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Due to the economic situation in the world, the advertising budget could be damaged in the coming months.
This, at a time when the giants of the streaming will introduce advertising on their platforms as a form of financing.
So that the streaming get over the subscriber churn crisis, advertisers will have to stay online.
The streaming It came with a great value proposition compared to traditional television: content without pauses and without advertising that would be invasive at the climax of the story. As the ecosystem evolves, advertising giants have announced the introduction of advertising on platforms as a means of financing; however, inflation and consumer insolvency have caused users to not subscribe or renew their subscription. Likewise, in the event that the economic situation continues, there is a risk that advertising demand will be reduced.
During the health contingency, the digitization of the media was a common denominator and in the first months of the pandemic, interest in entertainment was greater. According to Statista, those who had the greatest preference for consumers were Internet content and streaming platforms (67 percent); videos from YouTube, TikTok and others (66 percent); online games (42 percent), television (25 percent), and live television (22 percent).
At least in Mexico, the preference for the platforms of streaming raised. This, despite the fact that the country has the largest universe of viewers in the Spanish-speaking world. Between November 2020 and April 2021, 94 percent of consumers of streaming in Mexico they assured to use Netflix, followed by Amazon Prime with 27 percent, Disney + with 21 percent, Youtube Premium 4 percent and HBO Max.
Despite the worldwide interest in streaming platforms. In April, Netflix announced the loss of 200 thousand subscribers in the first half, the seriousness was not only due to the drop in interest, but because it was equivalent to the first drop in more than a decade.
In a statement the company announced that the company closed the same period with 221.6 million subscribers.
The subscriber loss trend wasn’t just on the leading streaming platform. According to Kantar, in Great Britain 1.51 million people canceled their subscription to various services during the first half of 2022.
And it is that consumers are prioritizing where they spend their income, since “The circumstances and the imminent economic gap generated from the pandemic crisis have forced consumers to reevaluate what matters to them, to prioritize expenses and thereby transform their purchasing habits,” indicates the global study Consumer Outlook 2022 carried out by NielsenIQ .
To mitigate the damage caused by the loss of subscribers, Netflix and Disney thought about admitting ads to their services, but the situation was not exclusive to streaming, but video game giants, such as Sony and Microsoft, also considered it, indicates information from Business Insider.
While entertainment spending is taking a hit, ad demand may struggle when faced with the outlook.
Inflation will affect advertising demand in streaming
According to projections from the International Monetary Fund (IMF), the year 2022 will end with an inflation rate of 7.4 percenta value well above the estimate just six months earlier, in October 2021.
The staggered growth of inflation has caused consumers to lose purchasing power and tighten their belts to spend their money, for the streaming one of the obvious solutions was to run ads to keep funding stable.
In this context, Disney + in March began testing a cheaper subscription with ads. For its part, HBO Max has been using the advertising formula since last year and Paramount + and Peacock already have rates with advertising.
Despite the fact that the advertising measure came as a solution to the drop in subscribers, the appearance of multiple platforms and even free ones, there is a risk that the demand for advertising will drop, since a possible recession could affect budgets marketing decrease, for example, Publicis and WPP. Snap cut their sales forecast for the second quarter.
However, although there is an imminent risk, some advertisers foresaw the problem and are already winners of space in the steeaming, for example, Trade Desk allied for 25 million dollars (mdd) with Paramount + and Sky.