Debunking OTT advertising: what is the actual value of CTV ads in Europe top 5?

CTV advertising will generate an estimated 2 billion EUR in revenues in Europe top 5 markets in 2023, a 34% increase from the previous year. The growth of CTV advertising revenues is expected to be more than 2.7 times faster than the overall revenue growth of non-CTV advertising generated by OTT video platforms for 2023.

CTV advertising is expected to account for 25% of all video platforms’ revenues in Europe top 5, and a record 8% of the overall revenues generated by TV and video advertising across the 5 markets for the year 2023.

Ads are getting digitalized across all segments

A growing number of ad products are available on fully digital platforms: on OTT services and video-on-demand platforms deployed across all screen types and on linear channels with addressable solutions deployed on set-top boxes and on HbbTV. OTT services’ TV apps are capturing a growing share of the advertising pie, mostly led by Youtube which consistently ranks in the top 5 of most used CTV apps across all European top 5 markets.

As Europe top 5 greatly outweigh the rest of the continent’s ad markets, both in terms of their volume of advertising expenditures and the size of their consumer markets, it is expected that those 5 countries will retain over 80% of the CTV advertising revenues across Europe in the next few years.

Taking the US CTV ad market as a benchmark, Europe has still plenty of room for growth

If the growth rate of CTV ad revenues in Europe top 5 is likely to remain on a double-digit trend for the next 5 years at least, it is on a similar level to the US. But the volumes of both markets are nowhere near one another. In the US, by far the largest advertising market globally, CTV ads will represent 45% of the overall video OTT advertising revenues this year.

Yearly advertising revenues per CTV-equipped household are expected to reach 220 USD (around 200 EUR) in 2024 in the US, while Europe top 5’s average is expected to just stand at 23 EUR for the same period. This huge gap is partly explained by the discrepancy between advertising expenditures per consumer in the US compared to Europe’s most advanced ad markets: advertisers spent an average of 380 EUR per inhabitant across the UK, Germany, France, Spain and Italy. This is 2.5 times less than for their American counterparts.

Out of the 5 markets, the UK has a clear lead on digitalization, with the largest digital advertising expenditures, the biggest share of OTT ad revenues over TV and video, as well as a leading position in terms of revenues and innovations in the addressable TV industry. Digital segments already account for more than 70% of the overall advertising expenditure in the UK, and CTV alone will capture more than 10% of the TV and video ad revenues generated locally. With such volume, CTV ads are expected to generate more than 40EUR per equipped household next year.

As a growing number of households get equipped with Smart TVs and streaming devices in Europe and an increasing proportion of content is consumed through CTV platforms, CTV ad revenues are expected to grow 1.4 times faster in Europe than in North America in the next 5 years.

Will technical complexity lead to an unredeemable fragmentation of the ad sales market?

Digital ad sales bring into play a multitude of technical suppliers, including various DSP and SSP affiliated with a vast number of active OTT services and CTV platforms. This means that advertisers need to get involved with a multitude of ad tech and intermediaries to distribute campaigns across the whole landscape of digital TV to reach critical-size audiences. And this has been a consistent pain point as reach is a key metric for ad budget allocation. No one has managed so far to create a “one-stop shop” that would answer advertisers’ craving for more simplicity on the digital video landscape, despite several ambitious initiatives.

The high complexity of the technological landscape risks fragmenting revenues, especially in markets where other solutions are capturing a growing share of the ad budget like addressable TV on IPTV services in France or banner ads on linear TV broadcasters’ HbbTV interfaces in Germany. Both types of solutions are aimed at the same kind of buyers and fight over the same budget pool.

Several key Pay TV operators in Western Europe have already started to question the relevance of their STB parc and are making moves toward the CTV world, which raises the question of their long-term perspectives on dedicated addressable offers. Notably, Sky in the UK, the unchallenged European leader in the addressable TV landscape, launched its own CTV brand last year. Their addressability already extends beyond legacy STB services and on their Now TV platform.

As time spent in front of traditional TV channels decreases across Europe, digital ad products are bound to capture a growing share of the ad market. Historical actors of the TV industry are battling to retain their market position against a growing number of players, out of which OTT platforms and CTV operating systems are becoming ever tougher competitors. Thanks to their global reach and their digital advertising products, the latter are likely to have found the best way to conquer European markets after having largely disrupted the North American advertising landscape.

This research highlight is based on our data coverage of Online media and advertising and OTT and Video in Europe. Please contact us to get a demo and see the depth of our service. Discover Nextv Series Berlin - IFA edition, the event that brings together TV operators, Smart TV vendors, retailers as well as technology suppliers for one full day of conferencing. 

Ophélie Boucaud

Senior Analyst

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Published on: Thursday, 20 July, 2023

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