Netflix and Amazon poised for growth as TV ad market seen climbing to $44 billion by 2028

By Ciara Linnane

Connected-TV advertising market expected to grow from about $29 billion in 2024

Netflix Inc.'s and Amazon.com Inc.'s streaming services are poised for accelerating growth as the connected-TV advertising market is growing and is expected to reach $44 billion by 2028, Wedbush said Wednesday.

A team of analysts came away from a meeting with Sean Adams, an ad executive who is currently at media-data company GumGum and was previously a senior head of platform sales at Roku, with a positive view of TV advertising trends.

Adams is expecting the rapid growth of advertising video on demand; increased programmatic ad buying, which should drive more optimized ad campaigns; and advancements in measurement to drive continued growth in the sector, analysts led by Alicia Reese wrote in a note to clients.

The key takeaways from the call were that Netflix's (NFLX) costs per thousand impression rates, or CPM, and ad-delivery rates have been steady at $40 and four ads per hour, respectively, and are expected to remain consistent through 2024.

Netflix's advertising is gaining traction as it has developed partnerships that help it lean on consumer data and boost measurement and return on investment, the analysts said, particularly in its partnership with Amazon's (AMZN) connected-TV platform.

Still, Wedbush, which rates Netflix at outperform, recently removed the stock from its best-ideas list. That's after a year of significant growth that has started to slow from previous quarters.

For more, see: Why Netflix's most bullish analyst says the stock is no longer a 'best idea'

Amazon, meanwhile, is well positioned to take share of CTV ad revenue given its leading first-party data and its ability to provide insights to advertisers to target consumers.

"Vizio's automatic content recognition ("ACR") capabilities will allow likely acquirer Walmart (WMT) to view and target by demographics on Vizio's platform, placing it within the highly competitive arena with other platform owners, Amazon, Google (GOOGL), Roku, Samsung (KR:005930), and others," the analysts said.

Walmart said last week it would refile paperwork related to its proposed merger with Vizio, after the retail giant held "informal" antitrust talks with the Federal Trade Commission and the Justice Department.

Walmart in February agreed to acquire Vizio for around $2.3 billion. The retailer and analysts said the move would help Walmart broaden the services it offers to outside advertisers looking to promote what they sell in Walmart stores and online.

Roku (ROKU) also has a lot of ACR data but has failed to monetize it at the same level and has surrendered some competitive edge, said Wedbush.

"We expect competition in this space to heat up as CTV e-commerceexpands; and the sports shift from linear and cable to CTV increases the total addressable market, especially as streamers are more engaged viewers, which advertisers will be more inclined to pursue," the analysts wrote.

Netflix's stock was up 0.9% Wednesday and has gained 27% in the year to date, while the S&P 500 SPX has gained 9%.

Read also: From 'Ripley' to 'The Jinx: Part 2,' here's what's worth streaming in April 2024

-Ciara Linnane

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04-03-24 1045ET

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