Why Should You Add CTV Advertising to Your Marketing Budget?

The entertainment industry is constantly evolving, and technology moves forward, but some things haven’t changed too quickly. TV advertising for the most part has remained the same. Connected TV (CTV) technology aims to shake up this situation by bringing in new, effective, and interactive advertising methods to replace old and outdated approaches.

Consumers are benefiting from this paradigm shift due to a variety of screen types and cord-cutter options available – the popularity of YouTube, Netflix, Disney+, and similar services’ confirm that. At the same time, advertisers can utilize innovative approaches to reach unique audiences, as well as improve advertising effectiveness per dollar. As viewers use an entire catalog of devices to watch content – from laptops and smartphones to big-screen TVs and gaming consoles – advertisers can reach them all at once through CTV advertising, combining the impact of linear advertisement with the accuracy of digital tools.

There’s much to learn about the CTV phenomenon, not to mention Over-the-top (OTT) media services and how it all can improve your marketing processes and business in general. Here’s a quick overview of the CTV/OTT advertising industry, the benefits it provides, and the opportunities it opens.

What is CTV/OTT advertising and what’s difference?

Let’s begin with the basics. A connected TV is a device that is connected to the internet and provides a hardware foundation for video content streaming. CTV devices might include a built-in screen or be used as an extension box for a separate display. Typical CTV devices are smart TVs – television sets that feature internet connectivity and built-in interactive media platforms, set-top boxes (aka OTT devices) – dongles, sticks, or other forms of accessories that are plugged into a TV to enable apps and internet connection like Apple TV, Roku, or Amazon Fire Stick, and gaming consoles – a more powerful version of a set-top box, like a PlayStation or an Xbox that can also run graphically advanced games and media.

OTT media is essentially a software shell that enables video content streaming from a provider, and is often a part of the CTV environment, but not always anchored to it. This can be a website or an application like Netflix or HBO Max that users can open on both the CTV devices mentioned above or non-CTV devices like laptops, smartphones, or desktop computers. Some of these services monetize their content through subscriptions, some through advertisements. The latter allows marketers to target a full diversity of audiences engaged in video streaming.

CTV/OTT advertising is a twenty-billion-dollar industry that opens up vast opportunities to precisely reach targeted audiences through programmatic technology, meaning the ad buying process can be conveniently automated, measured, and scaled. What adds fuel to the fire is the fact that third-party cookies and app trackers are going to be disabled soon by major advertising companies, hence web/app targeting will most likely become far less efficient. Marketers might want to look for a replacement for tracking cookies by investing in interactive CTV advertising.

Benefits of interactive CTV advertising

One of the key advantages CTV has over regular TV is accessibility. Advertising via traditional commercials on TV is expensive and rather suits big brands aiming at a wide audience, while CTV provides solutions for smaller businesses to target specific viewer groups. This ability provides marketers with a massive opportunity, considering the ever-growing CTV viewership. According to Statista, the number of households in America that use CTV devices is expected to rise to over 110 million by 2024, while other regions like APAC and LATAM are showing an even faster pace of growth. Global CTV marketing budgets are increasing in pace with the audience. In 2021, marketers spent more than 13 billion dollars on interactive connected TV advertising, an almost 50% increase over 2020, as stated by Insiderintelligence. But what are the reasons for that? Let’s check it out:

  • CTV media advertising reach. The Leichtman Research Group reports that 82% of US households have at least one connected TV device at home, with 40% of the streaming content daily. Over 500 million unique users combined watch more than 200 billion streams each year, says Conviva. The huge growth of the CTV viewer base in the last couple of years has much to do with big shifts in consumer habits caused by COVID, as far more people were suddenly stuck at home in front of their TVs. Weekly time spent using CTV devices nearly doubled during lockdowns, and refused to go down to pre-pandemics levels.
  • Precise targeting. Advertisers often have accurate user portraits to target. Imagine having to reach young men aged 20-35 that are interested in sports. Now there are two options: invest a big chunk of advertising budget on a prime time 20-second TV ad, or split it to reach the target audience pointwise and programmatically, individually for each viewer regardless of location and time of day. Of course, if you’re Nike, choosing between the two won’t make a dramatic difference, but for smaller brands that is a clear choice between a win or lose.
  • Measurement and reporting. It’s tough to measure the effectiveness of linear TV advertising. Normally it takes big performance reports that collect sales data, public opinion, and other information for at least a couple of months. Without that, advertisers have no clear way of knowing how their advertising is performing. CTV utilizes digital programmatic technology similar to PPC advertising, meaning that marketers can almost instantly see all the necessary statistics and adjust their strategy accordingly. For instance, they can measure the number of view-through conversions, site visits via an ad link, or number of banner clicks.
  • Communal interactive advertisement reach. Unlike other digital marketing mediums, CTV can engage multiple individuals at once, which makes it similar to regular TV. People love watching Netflix in their living room with their family and friends, increasing the total number of users engaged.
  • Cookieless advertising environment. CTV does not rely on cookies, in contrast to web or mobile advertising. Instead, it utilizes IP addresses, device IDs, and other first-party data to target households and individual users. This provides marketers with a future-proof hedge, given the oncoming cookieless marketing future.
  • Advertisement engagement. Since CTV advertising has better targeting capabilities based on device IDs and personal preferences, marketers can expect better engagement rates as ads are more relevant to the targeted audience. According to Digiday, interactive CTV advertising showed an 85% completion rate in 2020, meaning users often watch ads on CTV all the way through. Certainly, engagement rate is one of the key metrics to measure ad impact on brand image and sales.
  • Cost-efficiency and flexibility. Compared to its main competitor, traditional TV, connected TV is more practical and more flexible, with various price plans when reaching premium networks. CTV marketers can employ various pricing strategies like CPM (cost per metric) and CPCV (cost per completed view) according to their needs.

How to choose the right CTV demand-side platform?

Despite the fact CTV has a huge audience, not all of it should be approached the same way in advertising. The hardest part for any CTV advertiser is to come up with an effective audience segmentation strategy to hit the right spot. How is that done? With data. To get good targeting results, marketers should work with DSPs that only cooperate with privacy-compliant data providers. If the collected data is accurate, transparent, fresh, and secure, advertisers will have an upper hand in reaching their desired audiences faster. Essentially, choosing a demand-side platform is equally as important as choosing an ad medium, so to make the right choice, advertisers should learn how exactly data vendors contribute to marketing effectiveness.