Ads took over streaming this year — and they're just getting started

• Advertising took over the streaming-TV experience this year, and it'll only get bigger next year.
• Interactive ads that try to get viewers to shop or take other actions are gaining traction.
• This article is part of "Transforming Business," a series on the must-know leaders and trends impacting industries.

It's back to the future in Hollywood.

Streaming is starting to look like the TV days of old. Entertainment for the masses is back. Bundles are making it easier to consolidate subscriptions.

And ads seem to be everywhere.

Netflix, Disney+, and Max — which all started ad-free — now have cheaper ad-supported tiers. Amazon turned on ads in Prime Video this year, making advertising de facto for more than 100 million viewers in the US in one fell swoop.

EMARKETER expects streaming advertising to reach half of linear-TV advertising's size in 2024 and approach parity with it in 2027.

According to the analytics firm Antenna, these cheaper versions are gaining traction with viewers, too. In May, most new paying subscribers to five major streamers were choosing ad-supported tiers — a year earlier, this was true for only two streamers.

On Disney's latest earnings call, execs said that about 60% of new subscribers in the US were opting for its ad-supported tier, which accounted for 37% of its total US subscribers.

Ad-supported TV viewing also is on the rise through free services like Fox's Tubi, Paramount's Pluto TV, and The Roku Channel. According to Nielsen, those services plus YouTube made up 14.8% of viewing in July, up from 12.5% a year earlier.

"What's old is new again," said Jonathan Miller, a veteran media executive and chief executive of Integrated Media Co., which invests in digital media.

Miller sees ad tiers as a validation of the dual revenue streams that long supported cable. "Advertising and subscriptions have always been a successful model," he said.

Streaming ads are here to stay because — along with bundling, cheaper programming, and password-sharing crackdowns — they're one of the ways streamers can help make themselves sustainable.

Ads have also begun to directly shape the content streamers offer. Streamers are showing more sports and other live programming because of the big audiences and advertisers they attract.

For example, Netflix's highly anticipated Mike Tyson-Jake Paul fight on November 15 was a win for the streamer despite some tech glitches. Why? Because it showed Netflix's ability to draw huge audiences at once; it said that as many as 60 million households tuned in. That large audience bodes well for Netflix's NFL games on Christmas and its live WWE programming set to debut in January.

Viewers' tolerance for ads will be increasingly tested

Streamers that dipped a toe in the ad space are looking to wade in.

The ad load — or ad volume per hour of entertainment — has crept up over the past year, according to the measurement firm MediaRadar. There was an average of six minutes of ads per hour in September across eight leading ad-supported streamers, up by 9% from January 2023, when Netflix and Disney had just entered the ad-supported game. That's still far lower than cable, where ad loads can push an eye-watering 15 minutes or more an hour. Viewers are also more likely to tolerate ads in live sports because people are used to them being part of that content.

Amazon and Warner Bros. Discovery recently said they'd start showing more ads to their streaming viewers in 2025, while emphasizing that their ad loads were lower than their competitors.

"On the ad-load side, we are light," WBD's streaming chief, JB Perrette, said of the streamer Max during the company's third-quarter earnings call. "We have a very light ad load compared to everyone else in the market, so there's room to grow on the capacity side."

The industry consensus is that streaming ad loads won't become a throwback to cable, though — at least not anytime soon.

For one thing, it's a buyer's market. Amazon flooded the market with ad inventory, which depressed ad prices for everyone. Streamers aren't incentivized to add too much more ad inventory because it'll just drive the price down more. Some advertisers are also wary of annoying viewers who are still getting used to seeing ads in streaming.

"The supply has grown significantly over the last few years," said Maureen Bosetti, the chief investment officer for Mediabrands. "It's created a marketplace for marketers."

Makers of streaming video ads are also becoming more ambitious. It's not enough for an ad to be seen — they'll try to get viewers to take action, whether by clicking a QR code or dropping a featured product in their shopping cart. These interactive ads could get higher price tags at a time when streaming ad prices have come down.

"As a consumer, I'm seeing more of them," Jessica Brown, a managing director of digital investment at GroupM, said of interactive streaming ads. "We're getting more pitches from the streaming partners. You can measure success in a different way."

Warner Bros. Discovery recently rolled out two such formats. "Shop with Max" identifies items in TV shows and films and matches them with relevant advertiser products that viewers can shop while they watch. "Moments" uses AI to figure out themes, sentiments, and on-screen elements that line up tonally with the advertiser's message.

Fubo recently announced four ad formats, including ones that show trivia questions or polls and product carousels. Fubo said such ads made people 47% more likely to purchase something compared with standard video ads.

"A big objective we have is to make a majority of ads have some form of interactive or engaging feature," Krishan Bhatia, an NBCUniversal exec who was hired by Amazon to lead its Prime Video ads push, said at a recent event. "What brands love about it is not just the fact that you generate a potential purchase off it but people are spending more time with your brands."