Study shows advertisers may fall in love with cord cutters

Think TV companies hate cord cutters? Advertisers might just love them.

That's the conclusion of a study completed by research firm Networked Insights, which tracked engagement levels of TV and video viewers according to their activity on social media. The study found that viewers who had "cut the cord" and abandoned traditional TV packages in favor of Internet options like Hulu were 60 percent more engaged in the content they viewed.

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Signage for Dish's Sling television service at the CES in Las Vegas, January 7, 2015.
Justin Solomon | CNBC
Signage for Dish's Sling television service at the CES in Las Vegas, January 7, 2015.

The findings may come as a surprise to those who believed cord cutters abandon TV because they don't consume content. "Conventional wisdom is that these are folks who don't care about TV," said Networked Insights Vice President Rick Miller. "These are people who are extremely passionate about a narrow range of programming."

One obvious question is whether cord cutters are simply more active on social media—a factor that could skew the data. But Miller said he is convinced that social media is no longer a geeky tool for the tech savvy. "Social media covers north of 80 percent of the U.S. population that's connected to the Internet," he said.

The findings also echo the views of some media executives who have argued that on-demand viewers are more valuable to advertisers than those who watch live programming. Speaking at the Cable Show 2014 last year in Los Angeles, executives said that on-demand viewers are more engaged and also tend to represent a wealthier cohort with children.

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Big media companies have recently offered Internet TV products of their own after years of reluctance. The first big player was Hulu, an ad-supported streaming service owned by CNBC parent Comcast, Disney and 21st Century Fox. Just this week, Dish Network announced a product called Sling that will offer programming including ESPN, TNT, TBS, and the Food Network. Media executives interviewed by CNBC say they have had talks with other distribution companies about launching more so-called over-the-top services.

Most big media companies have seen soft advertising revenue in the last several months, with some blaming a shift by marketers away from TV spots to digital alternatives. That has created an impetus to catch up in digital video, with companies such as Discovery Communications signing a deal with Hulu in December to stream its content.

Internet TV viewers could appeal to advertisers for multiple reasons. "A digital delivery channel should give advertisers more control because it gives them more data," Miller said, adding that video-streaming services can track activity specific to individual viewers.

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That contrasts with traditional TV, which still relies largely on Nielsen ratings. "There are much better targeting opportunities," he said. In theory, advertisers could see the results of their ads by connecting digital video watchers with their social media accounts, he said.

A pickup in digital video advertising could be a boon for companies that have invested heavily in digital advertising platforms. Those include Google, Facebook, and AOL.

Earlier Wednesday, AOL CEO Tim Armstrong appeared on CNBC and described a game of "musical chairs" that may occur as companies scramble to find digital advertising partners. "We believe there are going to be 10 to 15 major chairs in our industry and there are 200 ad-tech companies trying to sit in those chairs," he said.

Earlier this week, rumors swirled that telecom giant Verizon was in talks to buy AOL, in part because of the potential to monetize video content with AOL's advertising platform. Armstrong denied that talks were underway, as has Verizon CEO Lowell McAdam.