaming ad spend has increased 15x
Not so long ago, political advertisers virtually ignored streaming. “Political campaigns are traditionally quite risk averse,” Briscoe said. “They are generally slow to adopt new things.” This is largely due to the cyclical nature of a business which measures each new campaign against previous ones. “If you’re a political consultant, you do what you did the last time, and the time before, and the time before,” she said. “You don’t mess with a formula that works.”
Until it doesn’t. Ad spending is increasingly disconnected from how people actually watch TV, which became evident in the 2020 election.” In the critical final month of one of the most expensive Senate races in the country, 90% of all political TV ads reached the same 55% of voters,” Lawrence said. By focusing solely on cable and television, the campaigns effectively ignored almost half of the electorate. “For young voters, [streaming] is really the only way to reach them,” Lawrence said.
Some campaigns have finally woken up to this new reality, with Basis Technologies seeing a 15x increase in money spent on streaming ads in the first six months of this year, compared to the same period in 2020. connected TV this year,” she said.
Basis isn’t the only company noticing campaigns are massively shifting to streaming. “This year, we’re seeing a huge number of advertisers relying on [streaming]said Mark Jablonowski, CTO and Managing Partner of DSPolitical ad network. The company, which works primarily with Democratic and Progressive campaigns, has seen connected TV ad budgets rise 20% from single-digit spending just two years ago. “It becomes a really big thing,” Jablonowski said.
More ad inventory leads to better targeting
One reason for this trend is the growth of ad-supported streaming. In 2018, Hulu and YouTube were the only two major players in the streaming space to sell ads, and Hulu has long restricted political advertising.
Since then, Viacom has acquired Pluto TV, Fox has purchased Tubi, and NBC Universal has both purchased Xumo and launched Peacock with an ad-supported tier. HBO Max launched its ad-supported tier a year ago.
Advertisers missed the cord-cutting market.Image: Christopher T. Fong/Protocol
All of the activity has led to much more available inventory for political advertisers, allowing them to more accurately speak to voters in individual markets. “This is the first year we’ve been able to deliver individually targeted connected TV at scale,” Jablonowski said. “It’s a big change in the industry.”
This is a change that is not lost on major media companies. Paramount Global CEO Bob Bakish specifically named Pluto as one of the services benefiting from this year’s mid-term spending during his company’s second-quarter earnings call; NBCUniversal CEO Jeff Shell also acknowledged that streaming will play an increasing role in bringing in those political advertising dollars. “We expect pretty strong results from Peacock next fall,” Shell told investors recently.
Roku CEO Anthony Wood echoed those remarks. “We expect policies [advertising] continue to grow, continue to be an important vertical for us,” Wood told investors recently. tends to be in certain localized markets with very high demand,” he explained. “And so, even if we have a large scale in a particular market, we will reach the ceilings quite quickly.”
In other words: Roku and others just don’t have enough ad spots to sell yet.
Netflix and Disney+ could be game changers
That could change within months: towards the end of this year, Netflix plans to launch ad-supported plans for its respective streaming services. A Netflix spokesperson declined to say whether the company would allow political ads. Disney+, which also plans to launch an ad-supported tier later this year, won’t accept political ads “at launch,” according to a Disney spokesperson.
Disney has justified its resistance to political advertising in an effort to keep Disney+ family-friendly. However, the service has evolved from its family roots in recent months, including the addition of R-rated fare. Disney also recently changed its policies regarding political ads on Hulu, and nothing would stop the company from instituting similar changes for Disney+.
“If Netflix and Disney+ allow campaign spending, it will trigger a land grab unlike anything we’ve seen in over a generation of political television advertising,” Lawrence said. “The ability to combine targeting and measurement information with the storytelling power of franchises like ‘Marvel’ and ‘Star Wars’ will be a game-changer for political campaigns.”
Until then, limited inventory is likely to drive up streaming ad prices, which could have ripple effects on non-political advertisers. “I expect we’ll see an increase in truly competitive bidding in connected TV, especially in states where racing is competitive and high-profile,” Briscoe said. “If you’re a retailer in Texas, it’s going to be tough.”
Briscoe expects some companies to respond to this by temporarily pulling ads in some markets, or simply waiting out the campaign season — unless they’re forced to compete, whatever the cost. “If you’re doing a movie release, you have no choice…you’re going to pay more,” Briscoe said. Until everything is back to normal in a few weeks, that is.
“October is going to be very competitive,” Briscoe said. “But on November 8, all those advertisers were done.”