What It Is & How it Works

For evidence of the rise in streaming TV usage in recent years, most of us have to look no further than our own television sets. Linear TV (i.e. cable and broadcast) viewership and advertising has been on a steady and continuing decline, leaving many advertisers looking for alternative solutions to reach the large audience that commercials on traditional television have historically offered. In fact, this year, it’s expected that cord-cutters will officially outnumber cord-nevers, who have never used a traditional cable TV or satellite service.

“This market has grown by double digits each year since we began tracking it in 2017, and it will continue to do so through the end of our forecast period in 2026.” — eMarketer

Source: https://chart-na1.emarketer.com/259798/us-connected-tv-ctv-ad-spending-share-by-company-2020-2024-of-total-ctv-ad-spending

But this new territory comes with its own set of major players, definitions, methods and manners of streaming content, and ad inventory and buying options. For those new to the streaming advertising landscape, it can seem like an entirely new path for which they have no directions.

In this post, we’ll work to take some of the confusion out of streaming ads by breaking down one of the most popular marketing avenues—Connected TV advertising.
 

What is Connected TV (CTV) Advertising?

Source: https://forecasts-na1.emarketer.com/584b26021403070290f93a3a/5d9671494945300bf4895bf9

Connected TV advertising includes digital ads shown to viewers who are watching streaming video content on an internet-connected television, including Smart TVs. Ads are displayed before, during/alongside, or after the television shows, movies, or livestreams being watched. Popular CTV ad types include display banners, traditional commercial-style placements, pop-up ads, and interactive ads that allow viewers to take direct action, often by using their phone camera or remote control.

Some recent stats that highlight the incredible growth and opportunity already underway for CTV advertising, which is expected to continually climb for many years to come, include…

• Nearly 68% of the US population (230 million people) uses a connected TV (Source)

 

• Annual CTV ad spend in the US is expected to reach $43B in 2026 (Source)

 

• eMarketer forecasts that connected devices will account for 39.2% of time spent with YouTube by 2024 (Source)

“In the US, CTV is the fastest-growing ad format we track, with a projected growth of 27.2% in 2023, for a total of $26.92 billion. By contrast, we project US retail media ad spend to increase by 20.5% and US social network ad spend to grow by 8.8% in the next year.” — eMarketer

CTV Advertising vs. OTT

‘Connected TV advertising’ and ‘OTT advertising’ are often used interchangeably, but there are practical differences between the two that relate most directly to the device on which the content is being consumed.

As their name implies, Connected TVs are able to deliver streaming content thanks to their “connection” to the internet. This connection is often built-in to the television, as is the case with Smart TVs, but a connection can also be facilitated through the use of after-market internet-capable devices, including the Amazon Fire TV Stick, Roku devices, gaming consoles, and Apple TVs.

While not all streaming content is viewed or listened to through a Connected TV, all CTVs deliver streaming video content. Looking at advertising specifically, CTV advertising would be viewed by prospective customers through apps they were accessing via their television screen. For example, while watching YouTube or streaming Twitch content on a Connected TV, viewers may be shown display banner advertising. That type of advertising is considered Connected TV advertising, but it is not OTT. OTT typically implies content streamed by a “network” like Hulu, NBC, or Pluto.

OTT is an acronym for “over-the-top,” and refers to streaming content that is “delivered over” (not through) a cable box. Unlike CTV advertising, which is exclusively shown on televisions, OTT advertising can be delivered on TVs, personal computers, tablets, mobile phones and more.
 

CTV Advertising vs. Addressable TV

Addressable TV provides advertisers with 1:1 targeting in a traditional TV environment, enabling them to segment and deliver ads to selected, internet-connected linear TV and OTT/CTV audiences (households), thereby ‘addressing’ the audiences they want to reach through their ads. This level of targeting is accomplished by matching an advertiser’s first or third-party dataset to a cable TV provider’s dataset in a privacy-safe way.

The audience segments you’re able to target through Addressable TV advertising can be built on a number of factors, including specific demographics a viewer falls within, and their geographic location. Have you noticed you get different ads than your friends when you’re watching the same program? Addressable TV advertising is likely at play, serving up better-targeted-to-you-specifically ads, rather than traditional TV ads, where all viewers of the same program (and in the same region) are shown the same commercials.
 

CTV Advertising vs. Linear TV

Linear TV is what most of us think of as traditional TV, with cable or satellite programming and adjacent advertisements running on a largely predetermined schedule. Today, linear TV typically reaches a much older demographic than streaming TV.

While linear TV watching is on the decline, there are still a very high number of subscribers. Advertising on linear can be incredibly impactful when leveraged in complement with CTV advertising. Targeting is available in the linear space, though it is often less granular than in streaming. Linear TV can be bought on a guaranteed demographic basis—i.e. a network can guarantee your ad will run to a certain audience (gender, HHI, etc)—with Addressable TV being a version of this.

