The shift in consumer behavior accelerated during the Covid-19 pandemic, led by the use of digital platforms and the consumption of entertainment online. As a result, advertisers need to quickly adapt their media buying and ad campaign strategies to reach today’s consumers. The good news is that TV, cable tv, and video advertising are 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 start your OTT advertising journey.
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 the content. We refer to this type of viewer as a cord-cutter—a person who switches from a pay TV subscription (cable, satellite, DirectTV) to an internet-based streaming service like Hulu, Netflix, or Amazon Prime Video. Additionally, recent data from eMarketer showed cord-cutting in the U.S. continued to grow to 35.9 percent of the US population in 2023. We expect continued growth, culminating in 41.6 percent of the US population cutting the cord by 2026.
With streaming 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 cost-effective and easily accessible across all connected devices, including:
- Mobile devices
- Personal computer
- Smart TVs/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 essential to a modern integrated media buy – depending on the target demographic. Furthermore, OTT ads are great for increasing reach and for building frequency. There are many different types of OTT Advertising for you to use.
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 and ad-supported streaming services.
OTT advertising allows marketers to deliver ads directly to viewers. A July 2021 survey showed that 67 percent of households aged 18 to 44 stated that they currently subscribed to a streaming service, compared to just 41 percent of households aged 18 to 34 or above who said the same.
Key streaming trends you should know:
- Average household has 6.8 streaming video services
- 88% of households have video streaming services
- Cable TV has declined, losing more than 1 million customers between the first and second quarters of 2022
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; experts project this number to continue growing.
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. Viewers’ 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. Thus, advertisers can engage a new audience with helpful and relatable video ads at any budget point.
What are the Benefits of OTT?
You can reach viewers beyond the traditional TV marketing landscape with OTT advertising. 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:
Forty-four percent 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.
OTT advertisers can segment audiences by almost any data point users generate. Therefore, advertisers can show ads based on a user’s demographic, device usage, past purchases, and more.
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.
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.
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.
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 (e.g. Recently moved or graduated)
- In-market signals (e.g. Remodeling or auto shopping)
- Affinity signals (e.g. Luxury shoppers or travel enthusiasts)
Similar to other forms of digital advertising, OTT Advertising can provide you with 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. Basically, OTT ads don’t just “appear;” advertisers deliver the content through various OTT channels. With fierce competition among content distributors and CTV device creators, OTT advertising does have the following disadvantages:
Most brands access OTT advertising through a reseller or an aggregator, but using a reseller can make it more challenging to know if an ad is showing on a premium channel or a less popular segment.
OTT ads are delivered via television, so tracking attribution is challenging. Since 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, thus limiting the scale of audience targeting.
How is OTT Advertising Bought?
You can buy OTT advertising directly from streaming providers or resellers or purchase programmatically.
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.
While 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 Start Using OTT Advertising?
Due to the extensive research that goes into each OTT ad placement, most businesses 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.
We commit ourselves to maintaining end-to-end control of our digital advertising practice. Together, 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 start? Schedule a free consultation.