In SmartHub white-label programmatic solution CTV is number two in popularuty ad formats after in-app video. Roman Vrublivskyi, the experienced Head of SmartHub, explaines what is connected TV advertising, what is the difference between CTV and OTT, and why many international brands take a hybrid approach that combines traditional linear TV and CTV programmatic advertising methods. Read on.
With rising ad rates and dwindling viewership, 2022 might be linear TV’s last year. Linear TV may have dominated the marketing scene in the past, but that is quickly changing. Consumers are rapidly adopting new types of media and advertisers must keep up with a trend.
Much of the money departing this traditional TV medium will not go very far, partially because many Americans are shifting their attention on CTV that represents an alternative way of TV watching. By 2024, the average US adult will spend more time watching digital video than linear TV, which signals a victory for CTV viewing and the streaming revolution. As a result, several brands have already identified this landscape shift and began testing CTV as a greater component of their ad spending. According to Statista, connected TV (CTV) advertising spending in the United States was worth $9.03 billion in 2020 and is expected to reach $27.5 billion by the end of 2025.
By shifting from linear TV to CTV, marketers are enhancing the ROI of their ads while being much more focused on their approach. At a deeper level, this change signals a new age of data-driven advertising that reaches customers where they are, far more efficiently than was previously considered possible.
What is Connected TV (CTV)?
CTV or Programmatic TV refers to any TV capable of receiving digital video streams. This covers Smart TVs and TVs that employ a device to support the transmission of streaming content. In the past, the sole delivery method for video was television. In later years, video content began to be distributed using set-top boxes and a cable provider.
Thanks to these technological advances, we no longer need TVs or cable to watch videos. Suppose you have access to high-speed Internet and mobile connectivity. In that case, you may view live videos on virtually any portable device as long as it has an online connection.
The COVID pandemic is also a major driver of CTV adoption among users. When COVID-19 struck in 2020, consumers were prompted to rethink their TV usage due to several factors. These include work-from-home jobs, restrictions and lockdowns, and job loss resulting in more “opportunity to view” content.
Programmatic TV or Connected TV benefited from this pandemic transformation and remains a fast-growing digital advertising channel. In fact, CTV investments in the United States soared to more than $9 billion in 2020, representing a year-over-year increase of 40.6%.
Following that, many CTV content providers, including Netflix, Amazon Prime, and Hotstar, have sprung to the forefront of public attention due to their customers’ flexibility. Through programmatic technology, these providers can offer advertising space on a number of the apps hosted on their platform.
The key benefit of using programmatic CTV for advertisers is the ability to layer in digital targeting approaches and tactics by integrating many data sources. This helps to guarantee that the right audiences are targeted and that quality, rather than merely cost, is the primary focus of the effort. Users, on the other hand, can stream advertisements on a variety of CTV devices, including:
- Smart TV: This is a TV set with an Internet connection and a media platform built directly into the set. This means there is no requirement for additional hardware to broadcast videos on the television.
- Connected devices: These are also known as over-the-top (OTT) devices. Connected devices can be plugged directly into your TV and connected to the Internet. This allows applications and video streaming to be utilized on the television regardless of whether the TV is smart. The Amazon Fire Stick, Apple TV, Roku, and Chromecast are some examples of a Connected device.
- Gaming consoles: Gaming consoles such as the Nintendo Switch, Xbox, and Playstation effectively function as connected devices because they come equipped with their app stores.
What is Connected TV advertising?
Connected TV advertising means reaching a specific target audience through ads served on connected devices, such as smart TVs, apps, etc. Although connected TV ads have the same look and feel as traditional linear TV commercials, they are not purchased, sold, or delivered similarly.
Advertisements broadcast on connected television typically last anywhere from 15 to 30 seconds, but they can be as short as ten seconds or as long as 60 seconds. The brand/advertiser decides the length of the specific video commercial and its format.
How does programmatic CTV complement linear TV?
With the linear TV framework advertisers have to choose a specific show or time slot. Because ads can be served at any time and within any content, CTV advertising allows advertisers to advertise more effectively. In other words, they can leverage CTV to target prospects based on their online and offline behaviors, ensuring they reach the right consumer at the right time across any connected device. And this type of precise targeting takes place regardless of what show the audiences are watching or when they tune in.
Advertisers can continue to serve ads on specific content via CTV, just as they would with linear. But there are more options to effectively reach the same type of audience as linear to achieve the coveted incremental reach. Simply put, by running the same ad through CTV, brands can deliver the same message to the right people regardless of where they consume their content.
In this scenario, the use of programmatic advertising technology helps to buy Connected TV inventory that will be served on the CTV devices. The purchase and display of digital ads can be carried out in an automated manner using a data-driven approach and real-time bidding.
CTV vs. OTT: what’s different?
OTT (Over-The-Top) means delivering TV content via the Internet rather than the traditional, closed TV system. Viewers do not need to subscribe to a traditional cable or satellite provider to watch television content over the Internet. This means that OTT programming includes all internet-streamed content.
