OTT, CTV, & the Future of Video Advertising
Whether they’ve been in marketing for a few years or a few decades, today’s advertisers have seen a lot of changes. With so many rapid developments in the way programming is produced, marketed, delivered, and sponsored, it’s hard to keep up. Media, digital technologies, and even consumer behaviors are changing every day. In response, new advertising opportunities are appearing at an alarming rate.
Today, many marketers, advertisers, and business owners are trying to figure out similarities and differences between OTT and CTV. To make matters even more complex, the media industry is not defining or using the terms consistently. And some seem to make new terms up as they go along. OTT, CTV, Programmatic TV, Streaming TV, IP TV, Smart TV, Livestreaming, VOD, Pre-Roll, direct-to-consumer, and more all swirl together into one confusing glossary, while the more you research these terms, the more you’ll realize that the dust hasn’t really settled on terminology and naming.
From a viewer’s point of view, this turmoil is practically invisible. The vast majority of TV and video audiences are unfamiliar with the changes in ad formats, terminology, and delivery. They have no reason to become familiar with the language – it’s all just programming and content to them.
However, for marketers understanding these new terms and opportunities is critical, so we’ve provided this guide to make explanations and definitions easy-to-understand.
A Little Background on Advertising, Commercials, and Videos
Decades ago, if a company or advertiser wanted to run a video ad (also known as “commercial,” in pre-digital lingo,) they really had just three choices; ABC, NBC, or CBS. Having just three channels that went off the air at night considerably limited the advertising inventory. Because there were a limited number of advertising slots, or inventory, available, only the wealthiest advertisers could afford to buy on-air ads. These pricey TV commercials required the patronage of big brands with deep advertising pockets.
In the late ‘60s, other, smaller networks started popping up based on regional interest or more focused content. Early cable was born. By the 1980s, viewers had access to a wide array of cable channels. With remote controls in hand, ‘80’s viewers could “surf” from MTV to VH-1, and paid stations like HBO became common.
With thousands of shows on the air and many 24-hour stations, TV advertising inventory exploded in the 1980s. The price of advertising dropped. For the first time, TV ads became an affordable option for a much wider variety of advertisers and businesses.
In the 90’s home internet became more popular, and by the 2000’s online TV became a reality. Today’s viewers can access free and paid programming on TVs, computers, tablets, and smartphones.
The marriage of TV and internet continues to evolve. Today, many people are getting rid of cable in favor of online viewing. In fact, over 74% of American homes say they own at least one Internet-connected TV/device. Known as “cord cutters”, more and more of these people are eliminating cable and linear TV and relying on streaming services. In fact, many of today’s household never activate a cable service. These “cord-nevers” opt for the flexibility and versatility of TV delivered from companies such as Roku, Hulu, Fire TV, and other internet-based options that stream content to a variety of devices and platforms.
As people shift to more flexible TV delivery styles, connected TV advertising, also called streaming TV advertising, has adapted along with them. Determined to meet the needs of content producers, advertisers, and consumers, the market continues to unfold with improvements and iterations intended to provide compelling ways to deliver a customized, high-quality, and efficient TV ad experience.
Elizabeth Thorp from Moblyft reports,
“Compared to traditional TV advertising, connected TV advertising is a laid-back branding experience that occurs while users consume digital video content on their television sets. These are the ads that you see before and during streaming content, and typically appear in 15 to 30-second segments.”
Whether viewers choose to watch free videos on YouTube or want to catch up on local news, there are many options to choose from. By combining the right subscription and technology, audiences can now watch all kinds of content almost anywhere Wi-Fi connections exist. As a result, people now have millions of viewing choices across a variety of platforms, including ad-free viewing.
Alex Sherman at CNBC noted that, as of November 2019, the list of current streaming services included,
- Netflix(introduced streaming in 2007): 158 million subscribers, 60.6 million U.S. subscribers (as of October).
- Hulu (began streaming in 2007): 28.5 million U.S. subscribers (as of November).
