Everything You Need To Know About OTT and CTV Advertising

OTT CTV

Are you ready to take your advertising strategy to the next level? OTT and CTV sound like media buzzwords, but they actually offer a more effective and affordable advertising solution than traditional options.

OTT and CTV advertising can reach more customers and boost your brand recognition like never before. OTT advertising is projected to hit $210 billion in revenue by 2026. It’s time to incorporate OTT/CTV into your advertising repertoire so you can reap your own revenue share.

What exactly is OTT/CTV? What are their benefits? How do they help create successful advertising campaigns?

We have the complete guide to all these answers and more. Keep reading to learn everything about OTT and CTV advertising, and how you can use it to drive business results for your company today!

Streaming Services vs Traditional Cable Advertising

Streaming services have created new viewer opportunities and advertising models for companies. However, these services and ads are very different from traditional, or “linear” TV methods.

Creating an effective OTT/CTV advertising campaign relies on knowing the differences. If you try to apply the traditional linear model to streaming services, you won’t see as many ad benefits.

Linear TV

The traditional cable TV and satellite model has viewers purchase channel packages. Channel programming is delivered to their TVs via a cable box or satellite dish, allowing viewers to watch whatever is playing on the channels at the time.

For decades, the only way to watch a show, movie, or other media program was to tune in at the right time on the right channel. VCRs and DVRs eventually allowed viewers to record their media and watch it later. Unfortunately for advertisers, this also meant they could fast-forward through TV ads.

Linear TV Ads

Linear TV channels sell extra air time as commercial slots. These ads assume some time slots are more popular than others. It also targets key demographics for each slot.

For example, the Super Bowl guarantees over 100 million highly diverse viewers each year, so advertisers pay a premium to run ads during its broadcast. The Super Bowl sold 30-second commercial slots for $7 million in 2022.

Clearly not every commercial will cost that much. Even so, TV advertisers can still expect to pay over $100,000 on average for the low end of national distribution. Local TV slots are much cheaper, but also reach far fewer viewers.

Streaming TV

The early 2000s ushered in the rise of new telecommunications technology and household Internet access. On-demand and live streaming media services naturally started popping up afterward.

On-demand streaming services allow viewers to watch whatever they want, whenever they want it. These services include:

  • Netflix
  • Hulu
  • Disney+
  • HBO Max
  • Prime Video
  • Apple TV
  • Crunchyroll
  • Peacock

Live streaming services allow viewers to tune into an ongoing broadcast, including live coverage programs like sports or news. These include:

  • Hulu+ Live TV
  • Youtube TV
  • ESPN+
  • FuboTV
  • DirecTV Stream
  • Pluto TV
  • Sling TV Blue
  • Twitch (gaming)

Streaming service convenience has led to a mass “cord-cutting” of cable services. Although cable is still popular, they lose millions of viewers each year. AT&T lost over 1 million accounts in 2021, for example, while Disney+ gained over 11 million.

Streaming TV Ads

Streaming TV ads are more flexible and precise versions of linear TV ads. Instead of buying certain time slots in a fixed program, companies can insert ads before, after, or even during streaming services.

Providers like Crackle and Vudu use ads to maintain low subscription fees for their viewers. Hulu offers a lower-cost subscription with ads, and premium services without ads.

Streaming service ads have two main mediums: OTT and CTV. While they refer to similar concepts, CTV vs OTT has very important differences that can affect your marketing strategy.

What is OTT?

OTT stands for Over The Top. This doesn’t mean commercial ads full of explosions or melodramatic performances, however.

OTT refers to media content delivered through the Internet. The Federal Communications Commission (FCC) officially defines OTT as, “linear video services that travel over the public Internet and that cable operators do not treat as managed video services on any cable system.”

Most people are familiar with the traditional TV process. A cable channel, or content provider, produces media content for you to view. Distributor services like AT&T or DirectTV transmit this content to their subscribers.

A transmitter tower or satellite transmitter sends a signal to your home. The signal goes through a cable box or satellite dish, which converts the signal into your TV receiver for your viewing pleasure.

The OTT viewing process is similar:

  • OTT content publishers: streaming service apps like Netflix
  • OTT transmitters: internet service providers (ISPs) like AT&T and Comcast
  • OTT receivers: viewing devices like smart TVs, laptops, mobile phones, etc.
  • OTT converters: secondary internet-access devices like gaming consoles, Chromecast, etc.

