Why streaming services should consider product placement

Streaming services are all moving deeper into the ad space, with almost every platform announcing the inclusion of ad-based subscriptions beginning next year. Hulu has already been including ads since its foundation, but Netflix and Disney+ and its subsidiaries will begin to offer ad-based subscriptions at a lower price than current subscriptions while increasing the prices of others. But for both advertisers and streamers, is this the best move?

Instead of investing in commercials, brands should go back to the basics of traditional advertising and invest in embedded product placement. A TV is definitely something you’re staring at, you’re definitely in a certain place, and you’re definitely a certain person. Traditional marketing worked for a reason – it was sticky. Currently, companies are throwing money at influencers even with a largely uncertain return of investment (ROI). Yet historically, embedded product placement leads to a 20% increase in brand awareness when done right. This is a huge ROI, one that can’t be topped by tagging an ad in CTV, which is 5 to 8 percent only if it’s a hot show. Product placements will definitely outstrip both human and virtual influencers pretty soon.

What will CTV ads do for streamers?

Large format TV advertising works well – both for CTV ads and embedded product placements – because the viewer is captive. While they can look away, they are still immersed in the sound and can be tantalized to look back if the ad sounds interesting enough. However, viewers strongly dislike ads, even muting the commercials so as to not hear them and going on another device or engaging in conversation instead.

Netflix is including ads because it’s bleeding money. But Netflix is losing money because it’s losing subscribers, and if subscribers don’t want ads, is this the best method for Netflix to make up for that lost income? If Netflix instead included product placement, it could make up the money with continuous natural embedded placements.

Of course, the embedded placements have to make sense. Think about Eggo and Schwinn in Stranger Things. Although the brands didn’t pay to be in the show, they’re everyday brands that existed in the 80s (the time frame of Stranger Things) and now. After being included, Schwinn partnered with Netflix to create limited edition bikes that sold out in five days. But timelessness is just one aspect, the brand must morally align with the show or movie it’s being placed in, and the platform can’t be oversaturated. Remember the nightmare that was 2015’s Jurassic World? It was chock full of product placements and the Starbucks advertising almost took away from the movie.

Offline placement collaborations work too

A brand should not consider the total cost of sponsorship as merely just product placement, it also needs to consider the offline and extensions that it negotiates as part of the intellectual property. Everyone was in Star Wars at some point. Nissan partnered with Star Wars to make its 2017 Rouge that had logo decals, badging, and floor mats to amp up the Star Wars message. That brand extension increases uptake long after the content is cold or old.

Even with McDonald’s, it will pay to license rights because the offline licensing is so powerful. A lot of brands forget that because a lot of marketers are not incentivised to make sales, they're thinking of brand awareness and the conversion funnel. But there’s a direct benefit to sales that a lot of marketers generally miss. These partnerships are often initiated by sales teams and specific revenue teams in regions or parts of a country that need to increase consumption of a product or service locally.

Although embedded product placement can sometimes be too obvious, it might be a less annoying alternative to interruptive CTV ads.

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Humphrey Ho is managing director of Hylink USA.