- HBO(founded in 1972, began streaming outside pay-TV bundle in 2015): 34 million U.S. subscribers, 8 million HBO Now subscribers (as of October)
- CBSAll Access and Showtime (began streaming in 2014): 8 million subscribers (as of February)
- ESPN+ (began streaming in 2018): 3.5 million subscribers (as of November)
- DAZN (began streaming in 2016): More than 4 millionglobal subscribers (as of May)
- Crunchyroll (began streaming in 2006): More than 2 million global subscribers (as of November)
- Amazon doesn’t disclose the number of Amazon Prime Video users. Consumer Intelligence Research Partners estimated there were 100 million Prime subscribers in January, but those subscribers get many other benefits, including free one-day shipping.
With so much change and churn in the industry, and with such a wide range of options available to audiences, it’s no wonder that advertisers are continually devising new ways to create ads and sponsorships to fund all this content. Even as you read this blog, the OTT, CTV and streaming TV advertising options are continuing to develop, change, evolve, and expand.
Research Reveals Rapid Growth in OTT and CTV
For decades, traditional network television captivated audiences in great numbers across the nation, making it one of the most powerful mass media tools available. Even with the arrival of cable, it was years before network programming began noticing diminishing audiences.
Today’s TV and video innovations are causing tremendous excitement in the advertising world. For marketers, extremely fractured audiences are a new challenge, and a new opportunity. Instead of reaching one or two larger audiences, advertisers can now isolate thousands of smaller audiences. But just as the content producers struggle to keep pace, marketers must also move fast to find the best advertising solutions.
How fast are things changing? eMarketer reports that OTT service subscriptions continue to increase while traditional TV viewership is declining. In 2018, 90.3 million U.S. households subscribed to services like cable or satellite. In 2019, that number fell to 86.5 million and is expected to decrease to 82.9 million in 2020.
The same eMarketer report noted that in 2018, there were 170.7 million OTT viewers, which jumped to 182.5 million in 2019, and that number is predicted to increase to 191.5 million in 2020.
Other research shows the same story again and again.
According to an article by Joseph O’Halloran for Rapid TV News,
“…nearly three-quarters of consumers subscribed to at least one streaming TV service, and as many as 69% young consumers (ages 25-34) particularly believe of the superior nature of streaming , with 69% agreeing on the superior relevancy of connected TV (CTV) ads. Additionally, 53% of consumers used their mobile device or tablet to shop while watching TV on a streaming service, with this number rising to 74% among parents.”
This data illustrates the major shift away from mass-audience advertising toward hyper-segmentation. As fewer and fewer people watch traditional cable TV, the viewing audiences split into smaller, more diverse groups.
Since the cost of advertising is usually based on the size of the audience, ads that reach fewer people are more affordable. This means that more advertisers can get into the video/commercial game for less money, reaching smaller numbers, and delivering their messages to more targeted viewers.
While videos (a.k.a. commercials) are one way to advertise in this new world, other popular strategies include product placements and brand integrations. Products and services pay content producers to include them in the show. This may take the form of reality show judges keeping cans of Coca-Cola on their desk. A character in a series might work at the Cheesecake Factory, or a sit-com family might take a trip to Disney World. Media services like Netflix and Disney+ rake in millions from such placements, and this type of covert advertising is likely to increase.
According to Tiffany Hau reporting for the New York Times,
“Even as Netflix resists commercials, it is finding ways to work with brands. Last month, Netflix worked with the sandwich chain Subway to start offering a Green Eggs and Ham Sub (spinach-dyed eggs, sliced ham, guacamole, cheese) tied to the new Netflix series ‘Green Eggs and Ham,’ based on the Dr. Seuss book. The sandwich generated a lot of publicity for Netflix in the lifestyle press while also putting the Netflix name in front of the millions of people who buy a Subway sandwich each day.”
What are the Definitions of OTT and CTV?
While we’ve mentioned before that many advertisers and media companies are not using consistent definitions, it’s helpful to have an understanding of some of the most common characterizations.
OTT is one of the most standard terms. OTT is an acronym for “over-the-top.” This term is used for the delivery of film, video, and TV content that is served via the Internet and “over-the-top” of cable, in addition to or instead of standard cable or satellite services. Over-the-top programming doesn’t require users to subscribe to a traditional service like DirectTV, Comcast or Time Warner Cable. However, traditional cable/satellite TV content and advertising is usually included in OTT definitions.
