If connected TV advertising isn’t part of your marketing plan, you’re likely missing out on some seriously killer business opportunities. Not only is connected TV advertising one of the fastest-growing industries right now, it is also more affordable than its big-screen counterpart. CTV advertising gives marketing leaders of every scope and size access to video content advertising opportunities in a relatively untapped market.
If you’ve been anywhere near the world of marketing lately, you’ve likely heard the buzz surrounding connected TV advertising. Yet, some people still aren’t aware of the power it holds, or what qualifies as a connected device. Don’t worry! If you have questions, we have answers. Here’s everything you need to know (and more) about CTV advertising; what it is, how it works, and when it’s an excellent choice for you.
The rise of internet-connected devices
Did you know that there are more Internet-connected devices today than there are people on Earth? That’s right – there are currently 23.14 billion connected devices in the world, with estimates expected to reach an astounding 30 billion in the next year. It’s not all smartphones and laptops, either. The number of Smart TV’s and OTT (over-the-top) devices in households exceeded 1 billion in 2019. In the U.S. alone, more than 50% of the population has a TV-connected device in their home.
What is a connected TV?
A connected TV (CTV) is simply any television or device that allows you to connect to the Internet and stream video content. (Think devices such as Amazon Fire, Roku, and Apple TV, as well as gaming consoles like PlayStation and Xbox.) CTV’s can stream OTT content through applications. CTV is anything that allows your TV to access video content through the public Internet, as opposed to traditional cable.
TV manufacturers have also tapped into the market, developing TV’s with Internet connectivity included. These units are known as Smart TV’s and can connect to the Internet without additional devices. Connected TV devices include:
- Smart TV
- Apple TV
- Amazon Fire
- Amazon Fire Stick
What is OTT?
Cable providers don’t dominate the video content market as they used to. The pond that was once the mobile Internet has quickly become an ocean, causing a paradigm shift in the market. A new breed of content providers, such as Hulu, Netflix, and Sling TV, have given people the ability to watch their favorite content on the go. Instant streaming takes place on a closed infrastructure, allowing users to subscribe to specific services without going through a cable provider. The platforms that make this streaming possible are known collectively as OTT, or over-the-top.
OTT platforms are becoming more popular than ever. With Internet provider prices dropping and Internet speeds skyrocketing, it’s no wonder that over-the-top services have reached exponential levels of growth. A recent study by Allied Research titled Over-the-top Market suggests that the industry is poised to reach $332.52 billion in 2025. That’s a lot of people binge-watching The Office.
The five top OTT subscribers in 2019 are:
- Netflix, with 151 million subscribers
- Amazon Prime Video, with 96.5 million subscribers
- Hulu, with 28 million subscribers
- HBO Now, with 8 million subscribers
- Starz, with 3 million subscribers
What is connected TV advertising?
Compared to traditional TV advertising, connected TV advertising is a laid-back branding experience that occurs while users consume digital video content on their television sets. These are the ads that you see before and during streaming content, and typically appear in 15 to 30-second segments. CTV administers pre-roll and mid-roll advertising at the times when users are most willing to experience the ad and keep watching their content. Mid-Roll advertising remains the most competitive of all video advertising.
Even though users are watching a show that is on the Internet, the experiences are incredibly similar to a traditional television experience. Studies reveal that over half of OTT subscribers are willing to sit through a video advertisement to continue watching a show. Compared to 86% of viewers who skip ads on traditional television, this is significant. Connected TV advertising is best used to complement digital advertising buys or as an extension of conventional television buys.
How does connected TV advertising work?
The programmatic media ecosystem operates on various levels of auction. Each of these levels has specific guidelines in terms of price and access. Connected TV advertising takes place in a private marketplace (PMP), which sits just one level above the open exchange. This position is favorable to marketers seeking targeted placement in an auction with fewer bidders, earning higher win rates.
The private marketplace is completely VIP, meaning you have to be invited to participate. Along with a higher-caliber of publishers, you also gain access to inventory within specific site sections, sub-sections, and creative formats not available in the open auction environment. Innovative formats in the PMP include audio, video, display, and OTT television.