Linear TV advertising can be beneficial for brands with an older customer base and very wide appeal, who want to reach the most varied group of potential consumers as possible—and it might be more affordable than you’d expect. Non-guaranteed linear CPMs (cost per thousand impressions) are actually often lower than streaming CPMs.
 

Benefits of Connected TV Advertising

Source: https://forecasts-na1.emarketer.com/584b26021403070290f93a3a/5851918a0626310a2c1869b5

Key benefits of CTV advertising include…

Reach more customers: Not only are there 113 million CTV households in the US, but those households include a large number of people from all current adult-inclusive generations. Whether you want to reach Gen Z, Gen X, Millennials or Baby Boomers, you’ll reach them all by the tens of millions with CTV ads (Source)

Source: https://forecasts-na1.emarketer.com/584b26021403070290f93a3a/5f624727ce286916fc72277e

Automated Optimization and Media Buying: The use of programmatic is on the rise in CTV advertising, though it isn’t the only way to purchase ad space. Because most CTV ad inventory is “delivered against premium video content from broadcast TV, cable, and streaming studios,” there is often a heightened degree of brand safety. (Source)

Precise Audience-Based Targeting: CTV ad options are continuing to expand—particularly programmatic inventory—with audience targeting capabilities that rival what social media networks and Paid Search provide (Source). Common targeting options include: age, location, gender, known interests, education or income level, and purchase history.

Real-time measurement: The great news with CTV advertising is that results are often deterministic and available in real-time, meaning you don’t have to wait weeks or months to adjust based on performance.
 

How Does CTV Advertising Work?

 
Investing in CTV ads can help you reach your desired audiences within the 113+ million streaming viewers across many popular apps and services, but how do you actually make those ads happen? Let’s dive into the steps…
 

Choose a platform

Whether you want to start small with one CTV platform, or design a fuller campaign that targets viewers across a variety of popular apps, there are an abundance of options to suit your goals and needs. Once you’ve selected a platform or platforms, explore all the available ad types offered by that provider. There are an expanding number of platforms to choose from, with some popular options including YouTube and Hulu. Once you understand the foundational capabilities of each, you can better design a campaign that leverages a mix of ad options and/or audiences.
 

Upload creative

Once you have all your creative polished and ready to help you reach your advertising goals, work with your agency partner to upload it to the platforms you’ve decided to advertise with.
 

Target an audience

The advanced targeting options CTV advertising offers are what draws many advertisers to this avenue, with the measurable results keeping them coming back. Consider the audiences you want to reach, and the actions you want them to take, in deciding who you’ll target with which creative and placements. Consider the audiences available within the platforms themselves, audiences you might want to reach based on your own first-party data, which KPIs you are interested in measuring, and whether measuring incrementality is important
 

Choose campaign placements

Available placement options vary depending on the platform you’ll be advertising on. It’s important to consider when and where a given ad placement will be displayed so you can ensure appropriate messaging.

For example, if your ad will display when a viewer pauses their programming, you’ll want to make your ad eye-catching enough that they’ll read it before returning to their show. Making it interactive can also prove beneficial, such as incorporating a QR code for viewers to take further action.
 

Set budget and launch

You’ve likely already considered your budget in the previous steps as how much you’re willing to spend can greatly influence the platforms, placements, and breadth of audiences you want to reach. Once you’ve finalized your budget, you’re ready to send your ads off into the streaming universe! Note that this is a highly scalable channel, and can be used to both drive brand awareness and bottom funnel performance.
 

Optimize and refine based on results

Like all digital advertising campaigns, there is no set-it-and-forget-it approach. Once you’ve given your ads enough time to reach statistically significant results, carefully review what’s working best, and where there might be room for improvement. Consider the full scope of what can be influencing these results, including targeting and the creative itself.
 

Platforms & Devices for CTV Advertising

Source: https://chart-na1.emarketer.com/259649/connected-tv-ctv-devices-currently-used-by-internet-users-north-america-q2-2022-of-respondents

CTV devices and platforms are already numerous, with options for platforms in particular most likely to continue to climb in the near future.

CTV Devices are the physical products that facilitate watching streaming content. In the Connected TV space, that includes Smart TVs (internet-capable by design), and regular TVs that have been “made smart” through the use of an after-market, internet-capable device (Roku devices, gaming consoles, Apple TVs, Amazon Fire TV Sticks, and more.)

CTV Platforms are the apps and services that viewers will be watching when they see your CTV ads. Some popular, ad-supported platforms include:

• Hulu
• Facebook Watch
• YouTube
• Pluto TV
• Peacock
• Amazon Freevee

Examples of CTV Ad Types

 
While the available ad units can vary from platform to platform, there are certain ad types that are most common. Below, we dive into four popular and widely-offered CTV ad types…
 

Display ads

Display ads on CTV function similarly to the display ads we see elsewhere, including on our favorite websites and blogs. These ads appear above, below or alongside the content being viewed, helping increase and improve brand awareness.

eMarketer estimates that “CTV will account for 16.5% of all US display ad spend” in 2023.
 

