A new class of players have entered the video advertising landscape and have a chance to disrupt the $820 billion advertising market, analysts at UBS say.
Advertising video on demand (AVOD) and free ad-supported television (FAST) have both emerged as alternatives to linear TV, and UBS estimates that these offerings could reach more than 15% of the global ad market over the next five years.
“The global advertising industry is wrestling with rising macro uncertainly but a new age of competition is developing underneath the surface,” analysts wrote in a note to clients Monday. “Simply stated, new ad supported platforms are bringing new inventory and new options for ad buyers.”
UBS expects AVOD/FAST revenues to triple over the next five years to roughly $30 billion in the US, which would be about 40% of the US TV ad market, and $50 billion globally, which is good for about 30% of the global market.
Major players in the AVOD market include Netflix and Disney+, both of which UBS believes are well-positioned in the long term.
Shares of Netflix were little changed Thursday afternoon at $364.70 and Disney stock declined 0.8% to $88.41.
Then there are the short-form video platforms, including TikTok, Snap, Facebook, YouTube and others. TikTok doubled its user base in less than two years to 1 billion monthly active users in the third quarter of 2021.
“We estimate that short-form video (SFV) now accounts for almost 40% of aggregate time spent across social+YouTube, but only accounted for 25% of revenue in '22,” analysts wrote. “We believe the sub-segment could almost triple over the next 5 years to $122B and account for almost 20% of digital ad spend ex-China with growth funded from brand and direct response ads as platforms scale ad load and advertisers master the creative.”
Specifically, UBS pointed to Meta’s combination of “improving engagement in short-form video with best-in-class bottom of funnel advertising technology to monetize time,” as a strong sign for the future.
Meta shares were up more than 2% to $254.41.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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