For example, when a cable/satellite provider offers viewers a service package that includes on-demand shows yet restricts fast-forwarding through ads, that’s one kind of OTT. If you can view apps via cable, like Netflix and YouTube, that is also OTT. Over-the-top also includes pre-roll ads for online shows, apps, and videos on your desktop, even when they are viewed without the use of cable. Broadly defined, OTT covers any video or programming content, with advertising, delivered by cable or the internet.
CTV is a definition created for a type of programming delivery service. CTV stands for Connected TV and is also called streaming TV. While it has the word “TV” in the name, it is not limited to content shown on a television set.
CTV is content that is:
- Delivered via the internet or through cable services to your Smart TV interfaces, computer, or smartphones
- Delivered to your TV, computers, or smartphone via Xbox, Apple TV, Roku, Google Chromecast, or Amazon Fire stick
Without digging too deep into the technical subtleties, Connected TV is just programming delivered via internet. It’s sometimes called IP TV, Smart TV, livestreaming, VOD, or direct-to-consumer. While cable companies often offer some type of CTV upgrades in their service offerings, most CTV can be delivered without a cable or satellite subscription. CTV allows for the delivery of video streaming services like Netflix, Hulu, YouTube, and Disney +.
Connected TV is the integration of Internet and enhanced web features that can be seen on new-generation TV sets. It is the merging of computers and television.
To help divide the two concepts, think of OTT as the content that is delivered, while CTV refers primarily to the device that delivers content. The definition of over-the-top content usually includes the type of programming delivered by CTV or streaming TV.
Advertising Performance: The Difference Between OTT and CTV
Now that you know the difference between OTT (content) and CTV (delivery method), we can start exploring the advertising opportunities. In a nutshell, if advertisers buy CTV ads, they will deliver only via Connected TV (the delivery method.) If marketers are purchasing OTT ads, they may show up on CTV, but they can run almost anywhere else internet programming exists, since they are “over the top” of cable and CTV.
OTT includes an almost endless advertising inventory and is sold at a lower average price than CTV alone. OTT blends the delivery of TV ads with all kinds of digital advertising products like pre-roll video ads. When you purchase OTT ads, you may get some CTV inventory mixed in with a vast video, commercial, and pre-roll inventory that may show up on websites or even on in-app ads. When you purchase over-the-top advertising, you are not purchasing 100 percent TV delivery. While OTT offers always reference the inclusion of CTV advertising or streaming TV advertising, OTT buys usually include very little CTV programming.
OTT advertising is cheaper than CTV advertising because it mixes premium (CTV) and cheaper (website/in-app) formats together. While Connected TV ads are often unskippable, over-the-top ads may not be. The viewer may be able to skip the ads after only a few seconds. The exact ad parameters will vary by platform. No matter where the ads ran, the sales rep should produce detailed reports on placements, that tell the advertiser exactly how, when, and even where the video ads ran, and how many times it was viewed in its entirety.
Even though OTT ads are a blend of CTV and online pre-roll ads, they still offer the reach and frequency numbers many marketers to need to reach their audiences. While it may be tempting to dismiss over-the-top ads as inferior, the fact is, many people are spending less time watching a TV (connected or not) and more time each day on their smartphones and computers. As a result, they are investing more time viewing videos and online content, which means they are more likely to see ads online.
For advertisers looking for higher ad frequency and lower cost per thousand, OTT can be an affordable, effective way for marketing videos and ads to reach a variety of target audiences. Many types of over-the-top ads are also clickable, so businesses may be able to measure their ability to drive action.
To add another layer of complexity, many sales reps are unsure of the distinctions between OTT and CTV. Many advertisers believe they are buying one type of advertising but end up with another package. If any rep is selling an ad package that they describe as 100 percent CTV, it’s smart to get the specifics in writing. Otherwise, there is a good chance that the actual media buy will be a mix of online and CTV spots.
CTV is More Expensive for a Reason
When shopping for media plans, most advertisers are struck by how expensive CTV is compared with OTT. Remember that while over-the-top ad buys usually include CTV, CTV ad buys do NOT include OTT. When advertisers run their videos on Connected TV, or “Pure CTV” as it may be called, the delivery is very different from the usual OTT package. These ads will look like traditional commercials that occur in the middle of programming.
