It wasn't long ago that linear TV was the only option for video entertainment. Netflix was one of the first to the streaming content scene, but options have since exploded.
Now, linear TV, streaming channels like Tubi and FuboTV, Youtube, TikTok, and many others are all competing for viewers’ time and attention.
As well as brands’ advertising dollars.
So whether you’re buying or selling ads in this environment, you should have a thorough understanding of OTT advertising.
You’re in the right place.
Let’s take a little tour through OTT ad basics and how to get started with over the top.
Over-the-top (OTT) advertising refers to ads that are delivered via a streaming service during a viewer’s movie, TV show, or other video content.
These ads may play on an actual TV set (CTV advertising), but OTT advertising also includes video ads streamed on other connected devices — like phones, tablets, computers, gaming systems, etc.
OTT is becoming an increasingly important segment of the $167.4B local advertising market.
Even as local TV and cable spending is on the decline, OTT’s share of local advertising spend is on the rise. After growing by 57% to reach $2B in 2022, OTT spend is expected to reach $3.5B by 2026 — and it currently holds the title of fastest-growing local media segment.
One local TV group executive BIA interviewed sings the praises of OTT and programmatic trading to better serve his clients — and grow beyond his broadcast sales. His station aggressively markets audience extension through programmatic OTT. With this strategy, his station has grown its digital revenue to 25% of total revenue, and this has been growing up to 20% annually.
“30% to 40% of TV ad campaigns’ impressions should come from over-the-top streaming in order to optimize results.”
Study Conducted by NBCU and iSpot
Get more OTT stats: OTT Statistics for Newbies—An Infographic to Get Your Grips
OTT advertising and connected TV (CTV) advertising both deliver ads to viewers during video content, via the internet. The difference comes down to delivery.
OTT content can be delivered to any device, as long as it’s connected to the internet. CTV advertising is a subset of OTT advertising and includes advertising played on an actual television set (either directly on a smart TV or via a streaming device like a Roku player or Firestick).
So, if you’re watching the latest season of Succession on your iPhone, the commercials are considered OTT advertising. But if you’re streaming that same episode via your smart television, the commercials could also be called CTV advertising.
On most streaming services, CTV represents over 80% of all viewing. The remainder happens on other devices connected to the internet (laptops, smartphones and tablets) and falls into the broader OTT category.
Ready for a few more digital media advertising acronyms? Next up is VOD — video on demand — and all its variations.
What’s the difference between OTT and VOD? At its simplest, OTT is a subset of VOD.
OTT refers to the delivery of video content over the internet, bypassing traditional television providers. VOD refers to any service that allows users to select and watch video content at their convenience — including cable TV or satellite providers, as well as TV streaming services like Netflix, Hulu, and Amazon Prime Video.
There are also several distribution models within the video-on-demand category.
When you buy advertising on OTT, your ads are shown to viewers during the movies, TV shows, and other videos they stream on their various connected devices. The streaming video content in which OTT ads are shown is provided by networks and publishers like Hulu, Peacock, Tubi, Pluto TV and Paramount.
Both Netflix and Disney+ recently began offering ad-supported video content, too.
But how do the ads actually get to viewers’ screens? Many OTT ads are served programmatically, through a complex auction system. Journalist Cleo Abram explains:
Learn more about TV advertising from Cleo: TV Advertising Explained
These OTT ads are shown to viewers while they are streaming content via a variety of OTT devices, such as:
For example, a viewer might be using a Samsung smart TV to watch Hamilton on Disney+. Another might be using a PS4 to stream Apple TV’s Ted Lasso on her television. And another might be watching an episode of Shark Tank on YouTube TV via his iPhone.
Your OTT ad could run during any of these streaming experiences, depending on your OTT platform, targeting parameters, and budget.
There are a variety of ad types and formats used in OTT advertising that can be seen across connected devices, including:
The over-the-top market is large and growing. U.S. advertisers were hot and heavy on OTT in 2022, with a combined spend of $1 billion per month. PwC projects that, despite recent setbacks, the market will continue to grow at an 11% CAGR over the next five years.
But why are marketers flocking to over-the-top advertising? The benefits of OTT advertising include some envy-inducing value props.