CTV (Connected TV), on the other hand, simply means TVs that can connect to the Internet to access content unavailable through a cable or broadband provider. So, in addition to smart TVs or IPTVs that are inherently capable of connecting to the Internet, CTVs include OTT devices connected to traditional TVs, allowing the TV to connect to the Internet.
CTV advertising can run on three main types of on-demand TV:
- Advertising-based video on demand (AVOD): AVOD refers to content that is available free for consumers, but the catch is that they need to watch advertisements. Examples include YouTube, DailyMotion, and even Facebook.
- Subscription-based video on demand (SVOD): SVOD is an entertainment programming model in which users pay a monthly fee in exchange for instant access to a streaming library of movies, TV shows, and other content. Examples include Netflix and Hulu.
- Transactional video on demand (TVOD): Rather than buying monthly subscriptions as in the SVOD model, TVOD refers to services in which customers pay for each video on demand program, either permanently or for a limited time. These services are frequently associated with movies, specific sports, or events. Examples include Sky Box Office and Apple’s iTunes.
Types of CTV ads
Let’s briefly consider the types of CTV ads and how they work.
- In-stream video ads
These videos appear within other video content – as a pre-roll, mid-roll, or post-roll ads. Pre-roll ads appear before other videos. Non-skippable ads last 15-20 seconds (depending on where the viewer is based), whereas ads that are longer than 20 seconds may be non-skipped by viewers. Mid-roll ads appear in the middle of video content, with a countdown letting viewers know when the ad is coming up. And post-roll ads, play after the video.
- Increased views: Instream video allows a targeted ad to be streamed within the timeline of a video, resulting in more views. Suppose a viewer watches content on their device, and an instream ad is embedded in that content. In that case, the viewer will almost certainly watch the video ad because it starts automatically unless skipped.
- Intrusive: Viewers don’t necessarily ‘opt-in’ to watch ads, so this can make instream videos feel annoying and even intrusive.
- A limited number of inventories: Only a few websites allow marketers to run in-stream video ads. Facebook and YouTube are two platforms that are big on instream advertising.
- Interactive ads
Interactive CTV advertising uses technology that allows viewers to respond by pushing a button on a console or device if they want more information on the advertised product or service. After selecting the button, the viewer will be brought to a new screen that may show a coupon code, an interactive TV game, surveys, or a digital brochure.
- Encourages consumers to engage with ads: Interactive video ads get 47% more viewing time than non-interactive ones. Even if viewers don’t click on the video, they are more likely to remember it due to the interactive options.
- Allows consumers to interpret ads in unique ways: Interactive ads offer the ability to make the ad an “experience.” This increases the odds that the users will engage with the product being presented to them.
- Boosts social interaction between potential consumers and suppliers: The main focus of interactive advertising is to have consumers engage and interact with the ad and directly or indirectly provide feedback on a campaign.
- Interactive advertising may be expensive: High costs are associated with gathering data about consumers and money spent on creating the ads. Moreover, it is rather challenging to create such adverts independently, and you may need to hire an ad setup specialist, which will require additional spending.
- Home screen ads
These advertisements appear whenever a user navigates to a CTV device’s home screen. They are usually static images, graphics, or brief videos that flash onto the screen for a few seconds. A call to action button is frequently featured in ads on the home screen, prompting the viewer to learn more or see additional information.
- Increased competitive edge: Home screen ad placement gives a company a competitive advantage because it allows the company to gain exposure. In most cases, the viewer does not even realize a product is being placed in a show until after it happens.
- Grabs attention: Tactfully placed CTV ads can capture the audience because there is no option for channel surfing like there would be during a commercial. Ads placement, in this case, effectively promotes a brand, exclusively diversifying its offering.
- Distracting: Placing ads on home screens can be distracting. In some cases, the placement of ads even leads to the irritation. If placed incorrectly, the desired advertising effect fails to materialize, and an unpleasant aftertaste remains.
Benefits of CTV advertising
91% of advertisers who moved their budgets to CTV stated they intend to keep those shifts or increase their investments in CTV. They frequently cited the following advantages of CTV as the primary reasons for this shift:
- Audience quality (young consumers, cord-cutters, etc.).
- Incremental reach to linear TV.
- Ability to target consumers more precisely.
- CTV measurement tools.
It would be great to delve deeper into these benefits and look at the other advantages that advertisers and brands can gain from CTV ads.
Access to a broader audience
The best marketing campaigns meet consumers where they are, and that’s increasingly on connected devices. Consider these CTV advertising statistics:
- As many as 80% of American households have at least one connected television, including a smart TV, video game system, or streaming box.
- In fact, Cable TV is on the verge of being phased out as more than one-fourth of American households cut the cord.
- According to Conviva, more than 500 million unique viewers watch 200 billion streams yearly.
Based on these statistics, more people will view ads on CTV. Advertisers on CTV have the opportunity to capitalize on the massive shift in consumer habits, and they are already doing so. In 2021, advertisers spent over $13 billion on CTV advertisements, representing an increase of nearly 50% compared to the previous year.