Most importantly, CTV videos, or streaming TV ads that play on an internet-connected TV, are almost always non-skippable. That means that viewers must watch the entire ad. If they rewind the program, often they must watch the ads again in real time.
Many networks now offer paid or free apps via CTV, including CBS, ABC, NBC, and specialty networks like Comedy Central. Most local TV affiliates also offer similar programming apps. Almost all of these apps feature non-skippable CTV ads in their programming. The ads are guaranteed to run in their entirety. As a result, CTV inventory costs more than OTT ads, with a higher CPM (cost per thousand).
However, despite their name, CTV ads cannot reach all Connected TV platforms. Most subscription services like Netflix, Amazon Prime Video, and Disney+ are supported by subscription fees, not pre-roll ads, so advertisers can’t purchase ads on those platforms.
If an advertiser’s videos have been successful in a broadcast campaign, it’s smart to add CTV into the mix. By including CTV into the media plan, marketers make sure the videos reach cord-cutters and cord-nevers. To viewers, it’s all a seamless experience.
The drawbacks of Connected TV? It is pricier, and unlike over-the-top, it does not give viewers the option to click on an ad.
If OTT and CTV Video Ads are so Great, Why isn’t Everyone Using Them?
Research from the Interactive Advertising Bureau shows that more than 50 percent of marketers say that programmatic TV, CTV and OTT are “top of mind”. But, only 15-17 percent of businesses have actually included OTT and CTV advertising in their promotional plans. While the percent of total advertisers using these platforms may be low, the companies that have tapped into this technology are spending, and spending big.
According to Alan Wolk of Forbes.
“According to the latest research from Beachfront, an independent video supply-side platform (e.g., publisher-side platform), ad requests on CTV are up an astounding 1,640% year-over-year.”
Even as CTV and OTT become more common, it can still be a confusing place to advertise. To make matters more complicated, the language seems to change from one vendor to the next. While some marketers are just not sure how to get started, others feel overwhelmed, unsure, untrusting, or even intimidated by the technology.
As marketers work to become more comfortable with these new offerings, they may find that it’s smart to start with conservative “test and learn” strategies. By starting small, and carefully measuring results, advertisers can quickly discover what effect these new ad formats will have on their business.
For many companies, Connected TV and over-the-top advertising isn’t replacing other successful marketing tactics. Instead, these new ad formats serve as marketing add-ons that are continually being tested, analyzed, and optimized. For many of today’s marketing experts, this kind of addressable TV advertising is a smart way to leverage the performance of other digital media, and can create a more targeted online experience for the consumer.
Yes, the technology is relatively new, but more and more advertisers are finding ways to make CTV and OTT a part of their advertising plans.
Taking Advantage of New Targeting Options
These new promotional tools provide more targeting options than ever before. With OTT and CTV, marketers can pick and choose among thousands of demographic, psychographic, and behavior-based attributes. Over-the-top advertising is also starting to connect social media targeting tools and with TV audiences.
According to Strategus.com,
“Customers have yet to develop a loyalty to any one OTT service provider, like NBC, Comcast or Universal, and instead go where the content is that they want to consume. Now ads can appear programmatically, based on their geography, online and offline behaviors, psychographics and other personal details, ensuring the ads they see are relevant.”
As any good marketer knows, even the sharpest targeting tools are useless if organizations are not sure whom they want to reach. With so many profiling options available, it’s more important than ever for businesses to provide well-defined audience profiles to media placement companies. If companies want to get the most out of these advanced targeting tools, they may need to do more work understanding their customers. Marketers that haven’t found the time to explore customer attributes and interests are going to be in trouble. Any advertiser who wants to tap into these new ad options must understand exactly who their audience is.
According to Mike Rowan in Forbes,
“The first crucial step is to know your audience. Draw heavily on your buyer personas, which hopefully you’ve created. Conduct interviews to determine what type of people are buying your products (age, gender, location, interests, etc.). Audience information is the foundation for successful OTT targeting, so take the time to do your homework.
Segmenting your audience based on their actions and intentions, such as what they browse and purchase on your website, is a highly effective way to target. And collecting data from your customers can be as easy as installing cookies on your website or as sophisticated as asking customers directly about their preferences.”