OTT advertisers can hyper-target consumers based on granular OTT data, including demographics, behaviors, and interests (similar to social platforms). OTT advertising pairs well with local targeting campaigns, using geo fencing, IP addresses, zip codes, and designated market areas for even more ad targeting precision.
Speaking of local targeting, advertisers can drill down to highly-specific regions using OTT. Unlike traditional TV advertising, OTT relies on devices to target and optimize campaigns. This means advertisers can target specific locales with ease and precision — which is just not possible working with traditional DMAs and demographics.
In fact, OTT advertisers can even target beyond the specific zip code, right down to the targeted household.
Check out how pharmaceutical brands are using Madhive to reach patients with rare diseases using highly-localized micro-neighborhoods: How Pharma Brands Can Use OTT Advertising to Reach Patients.
With OTT advertising, marketers can use sequential messaging campaigns that adjust to reach consumers with the most appropriate messaging — depending on factors like buyer’s journey stage and device type.
For example, an automotive dealership might deliver a viewer a brand awareness ad on her smart TV, follow up with a clickable display ad on her mobile device, and finally deliver an interactive ad that encourages her to sign up for a test drive on her desktop computer.
OTT provides faster data insights on both audience and performance, allowing marketers to make better, more informed decisions — during and after campaigns.
One of our clients, a luxury department store chain, increased revenue by millions through real-time, in-flight optimization.
The Madhive platform allows users to clone campaigns as needed and modify only the variables that require changing. This retailer took advantage of this capability over the course of several campaigns to optimize performance. Single variable changes were made in cloned campaigns for creatives, locations and placement. Each iteration led to confident decision making and consistent improvements.
The results of all this in-flight optimization included:
Get the full case study: Luxury department store chain increases revenue by millions through in-flight optimization
At its core, OTT is a full-funnel, performance channel, with the power of the TV screen, which 46% of consumers said was the most memorable.
This makes it the perfect platform to drive — and measure — both top of funnel lift metrics (like brand awareness, perceptions, familiarity, favorability, and purchase intent) as well as bottom of funnel metrics (e.g. location attribution, site attribution and conversion, offline sales lift, and foot traffic).
Similar to how social platforms like Facebook and Instagram democratized social media advertising, OTT is doing the same for streaming content. This means just about anyone can run OTT ads, even if you don’t have a huge ad budget (but some platforms make it easier than others).
There are six high-level steps to successfully executing the OTT advertising process.
Before you spend a single dollar, it’s important to identify your goals for your OTT ads. Some questions to ask yourself are:
The next step is to decide how you want to buy OTT ads and select an appropriate advertising platform. Some of the most well-known methods are:
For instance, advertisers may purchase OTT advertising from a streaming service provider like Hulu. Hulu's self-serve platform allows advertisers to purchase inventory directly. The advantage is knowing exactly which shows ads will run against. However, the drawback is that you’re restricted to the streaming provider's owned properties (e.g. only Hulu content).
If you want to broaden your choices and inventory across a range of streaming properties, an OTT advertising platform like Madhive allows advertisers and content providers to connect through private marketplaces — or within the larger programmatic ecosystem.
Creating an OTT ad is similar to creating an ad for linear television. However, you’ll want to optimize your ad for the platform's format and your viewer’s device type.
Remember, OTT platforms often have different ad formats (e.g. pre-roll, mid-roll, or post-roll ads). Choose the format that best fits your message and will appeal to your audience. When it comes to device type, you should consider whether your audience will be viewing on a smaller screen or a large television — and optimize appropriately.
You should also keep your ad short and sweet, usually around 15-30 seconds (some ads are as short as six seconds). OTT viewers can easily skip ads, so it is essential to make an immediate impression.
OTT advertising brings all the benefits of digital targeting to TV. You can use all of the data available from internet-connected devices like smart TVs, laptops, and smartphones to target audiences based on demographics, interests, viewing history, and dozens of other unique identifiers.
Instead of blanketing broad groups of viewers based on what show they tuned into, OTT advertising allows marketers to reach specific audiences with highly-personalized ads. Of course, this is all conducted in a privacy-safe manner, obscuring all personally-identifiable information (PII).
