Ads in Danger: Gen Z ad-avoidance habits 😲
Ad-avoidance tactics, the rise of UGC and the evolution of trust in advertising, all in our our Ads to Z research. Part 1 of a deep dive into the state and future of advertising with Gen Z.
Let’s be honest. Nobody really likes to see an ad. And Gen Z is no exception. But what happens when a generation that has grown up seeing 2x the ads as others is being hit harder and harder from every direction in a war to capture their attention?
Habits form. And ones that are not good for Gen Z or the ad industry itself.
New research: Ads to Z: Gen Z and the Future of Advertising
The team at dcdx has been hard at work digging into the pivotal questions that will shape the future of the advertising industry. While the full report can be accessed on Monday, we wanted to give the folks on our insights newsletter a bit of an inside scoop on a few of these key points we’ll highlight.
1. Ad-avoidance habits and their impact
“I know on Instagram, after you tap through three stories, there’s an ad or two. I just memorize how to tap and swipe past them. That’s how much they’re on there. It’s a pattern.”
-F, 20
Key stat #1: 3 in 5 Gen Z’ers will scroll on their phone when they see an ad while streaming.
Why is this so important?
There is currently a war among streaming services to figure out how to stay relevant. Netflix has realized that they can not keep production levels high enough to keep their audience engaged, after losing 1M subscribers in 2022. With users fleeing and revenue targets in trouble, their plans to launch an ad-supported tier seem to be a temporary solution to the long-term challenge that plagues all streaming services: how do we keep up with the speed of consumption in culture?
Only 12% of our respondents said they would pay to avoid ads, with 76% saying that they would find ways to avoid them. What many advertisers will likely figure out, if they have not already, is that the return on ad spend (ROAS) on these ad-tiered platforms is dropping with young users. But at the same time, the number of users and platforms enrolling in these ad-supported versions grows. Disney will launch their ad-supported tier in December 2022, joining the ranks of Roku, Paramount, and the many others that have seen growth on these tiers. Pluto TV, Paramount’s free ad-supported streaming TV, has grown to nearly 65M MAU with viewing hours up 50% from last year.
This all looks great - audiences can pay less while getting access to more content.
But what happens when the advertisers and brands on these platforms begin realizing that they are not seeing their revenues jump as a result?
The common argument given in defense of this is about the passive awareness that is gained from these ads, even if and when Gen Z’ers scroll on their phones.
But the issue that brands and advertisers will soon realize if they have not already, is that this passive awareness is not only useless, it’s detrimental to the very existence of the ads themselves.
The same behaviors that advertisers prey on are the very ones threatening advertising’s future.
Media multitasking has been linked again and again with lower cognitive capacities, decreased attention spans, and more difficulty in focusing. ADHD rates are up 31% from 2010 to 2017 among Americans aged 2-18, according to a study from the Blue Cross Blue Shield Association.
The last data point in this graph is from 2016. While studies vary on the exact number of diagnoses as of late, the trajectory is both clear and alarming. We predict the rate of ADHD among US children (diagnosed) may currently sit at around 20%. The attention war has only become more aggressive, and the impact must be equal and opposite in reaction.
What is really happening with ad-supported streaming?
Ad-supported streaming is less effective than it has ever been, and will only continue to decrease in ROAS for advertisers among young audiences.
The problem that advertisers and brands have, that streaming services are likely holding onto with their lives, is that ROAS in these situations is extremely difficult to measure. The default response of “awareness”, as we discussed earlier has no clear measurable value. And that “awareness” is becoming less and less valuable as the ability of young audiences to focus and recall measurably shrinks.
What happens to streaming services next?
Advertising-based video on demand (AVOD) services are expected to reach $70B in 2027, up from $33B in 2021, as subscription fatigue turns over-subscribed consumers into ad-supported tier users.
The vicious cycle will only grow - more ads fueling more ad-avoidance, more multi-tasking, more cognitive wear and tear, and the attention crisis will continue.
Brands and advertisers will continue to dump massive amounts of money into the proxy of raising “awareness”, as the “awareness” dollars disappear into the same black hole that has consumed the attention of young audiences.
Streaming services? They’ll be fine, so long as the proxy continues to survive.
The advertisers are the ones in danger.
As doomy and gloomy as this sounds, there is hope. There are approaches that are both more effective in reaching Gen Z, and that lead to a healthier future. We will continue to explore some of those in the following pieces and in the report released on Monday.
This has been part 1 of a deep exploration of the research we’ll be sharing from our Ads to Z: Gen Z and the Future of Advertising report.
A quick and important note to the advertisers receiving this email: while it may seem like this is a rather grim look at the industry, at dcdx we firmly believe that the way advertising pivots and adapts to the behaviors of this generation is the key to a more human future. If we can collectively learn how to evolve the industry to create both more effective and healthier strategies, we can help to turn around the mental health and attention crises harming the future of our world.
We believe in the role advertising plays in making the future human.