Connected TV advertising is a lot different than display advertising, and this includes its metrics and performance indicators. Here are the key terms you need to know.
- CPCV: Cost-per-completed-view
- VCR: Video completion rate
- CPM: Cost per mille (cost per 1000 views)
Let’s dig a little deeper.
Because clicks can only occur on video streaming via a laptop or mobile device, Click-Through-Rate (CTR) and click to conversions will not be primary metrics of success. Therefore conversion tracking is limited to view time, such as cost-per-completed-view (CPCV) and video completion rate (VCR).
Premium ad space on connected TV advertising isn’t cheaper compared to traditional video advertising, but CTV is almost guaranteed to produce better outcomes. Here’s why.
Connected TV premium advertising space requires participants to pay a higher CPM or a specific price floor. These prices can be 3 to 5 times higher than standard video placement. Connected TV can reach $65+, while video turns out CPM’s of $10 to $15. CTV isn’t the least expensive targeting tactic-per-unit, but it produces much higher outcomes in terms of video completion rates. Higher VCR means more top-quality views with better impressions.
According to Vincent Letang, Magna EVP of Market Intelligence, the OTT industry is exceeding expectations. He states, “The penetration and consumption of OTT home devices in the U.S. are growing faster than we thought.” Magna has since revised its OTT advertising spending forecast upward, speculating a 31% growth that will reach $5 billion by 2020. What’s even more interesting is that only half of the U.S. population uses an OTT service across all ages. These numbers are expected to grow significantly in the next few years.
OTT advertising has put particular pressure on direct TV sales. The primetime audience of broadcast networks is off nearly 20% from 2019. Also, major entertainment cable networks have experienced double-digit declines as digital platforms consume video content to a significant degree.
The market is good and growing in OTT and connected devices. Not quite convinced? Check out these statistics:
- The US is home to over 200 OTT providers. (Digiday)
- As of 2019, OTT subscription video service users have exceeded 182 million in the US (eMarketer)
- There are over 820 million connected video devices in the U.S. (VBA)
- 71% of all Internet users also use OTT services. (VBA)
- 46% of U.S. households with Wi-Fi own a streaming stick. (Marketing Charts)
- OTT users access three different OTT services on three different devices. (OpenX)
- 55.1 million people will no longer watch traditional pay-TV by 2022. (eMarketer)
It’s no secret that there is money to be made from OTT advertising. Millennials and Generation Z are the largest consumers of streaming platforms. As if you needed any reason to sweeten the deal, here are OTT consumer statistics:
- Millennials spend an average of 7 hours a day watching video content on their phones.
- More than half of adults in the US use at least one OTT service (OpenX)
- While viewing a program, two out of three people use a second screen to look up information on a product they saw during that ad. (Adweek).
- Traditional TV viewing time by 18-24 year-olds has dropped to just 25 minutes a day. (MarketingCharts)
Benefits of connected TV advertising
TV channel ratings continue to drop, and linear broadcasting costs remain high. Subsequently, connected TV advertising gives marketers a new and highly visible medium to grow your audience. Consumer migration to Smart TV’s and OTT devices is strong and growing. This migration, paired with consumer analytics and lifestyle preferences, is paving the way for programmatic advertising and endless CTV advertising benefits and opportunity.
Lower impression cost
As digital advertising shifts linear markets, it’s safe to assume that there will soon be no Smart TV without ads. Because users often stream programs in the company of other individuals, over the top devices afford advertisers more views compared to individuals surfing the web on a single device. More viewers per household mean reduced impression costs!
Millennials and Generation Z prefer connected TV.
Millennials and Generation Z don’t have an attachment to conventional television like preceding generations do. For Generation X and Baby Boomers, classic television offers a level of nostalgia and comfort that newer generations don’t share. Surveys reveal that 65% of millennials’ households use connected TV’s as their only source of video content. As the largest group of people on the planet right now, millennials hold the most purchasing power, so getting ads where they can see them is essential for many businesses.
