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OTT Advertising: Everything You Need To Know

Television viewing habits have changed a lot over the past decade as cable television providers have slowly been losing subscribers to internet-based streaming services such as Netflix, Hulu, Disney Plus, YouTube TV, and more.

This shift in consumer behavior accelerated in 2020 during the Covid-19 pandemic. As a result, advertisers need to quickly adapt their media buying strategies to reach today’s consumers. The good news is that TV and video advertising is more accessible than ever for companies that don’t have million-dollar TV budgets.

This guide will provide a 101 overview of OTT – what it is, why it’s important, and how it’s bought. We’ll also examine the benefits and drawbacks and then close with tips on how to get started.

What is OTT Advertising?

Over-the-Top (OTT) is the delivery of TV/video content directly over the internet. Viewers don’t have to subscribe to a traditional cable or satellite provider to access content. This type of viewer is often referred to as a cord-cutter—a person who switches from a pay TV subscription (cable, satellite, DirectTV) to an internet-based streaming service like Hulu or Netflix. Recent data from Statista showed cord-cutting households in the U.S. amounted to 24.1 percent in September 2020. Continued growth is expected, culminating in 35.4 percent of households will cut the cord by 2024.

With content so readily available across devices, it’s no surprise consumers are cutting the cord with their cable providers. High-quality video content is now easily accessible across all connected devices, including:

  • Mobile devices
  • Personal computer
  • Smart TV/Connected TV
  • Streaming devices (Roku, Apple TV, Amazon Fire)
  • Gaming consoles

So cutting the cord means cutting the ads too right? Wrong. Companies of all sizes leverage OTT ads to reach their audience in targeted and creative ways. So what is OTT advertising?

OTT Advertising describes the act of buying ad space on streaming video services.  These internet-based video advertisements reach consumers as they actively view video content on connected devices.  Basically, it’s like advertising on TV, but it’s bought programmatically or through streaming media platforms. OTT advertising is an essential part of a modern integrated media buy – depending on the target demographic. OTT ads are great for increasing reach and for building frequency.

Is OTT Advertising Important for My Business?

It’s official—streaming has gone mainstream. With more content to choose from every day and more ways to watch it, viewers are customizing the “primetime experience” by spending more time using streaming services.

OTT advertising allows marketers to deliver ads directly to viewers. A May 2020 survey showed that 70 percent of respondents aged 18 to 34 stated that they currently subscribed to a streaming service, compared to just 49 percent of those aged 65 or above who said the same.

Key streaming trends advertisers need to know, according to research from Nielson and Comscore:

  • 64% of homes with WiFi use OTT, up 17% year-over-year
  • 28% year-over-year growth in total time spent streaming OTT
  • 47% of 18- to 49-year-olds are light TV watches
  • YouTube leads reach (68%) and watch time (41%) among ad-supported OTT services

The COVID-19 pandemic has turned on-demand content into a massive industry. With increased viewership comes ad spending. In 2020, total ad spending for OTT came in at $990 million; this number is projected to grow to .

According to a recent Google Think trend report, video viewers said relating content to their passions is 1.6X more important than high production quality. Viewer’s passions differ, as do their unique ideas of what primetime looks like shifting the focus from networks to viewers and content relatability to high-quality production. Advertisers have a prime opportunity to engage a new audience with helpful and relatable video ads at any budget point.

What are the Benefits of OTT?

With OTT advertising, you can reach viewers beyond the traditional TV marketing landscape. Bringing together the targeting precision of digital with the high impact of TV viewership, advertisers can engage the right audience at the right time.

Let’s look at a few benefits of OTT advertising:

Increase Reach

As pointed out earlier, 24% of US adults do not currently have a cable or satellite subscription.  To reach a significant portion of your target audience, OTT Advertising must be a part of an integrated video advertising strategy.

Segmentation

OTT advertisers can segment audiences by almost any data point users generate. Advertisers can show ads based on a user’s demographic, device usage, past purchases, and more.

Cross-Channel Targeting

Brands can target and retarget the same audience on multiple channels. Advertisers can use a combination of OTT advertisements, social media, programmatic audio, display, their website, and more.

Engaged Audience

One of our favorite advantages to OTT Advertising is that it only runs if someone actively requests video content. When you buy traditional TV advertising, you are paying for an anticipated number of viewers, and the ad runs regardless of if anyone is watching the broadcast or not. With OTT Advertising, a viewer actively requests the video content, so it’s more likely an ad will have a higher percentage of impressions viewed.

Tracking Capabilities

While marketers have no way of knowing who viewed their commercial or if anyone even watched it, OTT platforms give advertisers information regarding user engagement. Engagement metrics include the number of viewers who skipped an ad, click rate, and more.

Advanced Targeting

OTT advertising providers can combine viewer household data with 3rd party data to create enhanced targeting opportunities for advertisers. Here are a few examples:

  • Life event indicators (ex. Recently moved or graduated)
  • In-market signals (ex. Remodeling or auto shopping)
  • Affinity signals (ex. Luxury shoppers or travel enthusiasts)

Enhanced Accountability

Similar to other forms of digital advertising, OTT Advertising can provide near real-time data.

What are the Drawbacks of OTT ?

While it may seem that the streaming landscape is one channel, it is actually fragmented across devices, channels, platforms, and publishers. OTT ads don’t just “appear,” content is delivered through various OTT channels. With fierce competition among content distributors and CTV device creators, OTT advertising does have its disadvantages, including:

Transparency

Most brands access OTT advertising through a reseller or an aggregator. Using a reseller can make it more challenging to know if an ad is showing on a premium channel or a less popular segment.

Measurement

OTT ads are delivered via television, so it’s challenging to track attribution. Tracking clicks or traffic isn’t as straightforward as other digital channels. Partnering with an agency specializing in OTT advertising may help you fully understand your OTT ads’ impact.

Media Planning and Targeting

Buying an OTT ad isn’t difficult but understanding how your OTT campaigns fit into your larger media and digital campaigns requires a more strategic approach. Many platforms and data providers can’t match cookies and media ad IDs to IP, limiting the scale of audience targeting.

How is OTT Advertising Bought?

OTT advertising can be bought directly from streaming providers, resellers, or programmatically purchased.

Streaming publishers and service providers offer contracts for ad space directly to advertisers and advertising agencies who get to pick and choose when, where and to whom their ads are placed.

OTT advertising resellers act as a middleman. They sell streaming ad space that they have pre-purchased from streaming publishers or that they have access to through auction-based ad exchanges.

Programmatically buying OTT advertising allows advertisers and agencies to purchase ad space without making significant commitments to streaming publishers and bypasses many of the markups tacked on by OTT advertising resellers.

Whether you are negotiating with a salesperson or buying OTT ad space programmatically, two main currencies are used to purchase space.

  • CPM = Cost per mille or more commonly referred to as cost per thousand. CPM is a measure of impressions served.
  • CPCV = Cost-per-Completed-View. Advertisers are only charged when a user watches the video.

How do I get Started with OTT Advertising?

Due to the extensive research that goes into each OTT ad placement, most businesses will want to partner with an advertising agency with the experience and tools to handle programmatic OTT placement.

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 get started? Schedule a free consultation.

Summary

This guide will provide a 101 overview of OTT – what it is, why it’s important, and how it’s bought. We’ll also examine the benefits and drawbacks and then close with tips on how to get started.

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