OTT Advertising Ad Spend: Deep Dive

Increased popularity in streaming content and OTT advertising has leveled the playing field for SMBs to compete with enterprises in the television advertising space. You can start with a moderate budget of around $2000/month, then adjust ad spend depending on brand needs and overall performance.

More and more people consume video content on their laptops, tablets, and smartphones. With this shift, marketers and advertisers are following suit and increasing OTT advertising ad spend.

With 62% of adult households subscribing to streaming services such as Hulu, YouTube TV, Paramount +, Sling, and devices like Roku, Apple TV, and Amazon Fire TV – OTT advertising has emerged as a new, cost-effective advertising opportunity.

Brands can reach consumers directly in their homes and living room on laptops, connected TVs, tablets, and mobile smartphones and hone in on their preferences and interests in a way traditional TV advertising never allowed.

What is OTT Advertising?

OTT advertising allows marketers and advertisers to reach consumers directly over the internet through streaming devices, such as laptops, connected TVs, and smartphones.  Viewers can bypass traditional TV providers that control media distribution to reach audiences directly. This is especially beneficial for SMBs who have not been able to participate in expensive broadcast tv advertising space.

Advertisers can now go directly to OTT platforms and media companies and buy OTT advertising space programmatically, while audience data analytics make it possible to personalize ads in a more cost-efficient way.

BIA Advisory Services, a leading research and consulting service company specializing in local advertising, projects OTT local ad spending to increase from $1.18 billion to $2.37 billion by 2025. It’s no wonder OTT advertising ad spend is increasing year-over-year and gaining on TV as an overall leader in total ad spend.

Costs of OTT Advertising Ad Spend

Increased popularity in streaming content and OTT advertising has leveled the playing field for SMBs to compete with enterprises in the television advertising space. You can start with a moderate budget of around $2000/month, then adjust ad spend depending on brand needs and overall performance.

Some platforms may require higher monthly spending, but overall you will find more flexibility in pricing with OTT advertising. OTT ads typically cost between $25–$40 CPMs (cost per 1000 impressions/tv spots). This means you only pay if someone views your ad.

Traditional TV advertising can range from $40–$200 CPM Rate or more depending on demand. Unlike OTT ads, there is no way to track who or how someone views your ad. The inefficiency in TV ad spending, reaching people you don’t intend to target, and limited tracking capabilities mean the cost of OTT advertising provides more efficient ad spending. Check out our OTT budget calculator here to estimate your OTT advertising cost.

Shifting Beyond CPM Pricing

To account for metrics beyond impressions and ensure advertisers are getting the most out of ad spend, the industry has begun introducing payment rates beyond CMP rates.

Accountability, transparency, and performance are key pillars for the new buying system. Companies like Moat and Integral Ad Science are gaining popularity, tracking metrics like viewability, audibility, and completion rates.

New OTT Advertising Ad Spend Pricing Systems

  • Cost Per View (CPV): CPV guarantees advertisers are only paying for impressions that meet the current standard of viewability: at least 50% of an ad’s pixels on screen for at least two seconds. For optimal benefits, viewability standards need to be redefined.
  • Audibility and Viewability: One step beyond CPV, considering an ad must be viewable and heard.
  • Cost Per Completed View (CPCV): Measures how many people watch an ad. This is more challenging for publishers but does give advertisers a high level of accountability, transparency, and performance they seek.
  • Percent Complete: Would charge based on how much of an ad was watched. If a viewer watches the whole ad, you will pay a higher rate. Whereas you’d pay a proportionately lower rate for a smaller portion of a video watched.

Currently, CPCV is the front-runner for replacing the industry-standard CPM pricing system. Knowing a viewer has viewed your whole video is a better metric for measuring genuine engagement and understanding an audience’s preferences and interests.

OTT Advertising Video Best Practices

While you may want to put together a quick video and send it to your OTT buying platform, programmatic and direct buy platform requirements must be met. Following a few standard best practices will get you the most out of your OTT ad spend.

  • Keep It Short: People have short attention spans, so you want to keep your video short, which means somewhere between 15 to 30 seconds tops. Regardless of non-skipping features, you’re going to lose your audience with anything longer than 60 seconds.
  • Format for Multiple Devices: OTT ads can appear across multiple devices from mobile to desktop to smart TVs, don’t assume it will fit on one or the other. Identify sizing best practices and optimize for any type of device.
  • Personalize Your OTT Ads: Over-the-top advertising provides ample tracking metrics; take advantage of them and create ads that speak to your audience. The look, sound, and feel of your video should mirror the preferences and interests of your audience.

How to Measure OTT Advertising Success

OTT ads provide real-time reporting and data, allowing advertisers to understand their audience better and target specific demographics.  Direct buying platforms like Hulu and SlingTV provide some demographic targeting. Still, programmatic OTT ad buys give the best options for picking and choosing the audience you direct your ads to, including leveraging geofencing for audience curation.

With OTT advertising, brands have access to attribution tracking — which allows advertisers to connect an ad with the completion of an action (visiting a website). This enables advertisers to track online and offline behavior to better understand demographics and advertising efficiency.

If you look at a billboard, direct mail, linear tv, or radio ad, you are limited in measuring conversion beyond brand impact. On the other hand, OTT ads allow you to measure those who saw your ad and then visited your website or bought your product.

A few data variables OTT platforms allow you to analyze and measure are:

  • Budget/Spend
  • Impressions
  • % of Video Watched
  • Cost per Click (CPC)
  • Cost per Action (CPA)
  • View Through Conversions
  • Walk-In Conversion

An advertising agency can help you optimize your OTT and other advertising to provide the best possible results.

New Path is a pioneer in programmatic advertising. We work with the leading programmatic providers to execute campaigns that influence every step on the path-to-purchase.

Since our founding, we have been committed to maintaining end-to-end control of our digital advertising practice.  We plan, build, execute and optimize our programmatic display and video campaigns in-house.

Our programmatic display and video solutions include:

  • Display & Video 360
  • OTT (video advertising)
  • YouTube Advertising
  • Amazon Advertising
  • Adelphic DSP
  • Campaign Manager

The outcome? Accelerate campaign launch times, optimizations, and increase your overall return on investment. Ready to learn more about OTT advertising? Download our Complete Guide to Getting Started with OTT Advertising.

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