Generally speaking, it’s more cost-effective and flexible to reach premium networks with CTV advertising rather than linear TV. Connected TV advertising uses precise targeting, so every cent of your ad spend goes directly to your intended market. Most CTV ad providers offer flexible price structures, such as cost per metric or cost per completed view (CPCV). Advertisers running CPCV campaigns only need to “purchase” a view. It’s also common for users to watch CTV programs with family or friends, meaning your ads can be seen by multiple people simultaneously, lowering impression costs.
The ability to target specific audiences is one of the most significant benefits offered by advertising on CTV. In many cases, smart TVs and other connected TV devices make it possible to personalize the viewing experience for the user by requesting data from the user, such as their email address, preferred language, location, or other information necessary for ad serving. Utilizing this data can result in targeting that is both more precise and more effective.
The information can be used in many different ways, including targeting, retargeting, cross-targeting, and so on. Users who have shown interest in a brand or advertisement on one digital channel can be retargeted on another channel or vice versa. The same goes for CTV channels.
Because it enables you to send more individualized advertisements to a specific and relevant audience rather than a general audience. Targeting and retargeting on CTV channels is more effective than targeting a general audience.
Multiple ad formats
CTV advertisements are unlike ordinary TV ads. They must entertain and encourage creativity, allowing marketers to experiment with numerous formats. These ads engage and bolster video performance. CTV allows you to optimize for any platform, whether you have a static ad on a home page, an interactive pre-roll, or a non-skippable in-stream video ad. You can then perfect ads through A/B testing to determine which ad format and call-to-action drives the most response.
Tracked ad performance
It is impossible to precisely track and measure how well an advertisement performed when it was broadcast on linear TV; however, this is not the case with CTV advertising. Marketers can measure their campaigns’ effectiveness and keep tabs on user engagement through the CTV programmatic platform. The following is a list of crucial CTV measuring metrics you ought to be familiar with.
- Campaign impression: This is the total number of times ad content has been displayed, regardless of whether it was viewed.
- Campaign rate: This shows how many times the viewers watched your ad till the very end and can give you an understanding of how engaged your audience is. According to CTV Media, 98% of viewers watch an advertisement until the end.
- Total reach: This refers to the unique devices and residential locations where the CTV advertisement is shown.
Higher interactivity and response
When it comes to interactivity, CTV has far more options than standard linear. Because interactive CTV ads encourage viewers to take action, they increase engagement and conversion rates. Studies how even ad-averse consumers will watch advertising if it speaks to them. According to research, browsable galleries, QR codes, TV 2 mobile – and branded video vignettes in 30-second interactive CTV ads earned an average of 71 seconds, while 15-second clips earned 67 incremental seconds. So, yes, it appears that CTV works better than traditional advertising.
To top it all off, connected TV ads can be shown at the most receptive times. Advertisers, for example, can serve ads based on special events; game finales are the best times to target sports fans, while Children’s Day is a great time to target young families.
CTV is cookieless
Although a brand’s ultimate goal is to drive growth and using data to understand consumers’ behavior is an important part of that, these goals must be balanced with building consumer trust and quality targeting. We already see more legislative changes, and given the current political climate, we can expect more of the same.
The second major trend is what the industry’s largest players are doing, specifically Apple and Google, and the sweeping privacy changes they are implementing. Because of the impact of these privacy changes, marketers are rethinking their media mix and allocations. They’re looking for new ways to reach their target audiences, and CTV is a tried-and-true solution that doesn’t rely on cookies. Instead, it targets users based on household identifiers and offline data sources.
Incremental reach to linear TV
Many traditional methodologies that only measure incremental lift divide everyone into two categories: those who have seen your ad and those who have not. But what if you could reach a nearly identical audience who would have seen a TV ad but no longer pay attention to linear programming in favor of on-demand or ad-free platforms? This is now possible with an omniscreen strategy that targets specific TV audiences on their phone, tablet, laptop, or CTV apps. Advertisers realize they can now reach unique audiences that their traditional campaigns miss.
This level of targeting is largely made possible by automated content recognition (ACR) data. This enables advertisers to determine who is watching what and when. Advertisers can ensure they are reaching new audiences rather than just existing viewers by using ACR data to plan their CTV campaigns.
CTV advertising has a lot of advantages, and SmartHub white-label ad exchange owners can use it to get the most out of their marketplaces. Global digital ad spend shows that brands are increasingly using programmatic video advertising. According to the IAB report, roughly three-quarters of all video ad transactions are already programmatic, while CTV impression rates increase by 60% year over year.
While the revolution becomes clearer and CTV continues to win, indicating a possible total replacement of linear TV, many brands will likely take a hybrid approach. This combines traditional linear TV and CTV programmatic advertising methods. If it turns out that CTV programmatic advertising generates better returns, brands will likely begin to scale back their linear TV advertising. Eventually, because of this, many brands might switch entirely to CTV programmatic advertising, as predicted by Volkswagen, Anheuser-Busch, and Colgate-Palmolive.
Interesting Related Article: “Types of Advertising: What’s Best for Your Company?“