Targeted advertising experience
One of the best reasons to add connected TV advertising to your marketing playbook is the endless targeting opportunities. Users are required to log in with universal credentials, like a Google or Facebook account to use connected devices to stream OTT video content. Third-party data is then collected based on a variety of demographics and Internet behavior, including zip code, geolocation, interests, language, and more. Precise segmentation allows opportunities for programmatic advertising, a more brand receptive audience, and messages that are relevant to the user. Backed by intelligent analytics, connected TV advertising offers a better value in terms of advertising experience.
Premium ad quality and creative formatting
Compared to traditional online advertising, connected TV supports targeted, personalized HD-quality ads with full screens and stereo sound. Excellent ad quality boosts exposure and promotes brand loyalty. Furthermore, connected TV advertising gives users a connection to creative, entertaining formats. Marketers are experimenting with all types of video ads, including interactive video, call-to-action, static, and animated. Original formatting increases performance on video ad campaigns and drives consumer engagement.
Higher completion rates and real-time metrics
Connected TV advertising is unique because it allows large-screen viewing experiences with high visibility. CTV advertising imitates the knowledge of traditional cable, so consumers watch them for more extended periods than video ads on the Internet. The ads are short and allow the continued streaming of content, so viewers often pay closer attention than they do with traditional video advertising methods. Since CTV advertising takes place in the online space, marketers can measure the effectiveness of their ad campaigns in real-time. These metrics mean instant tracking of the number of views, clicks, responses, and conversions their advertisements receive.
Access to premium audiences
Over 20% of CTV ad requests occur during primetime viewing hours of premium content, including important sporting events and live concerts. These watch times suggest a unique audience with the potential of an impressive return. Additionally, premium audiences and smart TV users can choose the content they want to watch, how to consume it, and how to interact with it. Higher levels of control mean higher levels of satisfaction. When your audience feels like they are in control of their experience, they are more receptive and maintain a positive attitude toward the advertised content.
Conventional television advertising is called “shotgun” advertising for a reason. In part, this is due to difficulties with engagement. In general, connected TV audiences seem less bothered by OTT advertising. The reason for this increased receptiveness could be that subscribers understand that 30-second videos are now the price of low-cost platforms. Due to better targeting, these ads are more relevant, offering a more engaging outreach for the audience. Engaged and relevant audiences create a better ROI than traditional video advertising does.
Connected TV and programmatic advertising
By now, you may already see connected TV advertising as an excellent choice for your business. What if you could get all of the benefits with more control over your ads, including how often they run? CTV programmatic advertising serves your ads in the right places, at the right time, to the right audience. Real-time results help you optimize your campaigns faster, so your audience never tunes out.
Add programmatic advertising to your marketing playbook.
Advancements in technology have completely transformed the way the world approaches television. As the number of Internet-connected devices grows, so does the opportunity for marketers to raise brand awareness. Connected TV advertising adds yet another medium to get content in front of targeted and highly engaged audiences. With programmatic advertising, you can do this whenever they decide to come online.
How programmatic advertising can drive your connected TV marketing:
- Data-driven targeting. First and third party data allow you to reach more valuable audiences on every screen. Programmatic advertising with connected TV works, just like your digital campaigns!
- Better metrics. Track connected TV campaigns with traditional to digital metrics. This includes gross rating points and video completion rates, so you know the impact your ads are making.
- Smart retargeting. When your audience has seen your connected TV ad, programmatic advertising allows advertisers to re-engage with household viewers across all connected devices. Retargeting ads will appear on all of their streaming devices, mobile phones, tablets, and computers.
- Top-notch inventory. Premium ads benefit from premium content. Programmatic advertising allows you to run your ads alongside the most popular OTT movies and shows, in front of fully invested audiences.
Connected TV and precision geofencing
Midsize companies don’t always have the budget to advertise on major television networks. Connected TV makes it possible for people without big screen budgets to advertise on popular streaming devices through connected TV and over-the-top devices. When advertisers combine OTT advertising with the precision of geofencing, they target consumers in a precise area.
