What happens when high-income households opt out of ads?

Ads are everywhere in streaming video. They’re on HBO Max, Hulu, and Paramount+. They’re coming soon to Disney+ and Netflix. And, of course, they’re all over YouTube.

But the continued rollout of multi-tiered streaming services makes it easier than ever for consumers to sidestep marketing messages. If you’re willing to pay for an ad-free tier, you can watch and listen to programming without any advertising interruptions at all.

That can pose a challenge for marketers keen on reaching higher-income households. The same consumers with the most disposable income to spend on new cars, clothes, and household goods are also the ones most likely to be in the financial position to skip ads when watching TV. In the long run, that stands to reshape marketing spend, and it’s already influencing the ways marketers think about getting in front of affluent—and increasingly elusive—eyeballs.

“The people that advertisers most want to target are hiding from the advertisers,” said Eric Schmitt, research director and analyst on the Gartner for Marketing Leaders. “It really is going to have some interesting knock-on effects for the ad business over time.”

“Buying out”

While marketers targeting the “truly -rich” are not traditionally big television advertising spenders, many brands looking to position their products as aspirational purchases—like Apple or Lexus, for instance—are. But advertisers and media buyers know that ads, including on TV and digital video advertising, aren’t exactly beloved by audiences.

“They’re going to do whatever they can to get content without your interruption if they can afford it,” said Joel Kaplan, executive creative director and partner at the agency M/H, which has done work for high-end brands like Audi.

What’s considered “affluent” varies, but is sometimes defined as households with annual incomes of $125,000 or more in the US. Among affluent consumers globally, 70% say they tend to splurge for a product’s premium version, according to 2020 data from the Global Web Index. Add that to the digital ecosystem, where affluent consumers were 32% more likely than everyone else to use an ad-blocker, according to GWI, and are more likely to own iPhones, which have more digital privacy restrictions than other mobile devices.

“Advertisers want to sell products to them, because they have the money to buy the products and services,” Schmitt said. “Well, those are the very same households that are buying out of advertising.”

A different tack

Marketers targeting higher-income consumers are looking for other ways through. Christiane Lemieux, a designer and founder of the luxury home-furnishings brand Lemieux Et Cie, is dabbling in direct mail, as well as focusing on creating lifestyle home-decor content online designed to pull new customers in, she said.

Lemieux told Marketing Brew she’s also “focusing on places where [consumers] can’t opt out as easily.”

On streaming video in particular, opting out of ads may translate to an intensified interest in product placement, especially in shows that highlight aspirational lifestyles—think Lexus’s brand integration in the Peacock series Bel-Air or the various jackets sported by the wealthy Dutton family on Paramount’s Yellowstone. Kaplan, for one, knows people who have purchased clothing brands featured on the latter.

Schimtt hypothesized that the shift may eventually spell larger challenges for traditional ad-supported media channels, including TV, as marketers look elsewhere to reach higher-income consumers or spend more resources marketing to past customers.

“From the perspective of the media budget owner—the person who has to get their message in front of these households, as hard as they are to find—it’s a crazy game of hide and seek,” Schmitt said. “If there’s this clear pattern, and that sticks around—the folks with the most disposable income are harder to reach through media—logic would say that media spend will go down.”

There are a few exceptions, including live sports, which can deliver massive audiences while also presenting opportunities for high-wattage sponsorships and athlete-led brand endorsements: 86 % of affluent customers said they were fans of sports, and 60% of affluent customers said they were fans of the NFL alone, according to 2021 data from Ipsos. (Notably, live sports does not often come with the ability to opt out of ads entirely, even on streaming.)

But Kaplan expects a continued dispersion of media dollars toward other ways to reach higher-income viewers, including organic social posts and influencers, as well as new formats like the still-emerging metaverse.

“It’s not on them to be forced to watch things,” Kaplan said. “It’s on us as advertisers to figure out how to make something worth watching.”