The days of enormous tube televisions and fiddling with antennas for a clear signal are well behind us. We’ve moved on to sleek, slim, and plasma-filled screens that make an average living room feel like a movie theatre. So, what’s the next big improvement? In an age when we are ever-connected to the Internet, it only makes sense that television follows suit.
CTV and OTT: What’s the difference?
Connected television, or CTV, refers to any television that is capable of connecting to the Internet, typically via Wi-Fi. A CTV home screen contains a handful of built-in apps that offer access to popular streaming services such as Netflix, YouTube, and Spotify. In just a handful of years, CTV ownership has skyrocketed – and there’s no sign of slowing down any time soon. In a 2019 Nielsen study, CTVs were found to be in 68% of U.S. households.
When publishers first caught wind of this growing trend, they began to offer online streaming versions of their television content on CTVs – delivered through their own downloadable apps and usually for a small monthly fee. This type of streaming service is known as over-the-top, or OTT. For example, SlingTV is an OTT service that offers standard linear television content, but it goes “over the top” of traditional cable subscriptions. This allows viewers to stream cable shows without owning a cable box or paying for a full cable subscription. The OTT definition extends to products such as AppleTV, Roku sticks, or Chromecast. Essentially, any service or product that allows a viewer to stream media outside of a cable box is considered OTT. So SlingTV is an OTT subscription, streamed via the AppleTV OTT device, consumed on a CTV. Straightforward and not ambiguous at all, right?
A Whole New World of Ad Inventory
The proliferation of OTT content is great news for consumers— the ability to watch a favorite show or movie on demand from any network is enticing to many. Simultaneously, all of these streaming services are creating a new and opportunistic landscape for advertisers to run alongside premium inventory. Traditionally, running a video ad on cable television alongside premium content such as live sports, a popular TV series, or during the holidays was prohibitively expensive for many advertisers. In addition to daunting costs, traditional linear television offers little in terms of measuring performance or targeting audiences.
As CTVs and OTT have quickly started taking over our living rooms, the world of programmatic advertising has been right on the heels of all this untapped opportunity. Demand Side Platforms, or DSPs, are platforms used to buy programmatic inventory. Growing more prominent every year, programmatic advertising has gained unprecedented traction as an extremely efficient and affordable way to buy ad inventory across all forms of media.
How Does Buying CTV Ad Inventory Work?
Let’s say we want to buy video inventory on SlingTV that is viewed on a CTV. Furthermore, let’s say we only want the video to be served to individuals in Minnesota who are known to be cooking enthusiasts. SlingTV has already established with certain DSPs that its ad inventory is available to buy programmatically. The DSP applies demographic targeting by using first-, second- and/or third-party data, and then layers specific geographical boundaries on top, which gives us our intended audience.
By utilizing a technology called real-time bidding, the DSP is able to purchase the inventory in real time. So, when a cooking enthusiast in Minnesota begins streaming The Food Network on SlingTV and it’s time for an ad to play, SlingTV notifies the DSP within milliseconds that the perfect user is available to be targeted. The DSP then begins a lightspeed bidding process with other advertisers that may be trying to reach the same user. Just like an eBay bid war, the advertiser willing to pay the most wins. These bids are based on a CPM (cost per thousand impressions) value, so if an advertiser places a high value on the intended audience, they will be more likely to invest what’s required to win the bid. On average, OTT inventory sells for anywhere from $25–35 CPM, as compared to $35-60 CPM for direct buys — not a bad price to pay for a commercial aimed at the exact intended audience.
In other words, OTT streaming services sell their inventory to DSPs on a CPM basis to the highest bidder, which in turn is played on a CTV to a relevant viewer. This is cool technology and all – but why does it matter to marketers and advertisers?
Reach a Captive Audience with CTV Advertising
In 2018, CTV consumption topped out at 182.6 million viewers, which is projected to hit 204.1 million by 2022. Simultaneously, viewership for linear television, or LTV, has decreased by 43% over the past five years. As a result of OTT viewers being able to choose what they watch and when they watch it, they tend to be more receptive and thereby associate OTT ads with having an impactful, unique story to tell. This has resulted in a 32% higher lift in brand awareness compared to ads seen on LTV.
The growing viewership of OTT paired with the efficiency of programmatic buying is great news for advertisers— it means access to affordable inventory in a premium environment that leaves a lasting message.
The Efficacy of OTT: Quality Over Quantity
Simply having the ability to buy OTT inventory programmatically is a monumental shift for advertising on television –it allows advertisers to tap into an otherwise difficult-to-reach or unaffordable market. A recent study by Magna Global comparing ads on linear TV to ads on OTT emphasized the effectiveness of OTT buys. Although LTV still sees more than twice the number of exposures as OTT, when controlling for reach, OTT is 67% more effective per exposure at driving purchase intent.
This can be attributed to a handful of factors, but one to consider is the effect of ad saturation on LTV compared to OTT. Think about how much time is dedicated to advertisements on LTV and how easy it is to tune them out. A lighter ad load on OTT can lead to better ad recall. To put this in perspective, on cable television there is an average of 16 minutes of ads per hour, whereas OTT provider Roku averages just eight minutes each hour.
What Does All of This Mean to Marketers?
Being able to tap into OTT inventory programmatically provides advertisers with premium ad spots for a price that can be worked into just about any budget. The ability to target a specific audience ensures there is no wasted spend – and as the ad environment expands at an exponential rate, more and more publishers are deciding to consolidate their content in an OTT platform. Ultimately, targeting CTV and OTT services unlocks new territory for advertisers that is proven to amplify brand awareness and increase purchase intent.