In-stream Video ads

In-stream video ads are served to customers once they’ve begun a streaming session. These ads can be shown before, during, or after they’ve viewed their selected content. In-stream video ads are most similar to what most of us consider traditional television commercials.

Instream ads are the most common ad type shown “on platforms like YouTube,” and are also commonly referred to as pre-roll, mid-roll, and post-roll video advertisements.
 

Interactive ads

Interactive ads are a newer ad type that viewers can interact with in some way when they are displayed, with a few different interactive options. These might include scanning a QR code shown on the screen to be taken to a website, or sent more information via email. Some interactive ads even enable viewers to make a purchase, or add an advertised item to their cart, directly from the ad.
 

Pop-up ads

CTV pop-up ads include those that display beneath the content being viewed, or when a streaming viewer has paused their programming. These ad types don’t require that users interact with them in any way, helping boost brand awareness without interrupting their streaming session.
 

How Are Connected TV Audiences Targeted?

Source: https://chart-na1.emarketer.com/261554/household-reach-of-select-us-streaming-apps-on-connected-tv-ctv-h2-2022-reach

Different platforms offer a variety of audience targeting options, including the ability to target based on your own data. Below, we explore some of the most common and popular targeting options.
 

Geolocation

In real estate and advertising, location matters! Even if brands plan to advertise heavily across the US and beyond, targeting their ads by location can help improve relevance and expand their messaging options.

For example, you might not want to waste money letting viewers in California know that your warmest winter coats are on sale. Or, perhaps your product names or available options vary by location? In these instances, you can enlist different ads for each location to eliminate any confusion, or cause upset when customers can’t find an advertised item near them.
 

Demographics

For many products and services, to make the most of your advertising dollars, selecting specific demographics to target can help reduce costs without sacrificing hitting your desired audiences. Different household demographics advertisers might want to target include: people of certain ages, income levels, or education levels; homeowners / renters; and parents of young children.
 

Platform targeting

Targeting by platform enables advertisers to reach only viewers using specific devices. This is typically done if you want to reach viewers that you know will be more interested in your product or service because they’re using a complementary product, or to reach viewers using a competing/different product that you hope to convert.
 

Contextual targeting

Contextual targeting aims to serve ads that ‘make sense’ in context with the content that is being viewed.

For example, if a viewer is watching a program about running, ads for athletic wear and sneakers would make good contextual sense. You can assume with relative certainty that most viewers watching a television program or movie about running might have interest in those items.
 

Channel targeting

Channel targeting allows advertisers to reach viewers on a specific network. This can be especially beneficial if your product aligns with an overall theme of a given network.

For example, a company that sells bathroom lighting fixtures might want to target all viewers watching HGTV as many of that network’s shows are focused on home renovation projects. This would give reasonable certainty that a sizable number of viewers may be interested in making their own renovations, or that they’ll remember your brand in the future when they are. It also means your advertising will almost always work in harmony with the content a viewer is watching.
 

First and third-party data

Because CTV advertising is typically part of a larger digital marketing plan, it can be beneficial to leverage first- and third-party data in your audience targeting. This can include your first-party analytics and CRM data, and third-party audiences offered by CTV platforms.
 

Frequency caps

Frequency caps are limits on the number of times a given viewer will be shown your CTV ad. Due to CTV having a fragmented landscape across many networks, services, and platforms, without frequency caps in place, the same viewer may receive your ad numerous times in a short period of time—sometimes even repeatedly during the same ad break. To avoid annoying viewers with repetitive ads, caps can help you preserve your ad effectiveness and brand safety.
 

Important Metrics and Measurements for CTV Advertising

 
The measurability of streaming advertising on the whole makes it an attractive channel for advertisers of all niches and budgets. Some of the key metrics and measurements to help you track your CTV advertising performance include:

• Impressions
• Return on Ad Spend (ROAS)
• Cost per Completed View (CPCV)
• Cost per Acquisition (CPA)
• Incrementality
• Reach
• Brand Lift
• Frequency
• Conversions
• Gross Rating Point (GRP)
• Cost per Point (CPP)
• Cross-Screen Measurement
• Target Rating Point
• Video Completion Rate (VCR)
• Revenue
• Website Visits

Conclusion

 
With customers rapidly shifting from cable and satellite television to streaming TV, advertising options like CTV ads make an increasingly sound investment for advertisers trying to reach any audience. Because CTV advertising has a lower cost of entry than linear TV ads—and brings much higher targeting and measurement options—the playing field has been leveled a bit, giving a significantly larger number of brands and services the opportunity to reach relevant audiences on the biggest screen in the house. How’s that for smart TV?

It’s also important to note that many viewers, particularly those who have grown up watching streaming television, understand that ads are part of the equation. They are open to ad-supported video content when the tradeoff is a lower (or free) subscription that grants them access to quality content.

Want to learn more about CTV and other forms of video and streaming advertising? Visit our Performance Streaming services page, download our Ultimate Guide to Performance Streaming, or reach out today to chat with an expert.