The number of “cord-cutters” and “cord nevers” in the United States is increasing. An estimated 63 million people are now only reachable through connected TV and other digital channels. OTT advertising and connected TV advertising gives enterprises a programmatic advertising platform. This platform is designed to engage digital TV streamers with the precision you’ve become accustomed to with your digital campaigns. Programmatic advertising means highly specified ad targeting based on demographics, offline behaviors, in-market audiences, and of course, geofencing.
Here’s how you can benefit from an OTT advertising geofencing campaign
- Access to over 1300 demographic and psychographic variables for hyper-local precision allows you to reach individuals and households that are most likely to become customers.
- Use GPS data to target physical addresses with unmatched precision and scale.
- Bring the precision used with online ad targeting to CTV advertising, with targets set on context, keywords, and online behavior.
- Incorporate addressable geofencing to improve the results of your programmatic advertising CTV campaigns and other marketing efforts for specific households.
- Addressable geofencing is more accurate than IP address targeting, yielding up to a 90% match rate.
- Geofencing is highly scalable, in most instances allowing up to one million physical business and household addresses in a single campaign.
- Addressable geofencing supports creative formats, including OTT advertising, video ads, and static ads.
When is connected TV advertising right for me?
Ad dollars usually follow eyeballs, so connected TV advertising should be massive, right? A report by eMarketer, Connected TV: Almost Ready for Primetime, aims to explore the benefits and potential obstacles marketers experience when deploying campaigns through a new channel.
It’s no secret that the CTV and OTT industry is growing at a rapid rate. There are more cord-cutters and cord-nevers today than ever before. One survey suggests that over 60% of Americans have ditched the TV. However, there are still some milestones to hit before we ditch traditional networks altogether. Some brands that wish to reach audiences on a vast scale still choose linear over connected TV.
Ad inventory on connected TV is made up of a diverse set of players. They include streaming services, set-top box manufacturers, smart TV makers, and content aggregators. Even cable and broadcast networks bundle OTT and connected TV with traditional ads buys. This group of sellers can be intimidating.
Despite barriers, eMarketer expects the leading platforms, Roku and Hulu, to grow their ad business significantly in the coming years. Hulu’s net U.S. ad revenue is expected to top $1.4 billion in 2020, up from $986.4 million in 2019, earning a double-digit annual growth.
Your enterprise may be a great candidate for connected TV advertising and OTT advertising if it is mid-level to high-level in size. OTT advertising also benefits from enterprises that are looking to reach a niche audience in the CTV space. Companies interested in advertising in this fast-growing medium should partner with a digital advertising agency. The best CTV advertising company will have experience and knowledge with connected TV devices, programmatic advertising, and addressable geofencing for the best results and highest ROI.
How can I track conversions for connected TV?
LiftIntent offers our clients a CTV cross-device identity – unified ID solution. The LiftIntent CTV identity solution matches multiple devices and channels to a unique ID, so you can serve up relevant ads when and where they’ll be most impactful and track conversions for each user that has seen your advertisement on their connected device. Our measurement tools let you analyze those interactions to understand how to create the ideal customer journey.
Looking towards the future
One hundred sixty million Americans stream on connected TV every month, and connected TV has grown by more than 300%. However, connected TV advertising only accounts for 1% of television advertising dollars. The global reach of OTT advertising and connected TV advertising continues to stretch further. There appears to be very little reason why users wouldn’t continue to substitute traditional media providers with OTT services. From what we know today, $332.52 billion in estimated market value by 2025 seems reasonable. There are three things we know for sure: CTV’s are everywhere and ripe for video advertising, people don’t mind connected TV advertising, and there appears to be an enormous opportunity with CTV.
At LiftIntent, we understand the challenges enterprises face with connected TV advertising. Our connected TV advertising platform focuses on personalized, interactive, and programmatic ad experiences for viewers.