It’s Time to Customize OTT Videos for Each Audience
Once marketers know whom they are trying to reach, they can begin customizing their messages. Unlike old-school TV commercials, today’s ads are not casting wide nets, trying to get everyone’s attention. Instead, modern advertisers are empowered to talk to their audiences in targeted ways. For each ad campaign, businesses must consider the message, the tone, the setting, and even the size of the fonts used in videos.
For example, car dealerships may want to create different video ads for young, budget-conscious car buyers versus well-heeled retirees looking for exceptional service.
For videos marketing gym memberships, one video could target swimmers looking to stay lean and another could target weightlifters looking to bulk up.
Ads that market health systems may leverage the opportunity to differentiate between people who just need wellness checkups versus people looking for regional heart specialists. When marketers tap into the power of OTT, they have the ability to serve super-targeted ads to well-defined audiences.
Forget the old one-size-fits-all attitude. Businesses with more than one type of target audience can use OTT advertising and CTV video or streaming TV ads to be specific. This is the time to create multiple videos and deliver them to the right audience at the right time.
Remember These Words: Retargeting, Retargeting, Retargeting.
The best part of the new advertising paradigm is that it allows businesses to reach the same consumer again and again, but in different media. Retargeting is a term that means very targeted ads are sent to the same consumer based on prior online activity. Retargeting ads track online patterns, and then use that information to send ads to people based on their digital activity.
By taking advantage of device thumbprints, website cookies, and IP targeting, advertisers can now connect TV viewing and online marketing. For example, a woman uses her desktop computer to look at lamps on Bed, Bath, & Beyond’s website. After she’s done on her computer, she watches TV using a Roku device, which operates on the same internet connection. When the right kind of retargeting programming is in place, she’ll find that Bed, Bath, and Beyond ads for lamps are showing up on her TV.
If she decides to return to the computer and buy the lamp, the preset tracking will attribute the sale to the ads, helping marketers decide the best places to run the next set of ads.
This kind of sophisticated retargeting does require planning, such as the installation of tracking pixels, analytical tools, and cookies on the website. However, with the right set up, businesses can track web traffic by device and web pages, so they can then retarget audiences with personalized ads that remind them of what they’ve recently shopped for, even after they’ve left the website.
The best news? This kind of retargeting is affordable and available for businesses of all sizes. Even companies with modest marketing budgets can take advantage of these kinds of targeting tools and create highly specific marketing campaigns.
Beware: Make Sure You Know Exactly What You’re Buying
While there are many attractive aspects of OTT and CTV, the advertising sales process can be confusing. In fact, many sales reps don’t really understand the OTT and CTV differences. As a result, many advertisers have found that they inadvertently purchased one type of package when they meant to purchase the other. So, how can marketers be sure they got the right package?
The media rep should provide a detailed budget breakout with predicted impressions for CTV, mobile and desktop. The post-advertising report should match that proposal exactly, or clearly explain discrepancies, and offer compensation or refunds for non-delivery or alternate delivery of videos.
Right now, it’s a bit like the wild west out there. This is a new category and mistakes are made all the time. While it will take time for any marketing team to compare media proposals to reports, it’s the only way businesses can be sure that they got what they paid for. All products have their own inventory, pricing, and reporting, so advertisers must do homework and check all buys for accuracy.
The same rule applies for your CTV advertising campaign. Businesses must make sure their sales reps didn’t charge for a Connected TV ad campaign and deliver an over-the-top advertising audience. After the campaign has been running for a few days, advertisers are wise to request full site lists to check where the ads are running. CTV campaigns should list TV apps only. If the business sees that there are websites listed or reports on clicks, they’re running an OTT campaign.
The best ad campaigns are balanced
OTT and CTV ads are popular advertising options that are becoming more affordable and accessible every day. Both of these ad choices can be very effective. However, that doesn’t mean that marketers need to abandon other forms of advertising.
In the digital world, social media ads and search campaigns should continue to be affordable, effective components in a well-rounded marketing plan.
Print and newspaper also play important roles in balanced campaigns designed to reach a wide range of consumers and demographics.
Many of the most effective marketing campaigns have used OTT and CTV ads to support a growing social media presence. When set up properly, some over-the-top ads can ask audiences to click through to “continue the story” on other platforms such as Facebook or Instagram. Many print entities give short version or highlights on digital, and full stories and deep dives in print.
