Supercharging Ad Strategies for Streaming Services with Commercials

Supercharging Ad Strategies for Streaming Services with Commercials

Streaming has become the dominant choice for consumers, surpassing traditional broadcast and cable TV. However, the viewing habits of the past seem to be making a return, albeit not in the nostalgic form of live TV. Specifically, the rise of ad-tier options on most streaming services has introduced a new, yet somewhat familiar, twist to the streaming experience—bringing ads back, but as a choice for consumers seeking a more affordable plan.

With the growth of these ad tiers, what does the typical streamer look like today? Are there particular groups of people gravitating toward specific ad tiers? Can we identify these distinct groups? Causeway Solutions has insights on some of the answers to support marketers with advertising strategies and campaign planning.

Ad Tier Breakdown

Ad tiers have rapidly grown in popularity, now representing approximately 43% of all streaming subscriptions.[1] With streaming becoming the primary method of TV consumption for an increasing number of viewers — some estimates suggest that a third of all viewers now exclusively stream – it seems that traditional TV is losing its hold on audiences, while advertisers are holding on to their share.[2]

Through our modeling and universe-building process, Causeway Solutions’ Advanced Audiences identifies likely streaming consumers, both for general content and for specific streaming services, including Netflix, Max, Hulu, Paramount+, and Disney+, along with their respective ad-tier options.

Among the five services we analyzed, the average rate of ad-tier subscribers was around 48%.[3]

But how much of the audience can advertisers reach on each platform? As expected, different services show varying rates of ad-tier subscriptions. Larger platforms like Hulu tend to have higher ad-tier adoption, while smaller platforms like Paramount+ see lower adoption. However, this pattern doesn’t always hold true. For example, Netflix’s ad-tier audience size is closer to that of Disney+ and Paramount+, even though Netflix accounts for about 40% of the general streaming audience.

On average, we found about 15% of the general population are likely ad-tier subscribers, a crucial group to consider as the Streaming Exclusive audience continues to expand.

Source: Causeway Solutions Media Consumption Models

But what about the rate of ad-tier subscribers to general subscribers? Does Paramount+’s lower rate of ad-tier subscribers make it a lost cause for advertisers? Taking a look at our ratios of general streamers compared to ad-tier subscribers shows a different story:

Source: Causeway Solutions Media Consumption Models

Although Hulu has the highest rate of ad-tier subscribers compared to its general streamers, Paramount+ streamers show a significant adoption, with nearly 50% likely to choose the ad-tier. Max follows closely at around 43%, while our Advanced Audiences indicate that about 36.2% of likely Disney+ subscribers opt for the ad-tier, closely aligning with Bob Iger’s confirmation [4]. Even with just five streaming services in our analysis, we see an average rate close to the reported 43%, with an average of 48% of likely streamers predicted to be ad-tier subscribers.

Ad-Tier vs Ad-Free

While we’ve previously seen demographic differences between streamers across various services, do we see stark contrasts between ad-tier and ad-free subscribers within the same service? The breakdown of audiences reveals that the differences are, once again, service dependent.

Significant shifts are evident between likely ad-tier subscribers and general subscribers across various services, as well as among different demographic factors such as gender, age, ethnicity, income, marital status, and whether or not the household has children.

Unsurprisingly, income and age were among the biggest influencers of these shifts, though the patterns were not always consistent across services. For instance, consumers with an estimated income of $50,000 or less showed a notable shift toward the ad-tier for some services, with an increase of 10% for Netflix and 15% for Max. In contrast, the shift for Paramount+ and Hulu was much smaller, around 2-3%, and for Disney+, there was even a slight decrease of about 2% in ad-tier adoption.

Source: Causeway Solutions Media Consumption Models

Age is proving to be a key factor distinguishing streaming preferences for younger viewers on platforms like Netflix and Max, but not quite in the way you might expect. Instead of a consistent preference for either ad-supported or ad-free tiers among all streamers under 30, their choices varied depending on the platform. For instance, younger streamers are more inclined to choose Max’s ad-supported tier, but tend to favor ad-free subscriptions for services like Disney+ and Netflix.

Across all the audiences we analyzed, there was at least one notable demographic shift between likely ad-tier subscribers and the general streaming audience. For example, parents made up a slightly higher percentage (around 7%) of Hulu’s ad-free service, while African Americans doubled their share of Paramount+’s ad-tier audience, growing from about 15% to over 30%. No two streaming audiences are identical, and this variation extends even to the different tiers within each service.

The rise of ad-supported tiers has fundamentally reshaped the streaming landscape once again. Marketers and advertisers now face the challenge of distinguishing between traditional TV viewers and streamers, as well as identifying which type of service and subscription tier these consumers are using.

With subtle but important shifts in consumer behavior across both platforms and subscription tiers, businesses aiming to target these viewers need to be attuned to these differences. As ad-tier subscriptions continue to rise, companies will have more opportunities to reach audiences once thought to be lost to the decline of traditional TV viewing—provided they are prepared to understand and engage with their audiences effectively.

Get insights from our Advanced Audiences and media consumption modeling to refine your marketing and advertising programs. Find out how to reach your target audiences and strengthen your marketing strategies, while reducing waste and advertising spend. Contact us at [email protected].

Sources

1. "Ad-Supported Streaming Subscriptions Hit Record-High as 2024 Wraps,” The Wrap
   
2. “Distribution of traditional TV and streaming viewers in the United States from 2020 to 2024,” Statista
   
3. Causeway Solutions Media Consumption Models
   
4. “Bob Iger Has Hot Mic Moment on Disney Earnings Call After Accidentally Revealing Ad-Tier Streaming Numbers,” The Wrap
   

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