You’ll want to get familiar with the following OTT targeting options:
Depending on your budget, target audience, and other campaign parameters, your OTT platform will deliver your ad during the most appropriate streaming content.
If you’re using programmatic OTT advertising, your demand-side platform (DSP) will access available ad inventory and bid on the most relevant advertising slots for your campaign. The DSP will determine the appropriate bid for each advertising slot, based on the expected value of the audience that the slot will reach.
The highest bidder will win the advertising slot, and their ad will be displayed during the specified ad slot. The entire process is automated and happens in only a fraction of a second. This allows for real-time optimization and the ability to adjust bids and targeting parameters on the fly.
But there’s only so much premium inventory in the OTT space. This means speed is a chief objective in programmatic OTT — fractions of a second makes the difference between securing vital media and losing it to a competitor. Madhive CEO Adam Helfgott explains in Adweek:
“The race for CTV’s finite premium inventory makes it even more important to be able to make decisions as quickly as possible.”
OTT platforms that incorporate AI and machine learning are critical for sifting through massive amounts of information in milliseconds, surfacing informed purchasing decisions for OTT buyers.
Advertisers can track the performance of their ads across a wide variety of metrics, such as impressions, clicks, conversions — even footfall traffic. You can use this data to optimize your ad campaigns (in-flight and after the fact) and improve your return on ad spend (ROAS).
Warning: Don’t wait until the end of your campaign to measure performance.
You should constantly monitor results throughout your campaign and understand where your high-performing personas and markets are. This allows you to reallocate dollars and double down with those parameters.
OTT pricing can be wildly different depending on who — or what — you’re targeting. For example, if you are using a cost-per-thousand pricing model, you might pay $25 to $40 per 1,000 impressions.
How does that compare to the cost of linear TV advertising? Linear placement during primetime TV typically skews higher. For example, a 30-second ad during Bachelor in Paradise costs about $58 per 1,000 impressions (CPM). The CPM for a similar ad during Grey’s Anatomy runs about $49.
However, primetime TV has declined as the industry navigates precarious economic conditions, as well as an ongoing shift of viewers to streaming. As more viewers flock to OTT, pricing between the two models may further even out.
Does OTT advertising work? Absolutely — but you don’t have to take our word for it. Let’s take a look at a few OTT advertising examples from Madhive clients.
As the digital world evolved, this well-known cybersecurity company struggled to adapt to a new business model.
Specifically, the cost of customer acquisition was outpacing gains in revenue. The company turned to OTT advertising to take advantage of cross-device targeting with real-time optimizations. As a result of their OTT campaign, they lowered acquisition costs by 20% with 4.5x ROAS and a 57% incremental OTT conversion rate.
As a fintech company, all eyes were on the cost-per-acquisition (CPA) as this company tested out OTT advertising campaigns. With a combination of audience profiling, incremental reach, cross-device optimization, and real-time management, the company doubled its conversion rate while reducing CPA
If you want to see performance like our OTT advertising examples, there are a few best practices to follow. OTT ads should take video to the next level with highly personalized experiences.
Nobody wants to eat up their ad spend on fake views. Unfortunately, OTT advertising isn’t immune to fraud. The good news is that you can take steps to greatly reduce the likelihood of ad fraud, such as the following.
If technical security details aren’t your area of expertise, just make sure to look for an adtech vendor that’s independently certified against ad fraud by an organization like TAG — like Madhive.
Madhive CEO Adam Helfgott explains that no amount of ad fraud is acceptable in OTT:
“What we’re doing is working with other leaders in the industry to develop a set of standards that focuses on keeping a trail of data all the way through backed by mathematical equations.”
OTT advertising is relatively new in the world of media-based marketing, but it’s here to stay. This digital evolution of TV commercials offers a treasure trove of data analytics capabilities that is revolutionizing the way marketers look at media.
“As more advertisers start to see the advantages, they’ll shift their budgets toward streaming platforms, where they can target specific audiences and measure the effectiveness of their ads in real-time.” —Adam Helfgott
Take advantage of these OTT upsides in as little as a few weeks. See how Madhive can help you make it happen — schedule a demo today.