OTT advertising bypasses traditional cable and satellite providers by placing ads on streaming services. You effectively “go over” the cable box so you can advertise directly to viewers instead.

What is CTV?

CTV is a term often used interchangeably with OTT. It stands for Connected TV.

CTV refers to any device you use to view OTT content on your television. This includes an external device attached to your TV, or internet connectivity built into your TV’s internal functions.

Common CTV devices include:

  • Smart TVs
  • Playstation consoles
  • Xbox consoles
  • Amazon Fire Stick
  • Apple TV
  • Roku
  • Chromecast

CTV is an important component for viewing OTT content, which is why many people use the terms synonymously.

A good way to remember the distinction: all CTVs stream OTT content, but not all OTT content streams through CTVs. OTT content is also viewed on non-CTV devices like mobile phones, computers, and tablets.

CTV vs OTT Advertising

Now that you know the difference between OTT and CTV, how does that play out in advertising? Most OTT content is viewed on CTV devices, but a comprehensive OTT ad campaign isn’t limited to CTV alone.

CTV advertising occupies the middle ground between linear TV and OTT. It’s more dynamic than linear advertising, but less dynamic than OTT advertising.

CTV Advertising Basics

CTV ads are for large-screen TV viewing, so they follow the more traditional commercial format. This includes ad pods, which are similar to linear commercial time slots.

Ad pods run a series of ad slots for CTV streaming programs. Traditional commercial slots revolved around key viewership times, whether or not the viewers actually tuned in.

Ad pods, by contrast, run when the viewer is actually watching the stream. Ad pods have three main program placements:

  1. Pre-roll ad break: before the program starts
  2. Mid-roll ad break: ad segments throughout the program
  3. Post-roll ad break: after the program ends

Ad pods offer more flexibility for ad content, duration, and placement than linear TV. For example, advertisers can choose short or long ads placed well away from their competitors. They even buy up every slot in the pod.

These ads are generally not skippable or fast-forward compatible. Since the content is a streaming service and not recorded, audience viewership is more or less a given (unless they stop watching the screen altogether).

OTT Advertising Basics

OTT advertising includes CTV advertising. It’s not limited only to TV viewers, however. Streaming services and OTT ads can also be viewed on:

  • Computers
  • Laptops
  • Notebooks
  • Tablets
  • Smartphones

These devices offer a slightly different viewership experience than TVs. They’re much smaller and generally only used by one or two people to watch streaming services.

They’re also more interactive. Viewers can click parts of the ad using a mouse or touchscreen.

This allows OTT advertising to add more dynamic content. Examples include:

  • Links
  • Mini-games
  • Polls and surveys
  • Quizzes
  • Calls-To-Action
  • Augmented reality (AR) overlays
  • Forms
  • Free trials or previews
  • QR codes
  • Social media sharing
  • Web tools (calculators, map directions, etc.)

Hulu has experimented with interactive ads which allow viewers to choose the specific commercial they want to watch, or be redirected to a product page. YouTube routinely includes polls before a video begins, or adds affiliate links to a video.

OTT/CTV Advertising Benefits

There are numerous marketing upsides to OTT and CTV advertising campaigns:

  • Broader audiences
  • More precise targeting
  • Increased engagement
  • Improved conversions
  • Higher customization
  • Content flexibility
  • Digital metrics
  • Dynamic pricing
  • Higher ROIs

Even if you found traditional TV advertising prohibitive before, chances are you can find a workable strategy with OTT/CTT advertising. The adaptive elements of streaming service ads result in greater accessibility for smaller businesses and companies.

Broader Audiences

CTV reaches audiences who don’t have cable or satellite, including younger age groups. This includes both cord-cutters and viewers who never signed up for cable in the first place (cord-nevers).

Baby boomers are the last significant cable TV market. According to Pew Research, the percentages of viewers who had cable in 2021 are:

  • Ages 18-29: 34%
  • Ages 30-49: 46%
  • Ages 50-64: 66%
  • Ages 65 and over: 81%

This means companies who stick with linear advertising are missing out on the majority of people below age 50. CTV reaches audiences who don’t have cable, and OTT reaches viewers who don’t use TVs.

