Product placement effectiveness on cord-cutters

With the rapid rise of cord-cutting, the video advertising landscape has never been more fragmented or complex. Advertisers are wondering how to reach these video-streaming-only consumers, who skyrocketed from just 11 percent of US households in 2015 to 26 percent in 2018.¹ The cord-cutting trend continues in 2019. Industry data shows that major pay-TV providers lost about 2.86 million subscribers in the first half of 2019.²

Product-placement advertising on streaming platforms has emerged as a popular way to connect with cord-cutters, especially on ad-free platforms. But is it working?

Product-placement advertising has a greater influence on cord-cutters than on linear TV viewers

Source 1: Deloitte analysis based on data from "Digital Media Trends Survey, 13th Edition," Deloitte, March 2019

Brands pay hefty amounts to have their products featured in movies and TV series on streaming platforms.³ The price depends on the popularity of the content and the duration for which the product is shown on programs. Some streaming platforms do not charge for product placements. Instead, they opt for co-marketing partnerships to increase awareness about their content.

The big question, however, is whether product placements have any impact on cord-cutters.

The good news for advertisers and brands is that they do. Data from Deloitte’s "Digital Media Trends Survey, 13^th Edition," show that a majority of cord-cutters (54 percent) say product placements have a medium to high influence on their buying decisions.⁴ This proportion is much higher than for people who have only pay TV (linear TV viewers). In addition, the effectiveness of product placements on cord-cutters has grown steadily over the last four years (see chart).

We drilled down further to discover the behavioral traits of cord-cutters who are influenced by product placements. Our analysis revealed that many are more likely to have a larger number of streaming subscriptions, to binge-watch, and to prefer original content. Interestingly, 68 percent of them show a willingness to view video streaming advertising—if it significantly reduces the cost of their subscription. This proportion is much higher than the average (54 percent).⁵

Advertising has been an essential part of how content is funded and distributed, but as the industry transitions to new digital models, brands may have to look at different formats to reach consumers. Product placements and digital ads on ad-supported (AVOD) streaming platforms could play a key role going forward.

While targeting ad-free streaming platforms for product placements makes perfect sense, streaming advertisers shouldn’t ignore AVOD platforms when thinking about product placement effectiveness. Product placements on AVOD streaming platforms will likely create connections with broader audiences and drive a larger impact. Meanwhile, streaming platforms can explore product placements not only as a monetization opportunity, but also to scale up subscribers through co-marketing partnerships with brands. It’s also a way to create buzz around original content in the heavily crowded streaming market.

Advertising is far from dead in the streaming market! Instead, it is evolving and could prove to be a potent weapon in the upcoming streaming wars.

This charticle authored by Shashank Srivastava on November 21, 2019.

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Endnotes

¹ “Digital Media Trends Survey, 13^th Edition,” Deloitte, March 2019.
² LRG Research Notes, 2Q 2019 and LRG Research Notes, 3Q 2019, Leichtman Research Group.
³ Tim Peterson, “Rainy Day and Sunny Day Money: Producers at Streaming Shows Are Looking for Product Placement Deals,” Digiday, September 4, 2019.
⁴ Deloitte analysis based on data from “Digital Media Trends Survey, 13^th Edition,” Deloitte, March 2019.
⁵ Ibid.