The key is to use each media in the ways that work with the platform and elicit consumer response. Running videos in search ads can be annoying. Conversely, including pages of text on social media ads is often ineffective. One of the keys to marketing success is identifying the time, place, and format that works best with each platform.
The Future of OTT and CTV
Today’s TV has changed so much in just the last decade. Streaming services like Amazon Prime Video, Netflix, and Hulu are common in today’s homes. Viewers are spending more time with CTV and less time with traditional cable TV.
People are now willing to pay for streaming, or subscription TV, like Netflix and Hulu, particularly younger viewers, according to research by Nielsen. As the number of people who watch traditional TV continues to decline, changes in TV viewership are sure to follow.
So, what is the future of OTT ads and Connected TV ad or streaming TV advertising? Here are a few scenarios to watch for;
- Scenario: The Rise of Addressable AdvertisingAddressable advertising is the ability to show different ads to different households during the same programming. That means that even if two neighbors are watching the same TV show at the same time, if one neighbors likes travel, and the next door neighbor prefers cooking, the first household will see travel ads while the next door household will see ads about cooking. Addressable advertising will force advertisers to forgo mass marketing in favor of personalized messages created for smaller groups of more aligned consumers.
Addressable advertising will probably be paired with OTT’s super-targeted capabilities in ways that allow advertisers to deliver series of messages that really move the sales needle.
- Scenario Two: Real-Time Audience EnrichmentMarketing audiences and their needs change every day. But with new technologies, advertisers may be able to reach consumers at the exact moment that they need their services. As marketers get accustomed to having the ability to understand how each audience segment acts and reacts, they may be able to optimize campaigns in real-time based on improved audience data reporting. In the past, this kind of message optimization would take weeks to analyze and identify. With OTT, CTV, and the right tracking codes in place online, there is the potential to identify behaviors and predict needs immediately and accurately.
- Scenario Three: Amplified Predictive AdvertisingWe’ve already seen the power of some types of predictive advertising. Amazon is able to deliver relevant ads to users in real-time, continually adjusting with every view, every item added to a cart, and every purchase. These algorithms allow Amazon to continually cross-sell and up-sell. This ecommerce giant has pioneered predictive advertising using their own customers and shoppers as their laboratory.
These kinds of predictive technologies, based on viewing, shopping, and purchase behavior will work their way into all parts of the internet, and over-the-top advertising and CTV ads will play a part.
When it’s done right, predictive advertising is interesting and helpful. When it’s executed carelessly or incorrectly, it can feel annoying, invasive, or even insulting. Facebook has already run into issues with predictive advertising and has had to restrict targeting options for some classes of advertising including housing, credit, and financing.
As an example, a childless couple that gets ads for a daycare center for babies is quickly annoyed. However, if those same ads are delivered when they have a newborn in their home, the ads become relevant and valued. On an even more granular level, in the near future, advertisers may be able to send ads for sales on heartburn medication to people within one mile of a drugstore with a history of chronic indigestion who have eaten at Mexican restaurants in the past two hours.
Final Thoughts on OTT, CTV, & Video Marketing
There’s no doubt about it. The number of OTT-enabled devices is on the rise, and traditional TV advertising is on the way out. The use of Connected TV is exploding, and marketers are eager to find more cost-efficient ways to reach their consumers. The growth and flexibility of over-the-top ads and Connected TV ads or streaming TV advertising means that businesses shouldn’t ignore this media when examining marketing and advertising options.
Today, one size does not fit all. With so many customized options in the marketplace, and more developing every day, it makes sense to create a customized marketing approach. It is also a good idea to have a set of videos created to target a variety of people, needs, and situations. Today’s advertisers have a wide choice of targeting tools. The messages viewers receive will continue to be more relevant, personal, and when done correctly, more enjoyable.
If you want to explore your marketing opportunities in CTV, OTT, video production, and programmatic advertising, the LNP Media team is an experienced, affordable place to start. We’d love to hear more about your goals and needs. Call LNP Media today at 717-291-8831, or click here to drop us a line. Our video and digital experts will be happy to help you market your business effectively in an ever-changing media landscape.