Over the top (OTT) platforms offer a tempting combination for advertisers. Finally, you can have the premium content and powerful storytelling abilities of linear TV ads and digital advertising’s highly targeted and data-driven marketing opportunities in one place. For that reason, Connected TV (CTV) and OTT have really taken over the linear TV experience. Yes, the year-long pandemic that made us all shut-ins likely contributed to increased consumer interest in video content, but this shift to streaming was always bound to happen.
An Effective Channel
It’s taken some time for advertisers to get into the OTT scene in the past. eMarketer reports that fewer than 40% of advertisers have spent on CTV/OTT channels in the past year, lower than spending for social media, display and non-CTV/OTT video. However, the tides have started to shift in OTT’s favor. In the first half of 2021, 22% of advertisers are planning to significantly increase CTV/OTT YoY spending. This is up from the 16% eMarketer reported for Q4. Marketers are clearly starting to see how effective over the top advertising can be in their media mix.
According to eMarketer’s Q3 2020 Digital Video Trends report, while share of advertisers utilizing CTV in H1 2021 isn’t expected to drastically change, 60% of those already spending plan on increasing their investments in CTV. This is a big indicator that they saw ROI on their initial investment and want to continue exploring all that this channel has to offer.
The numbers coming in on CTV/OTT definitely look promising, but unlike linear TV, over the top advertising is still very much a young medium with a lot of room to grow. Before you start investing media dollars into it, make sure to take a look at all the numbers.
A Note on CTV and OTT
We’re sure you’ve already noticed some conflation between CTV and OTT, and that’s not that uncommon in the ad industry. There is a distinction, though.
CTV is the actual device used to watch TV content online. These can be products such as smart TVs and gaming consoles, but smartphones, tablets and laptops don’t count. Some examples include Xbox, PlayStation, Roku, Amazon Fire TV and Apple TV.
OTT is the delivery mechanism for TV content online. In practice, this usually happens through video on demand (VOD) providers such as Netflix, Hulu, Disney+ or Amazon Prime.
What makes this so complicated is that CTV devices are often used to access OTT platforms. For instance, you can watch Hulu on your Samsung Smart TV or Netflix with Roku. Although, because you can access OTT content on a smartphone or laptop, you don’t always need a CTV device. Sometimes CTV devices will even be called OTT players, and OTT streaming services will be called CTV apps, which adds confusion to the issue.
All that being said, for the purposes of this article, we’ll be talking about the two interchangeably. However, when it comes to the nitty-gritty of media planning and buying, we want you to understand that CTV and OTT are different things.
Now that that’s out of the way…
Some Important OTT Numbers
The Number of Providers (300+)
It’s difficult to nail down an exact number when it comes to OTT providers, but most estimates have it at over 300. It seems like every day, someone else is entering the market with their own streaming service, creating a highly competitive and fragmented environment. Many TV broadcasters are either creating their own apps, such as Discovery+ or Peacock, and in the coming years, we expect most TV cable operators to invest in these business models to establish their presence in the industry as well.
All of this competition makes it hard to know where to put your ad budget. Obviously, not all of these services will succeed - consumers can only watch so much content before they keel over - and you don’t want to back the wrong horse. You need to pay close attention to the services the industry starts to consolidate around as well as where you’re likely to find your audience among them.
Audience Size and Characteristics (65% of US Internet Users)
The US is one of the largest markets in the world for over the top advertising. According to Statista, there are about 193.2 million OTT service subscribers in the US in 2021, which is approximately 65% of US internet users. Millennials are leading the way, accounting for almost 40% of streaming viewers. According to Resonate, a leading provider of AI-driven consumer data and analytics, OTT audiences:
Are 52% female.
Have some college education or more (79%).
Are cord cutters (with 39% having cut the cord on cable and traditional TV). 50% currently have cable TV in addition to their streaming service subscriptions, commonly referred to as cord stacking.
Often binge-watch TV (43%).
Tend to watch TV in the evenings, between 7 pm and 10 pm (79%).
Are also online on their phones while streaming (33%).
Many households have been investing in connected TV devices such as smart TVs to facilitate OTT streaming. In 2020, more than 65-70% of US broadband households own at least one streaming entertainment product, and 50% own a smart TV, according to Mordor Intelligence. When consumers are using their TVs, 25% of usage can be attributed to Videos streamed through OTT services, like Hulu, Netflix, HBO Max, Disney+, Peacock and other video streaming platforms.
CTV/OTT Programmatic Reach (78% of US Households)
In practice, OTT ads are bought and sold in the same way as ads on other digital platforms. These platforms will hire sales teams that put together a sort of ‘first look’ of inventory, and then they’ll shop it around to different agencies and brands. If they don’t sell everything going this route (and they usually don’t), OTT publishers will usually try to clear remaining impressions programmatically. Programmatic advertising has several benefits that attract marketers, which is probably why we’ve seen more opportunities to buy over the top advertising this way.
According to Pixalate’s 2020 Ad Supply and Trends Report, you can now reach 78% of US households via programmatic CTV advertising. Last year, we saw an 11% total increase in CTV apps (aka, OTT platforms such as Hulu, SlingTV and Tubi) that support programmatic advertising, though the biggest increase was among Roku apps at 47%. In fact, 46% of programmatic CTV ads went to Roku devices in Q4 of last year.
Percentage of Ad Fraud (24%)
Programmatic advertising isn’t without its challenges, though, ad fraud being one of the biggest. Ad fraud has been on the rise for years in over the top advertising. In Q4 of 2019, AdLedger found that 18% of programmatic OTT ads were fraudulent. As of Q4 of 2020, Pixalate reported that nearly one out of four programmatic CTV ads (24%) were fraudulent.
AdLedger reports that there are several popular types of ad fraud.
Misrepresentation: When a fraudster sells ads claimed to be shown to US users, but are actually displayed on devices outside the country
Device-Based: When a single device reports a high number of ads during a given period
App-Based: When an ad-supported OTT app shows a very high rate of activity for the entire day
As you prepare your over the top advertising strategy it’ll be important to carefully scrutinize any ads bought programmatically.
We’re a Little Over the Top, Too
We don’t expect CTV/OTT platforms to disappear anytime soon. In fact, they’ll continue to disrupt linear TV as people explore ways beyond cable and satellite TV to get their content. As advertisers, you’re obligated to go where the people are, but you don’t have to go alone.
Our digital media buyers at The Ward Group know the ins and outs of buying ad online, over the top advertising included. When you work with us, your media budget is our media budget, so we’ll only spend it how we’d want to spend our own. Now that you understand the OTT landscape a bit more, it’s time to work with your media stewards to create and execute the best strategy for your brand. Contact us today to get started.