More Precise Targeting

Linear TV ads focused on time and general assumptions for demographics based on Nielsen ratings. This rating system is useful for certain household data but has limitations: it’s largely self-reported, only relevant to specific viewer types, and not based on random sampling.

OTT/CTV advertising makes up for the Neilsen rating gaps in marketing strategies. It’s delivered through ISPs, so it can use digital data to precisely target viewers based on their actual interests and needs.

OTT and CTV targets include standard demographics like age and gender, as well as data from a viewer’s digital footprint. This includes:

  • Shopping habits
  • Media viewing habits
  • Search engine activity
  • Social media use
  • Hyperlocation (i.e. specific neighborhoods instead of geographic areas)
  • Employment and income history
  • Hobbies and collections 
  • Fitness and activity levels

With more precise targeting, you can bring viewers the ads they actually want to see. This results in a net positive for you, the viewer, and the content provider.

Increased Engagement

According to marketing studies, the ad completion rate for OTT/CTV is over 95%. The impression rate increase is a great marketing boost, but the benefit doesn’t stop there.

Linear TV relied on two core concepts to create engagement: brand saturation and brand reputation. This forced smaller, newer companies onto the same playing field as established mega-corporations.

It also meant customers had to be motivated to create engagement on their own. This inconvenienced viewers who had to pause or miss their program, or remember to look up products and services after their program ended. 

Your engagement is built-in with an OTT/CTV advertising ecosystem that spans multiple channels. OTT’s interactive ads also have clickable links, social media sharing, and other dynamic engagements that remove the space between viewing content and engagement.

Improved Conversions

Over 80% of retail shoppers prefer to research a product or brand online before buying. This includes whether or not they buy in-store or online.

This gives OTT/CTV the perfect environment to grow an advertising ecosystem across multiple platforms, channels, and devices. Viewers can easily convert to engaged shopping researchers without even pausing their streaming services.

Higher Customization

Linear ads are deployed for a certain area during a certain time. Your CTV/OTT ads are reaching a more engaged target audience, which means you can customize your ad approach.

For example, commercials on linear TV pay premiums for certain commercial time slots. OTT/CTV advertising, however, can employ programmatic ads. These ads use learning algorithms to target specific viewers, instead of general viewer times.

Think of the difference between dropping a bomb from a plane and hoping it lands in the general area, versus firing a guided missile locked on a specific target. The guided-missile is more effective, less likely to miss, and decreases the number of wasted resources.

Content flexibility

Linear ads are less focused and rely on a broad appeal approach. Precise targeting gives you more customization for ad deployment, and more flexibility for your ad content.

Linear TV ads must appeal to as many customers as possible in the time allotted. This resulted in ads that were largely irrelevant to most viewers’ needs and interests.

Customized deployment means you can bring ad themes tailored to receptive customers. Your content doesn’t need to be watered down for mass appeal, making it more effective for the target audience.

Digital Metrics

OTT and CTV advertising are on digital platforms, so this allows you to directly track digital ad performance metrics. Key performance metrics (KPIs) include:

  • Video completion rate 
  • Cost per view (CPV) 
  • Cost per completed view (CPCVs)
  • Cost per click (CPC)
  • Cost per action (CPA)
  • Attribution tracking 
  • Device-level reporting

You can use these metrics and more to measure what’s a hit or miss with viewers. With this direct knowledge and analytics, you can holistically tweak your ad deployment for better results.

Dynamic Pricing

Linear TV pricing is based on rating demands, so you pay for CPMs whether or not anyone actually views your content. You also have no way to directly track your actual impression rate.

OTT/CTV pricing models for CPMs, by contrast, are based on when someone views the ad. Since your ads are more precise and result in higher impressions, engagement, and conversions, you can significantly reduce ad campaign waste.

Higher ROIs

All of these factors add up to an increased ROI for your CTV/OTT ad campaign. You reach more viewers, increase their impressions, and net more engagement and conversions.

Your ad spending is based on actual viewers vs rating targets. Overall, you spend less money but see more results. This means even small companies with relatively modest marketing budgets can take advantage of CTV/OTT advertising campaigns.

How to Create CTV/OTT Advertising Campaigns

There are two main methods for buying CTV/OTT ad space:

  1. Programmatic sales
  2. Direct sales

Programmatic sales use a learning algorithm to match your ads to your target audiences through bidding. Direct sales follow the more traditional method of negotiating certain program placements, ad slots, etc.

