All eyes are on CTV these days, especially as changes to third-party cookies and mobile identifiers complicate digital advertising in other channels. But even as brands, agencies, ad-tech firms and publishers turn their focus to CTV, they might not be taking full advantage of the channel as a way to reach Gen Z.
The cohort born between 1997 and 2012 is growing up, meaning it is increasingly made up of young adults that have entered the workforce and command their own growing purchasing power. And even as they have been on marketers' minds for several years, there are still misconceptions about their preferences, or a lack of follow-up on how their mindsets have evolved. Adding to the challenge of how to reach these consumers is a proliferation of marketing channels through which to engage them.
"The rules of engagement haven't necessarily changed. It's just that we have to make sense of all this fragmentation that's happening in the world," said Adriana Waterston, chief revenue officer and insights & strategy lead at Horowitz Research.
That fragmentation is evident in connected TV (CTV), which has seen exponential growth — some spurred by the pandemic — that is set to continue in the coming years. CTV ad spend is expected to increase 39% year-over-year in 2022 to $21.2 billion, more than doubling spend between 2020 and 2022, per an IAB report.
Streaming is king
While conventional wisdom around Gen Zers is that they are glued to their phones (at a rate greater than the rest of the phone-addicted masses), they aren't mobile-only: Gen Z spends 54% of their time with short-form, non-TV content versus 46% long-form, per Horowitz Research shared with Marketing Dive. Plus, nearly all (92%) report watching at least some TV content, spending more than four hours a day watching TV content — lower than all adults at 5.9 hours, but still substantial.
"While there's this perception that Gen Z are only using small screens — certainly they spend more time with smaller screens than older people — but it doesn't mean that they're only watching on the small screen," Waterston said.
Perhaps unsurprisingly, streaming is king among Gen Z, with 8 out of 10 saying they stream TV content at least weekly, with less than half (45%) watching via cable or satellite, per the research. Gen Z respondents use an average of 5.5 services to stream content, from Netflix and Disney+ to ad-supported video on demand (AVOD) and free ad-supported streaming TV (FAST) channels like YouTube, Roku Channel and Tubi.
Netflix has seen its share of streaming time decrease over the years, among all consumers and Gen Zers. This year, the platform's share of viewing among 18-24 year olds is 25%, down from 39% in 2018, per Horowitz research. Still, one out of four hours still represents a major part of the streaming video landscape, especially for advertisers eager to try out its long-awaited ad-supported tier, even as the decline underscores a growing challenge of advertising in a streaming environment that is beginning to resemble that of cable TV.
The challenge for marketers is how to reach consumers across a "paralyzingly fragmented media landscape," according to Dallas Lawrence, senior vice president and head of communications and brand at Samba TV. Plus, there is still a disconnect between where consumers are spending their time and where ad dollars are being spent, with 70-80% of TV ad dollars spent on linear TV despite 52% of U.S. adults no longer having a cable subscription, per Samba data.
"It's a big wake up call for marketers about the need to evolve their strategies to begin meeting the consumer, particularly the younger consumer, where she is spending most of her time, and that is in streaming environments disconnected from traditional linear television," Lawrence explained.
Using the tools of CTV
Gen Z — and the next older cohort, millennials — are leading the trail for a new type of consumer engagement through CTV. One in three have clicked a QR code on a TV ad with their phone, while 38% have used a connected voice device to make purchases, per Samba data.
"You're seeing a flattening out and a deceleration of the legacy models, just as new ways and means to reach consumers and for them to shop are also emerging at the same time," Lawrence said.
The shift in technology is coming as Gen Z more firmly establishes consumer behaviors and brand desires. Nearly half (45%) of Gen Z are regularly shopping on their phones while watching television, per Samba, meaning that advertisers no longer need to repeatedly put an ad in front of consumers to hopefully generate a purchase down the line — they need to compel an immediate action. Along with changes to technology around ad creative, cross-platform measurement is helping advertisers better measure performance advertising like direct-response campaigns.
"We're about to enter a creative renaissance in commercial advertising for television that is unshackled from the constraints of the last 50 years of linear television," Lawrence said.
Any creative renaissance will need to account for what Gen Z expects — and will allow — from brands. Instead of looking at CTV like a slightly more innovative form of linear TV, advertisers should see it as a digital channel and treat it accordingly, rather than using a "spray and pray, one-ad-fits-all approach" — especially when targeting Gen Z, according to Oz Etzioni, CEO of personalization platform Clinch.
"It's enough that you're doing everything perfect on the digital world and on social, and then the same brand shows an irrelevant ad to me when I'm watching my favorite show, that's it — it's a done deal," Etzioni said of Gen Z's relationship with brands.
Clinch advises brands to utilize what CTV offers, from the ability to localize ads to A/B testing. QR codes allow for greater personalization, as well as the ability to offer consumers an opportunity to engage that doesn't disrupt the viewing experience. The company is less bullish on interactive ads.
"If I'm watching a show, I don't want to start changing colors and stuff inside the ads — I want to go back to my content," he said. "Gen Z specifically is very sensitive to that: 'Don't interrupt me, this is what I want to do, and you're just in my way.'"