Commercials Return to Streaming Platforms and Reshape Brand Strategy

When streaming platforms like Netflix and Hulu first emerged, they quickly fueled a consumer behavior shift where sitting through commercials was no longer acceptable and waiting a week for the next episode of a favorite show to air was intolerable. Consumers transitioned from being patient to expecting instant gratification. Now, in an effort to maintain brand relevance with advertisers and improve their bottom line, these streaming giants are striving to reintroduce one of these elements: commercials.

The Commercial Comeback

Although television commercials have been a marketing staple for decades, their effectiveness has dwindled as more consumers abandon cable subscriptions and turn to streaming options. However, with the emergence of ad-supported streaming services, the use of commercials is once again becoming a key component in brand marketing.

Netflix originally launched its ad-supported plan back in November but recently rolled it out to Apple TV. This move marks a significant step for the streaming giant, as it expands its reach to a wider audience who may not be able to afford the premium plan. Meanwhile, Hulu also has its own ad-supported plan, which has proven to be popular among viewers who want to watch their favorite shows but find the ad-free plan out of reach.

See also: Disney+, Netflix Look to Ads as Streaming Market Slows Down

Why Commercials Are Novel (Again)

With an increasing number of consumers shifting from traditional cable subscriptions to streaming services, brands and retailers have acknowledged the necessity to alter their marketing strategies in order to reach this new audience. As of Q4 2022, Netflix has reported to have garnered 231 million paid subscribers globally, while in Q1 2023, the Walt Disney Company announced that Hulu’s paid subscribers had grown to 48 million, up from 45.3 million in the same period of the previous fiscal year.

Ad-supported streaming services like Netflix and Hulu have an opportunity to provide a massive platform for brands to promote their products and services. Moreover, by offering targeted advertising options, these streaming services allow brands to reach specific demographics.

In addition, the rise of advanced advertising technologies, such as programmatic advertising — which uses software to buy and sell advertising space automatically — has made it easier for brands to launch effective ad streaming campaigns. By leveraging data analysis and viewer preferences, brands can create personalized commercials that resonate with their target audience.

Consumer Shift From Cable to Streaming

Streaming services have gained popularity due to the convenience they offer. Consumers can watch their favorite shows and movies on demand, at any time, and on any device with an internet connection. This flexibility and ease of use have made streaming services more appealing than traditional cable subscriptions that require fixed schedules and hardware.

This shift was fueled by the COVID-19 pandemic with people spending more time at home, increasing the demand for entertainment. In response, streaming services have offered a wide range of content, including new releases and exclusive shows. Additionally, the pandemic forced many movie theaters and production studios to shut down or postpone their releases, leading to a surge in demand for streaming services.

Read more: Let’s All Go to the (Streaming) Movies

The cost of cable subscriptions has also played a role in the shift toward streaming services. Cable subscriptions can be expensive, and many consumers are looking for more cost-effective options. Streaming services like Netflix and Hulu offer more affordable subscription options with flexible plans and no long-term contracts.

User Mindset While Streaming

Users who engage with streaming platforms such as Netflix and Hulu are typically in a more intentional mindset as they log onto the platform with a clear idea of what they want to watch. Unlike traditional TV viewing, where users may be passive or multitasking, streaming platforms require active engagement from users to select their content, navigate the platform, and decide on what to watch next.

According to a study conducted by PWC, 65% of respondents said content was the most crucial factor when considering a subscription.

This mindset is significant for brands that advertise on these platforms. Since these users are actively engaged, they are more likely to pay attention and remember the ads, creating greater brand awareness. Brands that understand this user mindset can create ads that resonate with users and generate a higher return on investment.

For instance, brands can use data and insights from streaming platforms to identify user preferences, interests and viewing habits. By leveraging this information, they can create personalized and targeted ads, increasing the chances of the ads being viewed, clicked on or shared.

Moreover, brands can use the unique features of these platforms, such as interactive ads and branded content, to engage with users in an interactive way with options such as polls or quizzes. This creates a more engaging and memorable experience for users, and also provides valuable insights for the brands.

Impact for Brands

Ad streaming commercials isn’t just for enterprise brands. The solution is gaining traction with smaller businesses as these brands often lack the resources to advertise on traditional media channels.This levels the playing field, as niche and independent brands can promote their products and services on the same platform as their larger competitors.

“Hulu was ideal for us because it allows a small, local brand to potentially be on TV right after a big brand. That brings more credibility to the advertiser ... I don’t think that a lot of small businesses could afford to do TV advertising without a solution like this,” Josh Jarret, founder of Quantify Fitness, said in a Hulu “Success Stories” blog post.

See also: Inflation Slows, But Not Enough to Give Paycheck-to-Paycheck Consumers Relief

The Future of Commercials

As more consumers shift from traditional cable subscriptions to streaming services, brands and retailers are acknowledging the need to change their marketing strategies in order to reach this new audience.

“We believe branded television advertising is a substantial long term incremental revenue and profit opportunity for Netflix, and our ability to stand up this business in six months underscores our commitment both to give members more choice and to reaccelerate our growth,” Netflix said in its shareholder letter.

As inflation continues to impact consumer spending and brands look for more ways to reach consumers, ad-supported streaming solutions stand a chance of being here for the long haul.

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