Ad market rebounding but competition continues to build under the surface

Overall advertising trends have rebounded from a macro-induced slowdown but we believe competition for time spent and newly available inventory will continue to disrupt
traditional mediums in TV and digital. In this article , we provide an update from our initial Q Series where we identified disrupters in long form and short form video impacting the ~USD 1trillion global ad market. For long form video, the viewership migration to streaming is occurring faster than expected. We now expect streaming consumption in the US to surpass traditional TV by YE25 (a year earlier than our initial forecast) and ad-supported streaming to surpass TV by YE27. For short form video, we believe it has transformed from a downside risk to our digital ad forecasts to a tailwind for engagement. This applies to revenue growth as well as the monetization gap vs. existing surfaces starts to close.

New inventory flooding the TV ad market

Rapid adoption of ad-supported streaming is providing new inventory for ad buyers at a
global level. In the US, we estimate total viewership backed by ads (traditional plus ad supported streaming) grew in 2023 after a decade of declining TV consumption.

The implications are twofold:

  1. We expect traditional TV to remain in decline despite resilience in the economy.
  2. The flood of new supply is weighing on pricing for incumbents in the connected TV/streaming market.

We expect the ~USD 70 Billion US TV advertising market to remain stable over five years, as ~5% annual declines in traditional are offset by 22% growth in streaming (down from prior 26% w/ cost per mile (CPM) pressure).

Short form moving from headwind to tailwind for engagement & monetization

We have increased our forecast for short form video (SFV) contribution to online
advertising growth, as we now expect it to grow 39% CAGR 2022-2027 (vs prior 24%).

The underlying factors are the following:

  1. Higher-than-expected incremental engagement from short form video at 15% CAGR 2022-2027 given ongoing efforts to improve recommendation engines' ability to surface relevant content.
  2. Quicker-than anticipated ad load ramp as our recent checks suggested a step function increase in availability of biddable inventory starting in 4Q23.
  3. Pricing gap relative to legacy horizontal surfaces closing faster-than-anticipated - given marketer feedback on rising ROAS..

Taking these factors into account, we estimate that total short form video revenue / time will grow at 14% CAGR 2022-2027 and 15% CAGR 2023-2028.