Opinions expressed by Entrepreneur contributors are their own.
There are massive changes on the horizon for marketing agencies, specifically with respect to digital advertising. Due to the pandemic, streaming media advertising such as connected TV (CTV) has become significantly more popular than more traditional forms.
CTV distributes over-the-top (OTT) ads to consumers via various streaming services. OTT essentially refers to any internet-based streaming service, and is similar to traditional television, except that viewers view it through a different portal. As more and more consumers choose streaming over cable or satellite TV, advertisers must find new ways to reach this vast audience. Advertising through CTV and OTT is the solution to this problem.
CTV/OTT advertising is one of the fastest-growing ad channels. Mid-June 2021 data from Statista indicated that the U.S. CTV ad spend in 2020 was $13.41 billion, and went to on to estimate a market of $27.5 billion by the end of 2025. In the same report, Statista put the number of CTV users in the U.S. in 2020 at a stunning 203 million. While the pace of growth may slow a bit as the government continues to lift pandemic restrictions, these numbers will increase, and as the advertising industry evolves, marketers should include a solid CTV/OTT ad strategy in a brand’s business plan.
What are CTV and OTT marketing?
Connected TV and OTT advertising allows brands to reach viewers beyond traditional TV-by-cable and satellite, and essentially means delivering advertisements through streaming services. Marketing agencies such as Valux Digital professionally produce CTV advertising content that targets relevant channels and audience groups, and these rapidly growing forms of promotion reach households while they view their favored form of streaming TV.
CTV ads mirror traditional TV ads, and are un-skippable for viewers. The pre-roll and mid-roll ads run across connected devices, including smart TVs and gaming consoles. These highly effective ads reach cord-cutting consumers who are otherwise unreachable with traditional TV advertisements. Put simply, OTT ads give marketers a powerful tool to reach audiences directly, with all the same upper-funnel benefits of traditional TV advertising.
There are three structures for OTT ads:
• Programmatic: Here, advertisers use automation to deliver ads through demand-side platforms (DSP), which is software agencies can use to buy and display ads through video, mobile and search ads. Programmatic ads offer the best targeting and are less expensive, but advertisers have less control over where they appear.
• Publisher Direct: In this form, the exchange happens directly with the OTT provider. It offers more control over ad placement, but is also more costly.
• Platform Direct: Here, ads are purchased directly from the OTT provider, such as Roku, Netflix or Amazon.
OTT advertising works without using third-party cookies
Early this year, Google announced a plan wherein longread Chrome and Chromium-based browsers would no longer support third-party cookies. The company came to this decision because of both regulatory laws and privacy concerns, and has not set an exact phase-out date, but the process will likely begin by the end of 2023. Unless advertising agencies prepare, resulting changes will be sizeable, including difficulty tracking and otherwise understanding consumers’ online behavior.
Related: Rise of “regional” in the OTT space – Stage has made a unique impact on regional culture, dialect, and entertainment
OTT advertising uses a contextual structure, which protects consumer privacy. It allows marketers to target consumers based on content rather than the individual. Further, streaming service providers collect first-party data from streamers — information the streaming services collect directly from consumers when they register and log on. This data form reduces the need for other types of data collection, and OTT advertising allows for utilizing it without actually accessing the information. Finally, OTT advertising will enable you to check the effectiveness of ads using IP addresses and timestamps.
The OTT market generates revenue using various VOD models
VOD stands for “video on demand”— content that consumers can access online whenever they want. The same above-mentioned Statista report estimated that digital video advertising spending in the U.S. will increase to $78.5 billion by the end of 2023, which will account for approximately 51% of all revenue advertisers will spend on OTT. A further prediction is that the total digital ad spending will increase from $191 to $250 billion in the same period. Distribution is as follows:
• AVOD (ad-based video on demand): Video on demand allows viewers to watch online content without paying for a subscription. Ad-based video on demand will account for 51.58% of revenue.
• SVOD (subscription video on demand): Here, users must subscribe and pay a fee for access. Numbers show that 40.16% of advertising revenue will come from subscriptions to video on demand.
• TVOD (transactional video on demand): This more traditional format allows users to purchase content on a pay-per-view basis. It will account for 5.1% of advertising revenue.
• EST (electronic sell-through): This structure allows consumers to pay a fee for a one-time download. Numbers show that it will account for 3.16% of marketing revenue by 2023.
Related: How Targeted Programmatic Display Can Help Grow Your Business