Programmatic Sales

CTV/OTT campaigns based on programmatic sales are:

  • Automated
  • Parameter-based
  • Bought and sold in real-time
  • Dynamically priced (bidding)
  • Cross-channel compatible

Programmatic sales take human negotiation out of the ad buying/selling process and deploy your campaign through an automated system. This system takes the parameters you input, such as target audience and budget, and bids on select ad slots in real-time.

The system uses machine learning and/or artificial intelligence to “learn” about viewers and their viewing habits. They can also collect behavioral data as they go. This creates even more precise viewer targeting than data analytics.

Programmatic sales have the added perk of being cross-channel compatible. Ads can deploy across multiple OTT devices and platforms. You can build your company’s ad ecosystem quickly, cheaply, and effectively.

Direct Sales

CTV/OTT campaigns based on direct sales are:

  • Manual
  • Slot-based
  • Negotiated before deployment
  • Fixed cost
  • Cross-compatibility limited

Direct sales can be platform direct, or publisher direct. Platform direct refers to OTT devices, such as gaming consoles like Playstation, or streaming boxes/sticks like Roku and Chromecast. Publisher direct refers to content distributors like Hulu.

Platform direct sales negotiate ad space directly on the platform. This means your ad slot is determined by the platform, and inserted in their ad space. 

Publisher direct relies on negotiating ad space with a CTV/OTT provider. This depends on the type of subscription service they run. 

Platform and publisher streaming service types are referred to as:

  • Subscription Video On Demand (SVOD)
  • Ad-based video on demand (AVOD)
  • Transactional video on demand (TVOD)
  • Virtual multichannel video programming distributors (vMVPD)

SVOD is ad-free content that uses a flat subscription fee instead of ads. This includes streaming services from Netflix, Disney+, and HBO Max. Hulu and Amazon Prime also offer SVOD content.

AVOD is the opposite working model of SVOD. Instead of paying for a subscription, viewers can access free or low-cost content in exchange for watching ads. Examples include Hulu, the Roku Channel, and Amazon Freevee.

TVOD is content purchased on an individual basis. Renting or buying a movie through Amazon Prime is an example of TVOD.

VMVPD refers to live-streaming services separate from other subscription services. This includes Hulu Live TV, Sling TV, and Youtube TV.

Ad Insertion

The variables across direct sale platforms and publishers can affect your ad insertion. Insertion orders are guaranteed ad placements, compared to programmatic bidding which doesn’t always win a slot.

Ad insertions aren’t as targeted or as fast as programmatic ads, however. They also have their own limitations. There are two main types of ad insertion: client-side and server-side.

Client-Side Ad Insertion (CSAI)

This ad insertion method requests ads from the publisher. This means every time an ad plays, it’s loaded separately from the program.

This can cause latency issues with live streams, and quality issues with CTV content. It’s also more difficult to integrate across channels, and more vulnerable to ad-blockers.

Server-Side Ad Insertion (SSAI)

This method of inserting ads is also referred to as “ad stitching.” The ad comes from the server alongside the program, effectively “stitching” it together with the streaming content.

This method overcomes the limitations of CSAI, but comes with its own drawbacks. It requires high scalability and standardization on the server’s system. SSAI also reduces the risk of ad-blockers, but increases the risk of ad fraud.

OTT vs CTV: Final Factors to Consider

OTT and CTV are amazing advertising opportunities. It’s important to keep their key differences in mind when planning your advertising campaign.

CTV is similar to the traditional shared-viewing experience, while OTT can be more personalized for smaller devices like laptops and mobile phones. This will affect your precision targeting and dynamic content.

CTV’s large-screen viewing experience also means it must be high quality, and match the quality of the publisher’s content. For OTT, video quality must ensure it doesn’t interrupt the user’s streaming (buffering, loading issues) and cause viewers to close the streaming service.

OTT can encourage viewer engagement through dynamic content. CTV still mostly relies on increasing impressions to grow its rates of engagement and conversions.

Launch Your Own OTT/CTV Marketing Strategy  

OTT and CTV advertising give your company never-before-seen opportunities in today’s digital landscape. Streaming services offer new ways to target audiences and deliver ad content. 

Are you ready to increase your ad reach? We offer premium OTT/CTV services flexible to your goals and budget. Contact us for your free consultation today! 

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