Ever since the television was invented and with the days people used to watch the first TV’s at their neighbor’s home, video content consumption has evolved a lot. Today we have more options than ever to watch what we like and when we like, driven by new and growing channels, such as ‘Connected TV’ (CTV). All major US networks have ventured into CTV recently e.g. Disney has Hulu, ViacomCBS has Pluto TV and Fox has Tubi, similar to digital-first companies like YouTube and Roku Inc.
CTV is one of the most impactful broadcast technology innovations in history, as it enables viewers to watch the wide range of over-the-top (OTT) digital video content available online. We’ll explain OTT below. With the ability to reach over 92 percent of U.S. households in 2023 and usage expanding across all generations, the opportunity of CTV is huge.
US advertisers spend a combined $87 billion on linear and CTV last year, meaning about 1 in 4 ad dollars went to ads on the TV glass. CTV ad spend will account for over 10% of overall digital ad spending, in 2024. As streaming alternatives become more popular than linear TV among viewers, advertisers are eager to leverage the opportunities of this digital shift.
What is CTV advertising?
CTV is part of ‘streaming television’ (STV) or ‘over-the-top’ (OTT), which is the umbrella term that covers the delivery of video content via the internet with Connected TVs, devices and Streaming services. As audiences are streaming their favorite shows across a variety of devices and services, advertisers need to connect with these audiences where they are watching. We will now zoom into ‘Connected TVs’, as displayed on the below image on the right. Connected TVs stream content over the internet by using different internet-connected devices, this can be done with:
- Smart TV’s that connect to the internet and have built-in apps and streaming devices;
- Traditional TVs hooked up to gaming consoles allowing users to access streaming services and other content online. Consoles like Nintendo, PlayStation or Xbox can also be sed as CTV devices;
- Streaming devices plugged into a traditional TVs like Roku, Chromecast, Google TV, Apple TV or the Amazon Fire Stick via the HDMI port to access streaming services.
Similar to Connected TVs, OTT has a couple of benefits like the possibility of reaching an audiences with highly targeted advertising, customer segmentation and increased efficiency.
Linear TV advertising versus CTV advertising
Let’s start by sharing that in 2023, digital video overtook TV in terms of time spent by the average US adult, showing the dominance of connected viewing in the streaming era. Linear TV time will drop below 3 hours per day, for the first time in a decade!
Linear TV is the traditional way of viewing TV with a fixed schedule of programs on specific channels. With CTV the viewer has the freedom to choose what, when and where to watch. Other differences between the two are:
- Commercials: traditional TV ads are shown during commercial breaks in between TV programs, where CTV ads are streamed over the internet depending on user behavior;
- Interactive: CTV ads can enable viewers to engage directly with video advertisements using advanced creative features like QR codes or other interactive capabilities;
- Targeting: CTV ads are targeted and better quantifiable than traditional TV ads.
Despite the increasing number of CTV users and the decreasing popularity of traditional TV, CTV advertising spending in the US is still much lower than traditional TV advertising.
Digital video surpasses TV in ad spending in 2023
Apart from ‘average time spent’ digital video, that includes CTV, will also become bigger than ‘linear TV’ in ad spending this year. The same happened in China back in 2021. Video ad spending in the US is expected to reach $78 billion in 2023 and will continue to grow until 2026, while TV ad spending will lag behind at $66 billion and will decline in the coming years. Looking at CTV in the US eMarketer estimates ad spending will grow 22.5% to $23.90 billion in 2023, and soar to almost $39 billion by 2026.
Good to know the ad spending trends are typically ahead of time spent trends, not only because marketers are anticipating where viewership is going, but also as digital also offers a better chance for marketers to target and track their audience.
CTV reach
Overall there are 3.1 billion video viewers worldwide and CTV/OTT viewership is estimated at roughly 400 million viewers, with Singapore, Australia and Indonesia leading as most CTV-friendly countries. In the UK there are 45 million CTV Users which is 67% of the population. The US is estimated to have 230 million CTV users in 2023 which is about 68% of the population. eMarketer projects that 111 million out of 132 million households in the US will have CTV devices in 2023, and this number is expected to increase to 117 million by 2026 (out of 135 million households in total).
Netflix and Youtube combine for more than half of CTV viewing hours. With streaming app Netflix, CTV advertisers can reach over 61% of the US Connected TV households. As Hulu and HBO Max, offered multiple subscription options with lower prices, Netflix launched a new subscription tier that will support ads. Netflix partnered with Microsoft for CTV advertising in their new ad supported subscription, is available in 12 markets and can be bought exclusively via Microsoft. The millions of people, with the likes of Gen Z, Millennials, Generation X and Boomers, that are already fans of this type of entertainment can be reached with CTV advertising. For advertisers, this means a huge opportunity to reach their target audience.
How to buy Connected TV ads?
As more viewers join the CTV community, more advertising solutions are popping up. Let’s highlight three possibilities advertisers use most often to buy CTV ads.
- Programmatic way: Programmatic is an important piece of the puzzle, accounting for almost 90% of CTV display ad spending this year, and over 10% of linear TV ad spending. It is one of the fastest-growing sections technology-wise and eMarketer points out that today over 55% of CTV ads are already being delivered programmatically. If you are new to CTV advertising you can sign up with a Demand-Side Platform (DSP), they will give you the right support (campaign setup + Private-Marketplace (PMP) selection, target audience, budget, uploading ads) and guidance to ensure a smooth campaign execution. CTV ad buying through programmatic platforms differs from other advertising types, because it mostly happens through PMP deals. The reason for this is that publishers are selling premium inventory and are selective about the ads to appear. Their inventory is only available to exclusive partners that meet specific requirements to secure brand safety on CTV.
- Platform direct: Retailers can also buy CTV ads directly on a CTV platform like Amazon Fire Stick TV, Roku Inc. and others. Microsoft recently integrated with Roku revealing increased engagement across CTV and search. Each platform has it’s own interface, network, guidelines, specifics and can support you to place your ads within CTV content. Once your campaign is approved, it gets launched on the platform’s CTV inventory, and you can usually track it through the platform’s reporting dashboard.
- Publisher direct: The 3rd option for advertisers looking to reach audiences on connected TV devices is buying CTV ads directly from the OTT service provider in the likes of YouTube, Plex or Tubi. The publisher direct option may require more expertise from the advertiser, as each publisher has it’s own unique audience segments, ad formats and placement options. Make sure they align with your advertising goals.
How to buy Connected TV ads depends on your expertise and resources available. Buying CTV ads directly from publishers can help you target audiences more precisely, but it can also take more time and resources. Therefore, you should weigh the advantages and disadvantages before choosing the programmatic or direct buying option.
How are Connected TV audiences targeted?
As mentioned earlier, each platform offers a variety of audience targeting options. Let’s explore some of the most common and popular targeting options.
- Demographics can help to narrow down your target audience with selecting age, income, education and so on;
- Targeting a geolocation can help if a retailer only delivers in certain states or regions;
- Platform targeting enables advertisers to reach only viewers using specific devices;
- Channel targeting gives advertisers the ability target a specific channel;
- Contextual targeting helps to target ads that are relevant to the content being watched;
- CTV advertising is usually part of a larger digital marketing plan, therefore the audience targeting should include 1st and/or 3rd party data;
- Frequency caps limit the number of times a CTV ad will be shown to a viewer. The fragmented landscape across many CTV networks, services and platforms can cause an ad numerous times in a short period of time. Use caps to preserve your brand safety and ad effectiveness.
Connected TV ad formats
To capture the attention of their audience, advertisers should create engaging video ads that blend in with the streaming experience, as CTV ads are usually integrated with the video content. There are 3 CTV ad formats available, these are:
- In-stream video ads are served to audiences once they start a streaming session, and can be shown before, during or after viewing the selected content. In-stream video ads come closest to the traditional television commercials, and are also referred to as pre-roll, mid-roll and post-roll video advertisements;
- Interactive video ads are video advertisements that allow viewers to actively participate in the experience and engage with brands while they stream content on devices;
- Display Ads appear above, below or alongside the content being viewed. And help increase and improve brand awareness. eMarketer estimates that CTV will account for 16.5% of all US display ad spend in 2023;
- Depending on the platform pop-up ads are shown when a viewer has paused their programming or and below the content being viewed. These ad types help boost brand awareness without interrupting their viewing experience, and viewers don’t interact with them in any way.
Apart from the above formats there are two types of Connected TV ads, the direct response ads with the aim to drive performance and revenue through a call to action, and branding ads that aim to build brand awareness.
Important metrics and measurements for CTV Advertising
It is important to measure the effectiveness of CTV campaigns and make adjustments to improve results. Most of the metrics used for tracking regular video campaign performance apply to CTV as well. Viewability, completion rate, frequency, reach, CPC and conversion rate are the key metrics advertisers should track to optimize CTV campaigns. Apart from CTV reports can include operations, inventory, device price analysis and more. Your campaign goals determine which KPI’s and metrics to track.
Launch your CTV ad campaign
Use a 4 step action plan to run Connected TV ads:
- Know your target audience;
- Decide what ads to serve on each OTT channel;
- Find a DSP or Advertising partner to meet your goals
- Run your ads and track the performance.
In conclusion, CTV advertising offers a great opportunity for brands to connect with their audience in a more effective and engaging way than traditional TV ads. CTV advertising is growing rapidly and has many benefits, such as better control, targeting, engagement, reach, cost-effectiveness, sound and measurability. To launch a successful CTV ad campaign, you need to set clear goals, choose a CTV advertising platform, decide on an ad creative, choose the right targeting options and test and optimize your campaign. We hope this article has helped you get ready for your CTV ad campaign and achieve your marketing goals.