Television has changed significantly in the past decade, evolving from simple visual content to elevated entertainment and becoming an integral part of modern human life and the internet of things. Connected TV ( commonly referred to as CTV in the marketing industry) is a format that once again changes how video content is broadcast.
Connected TV sits at the confluence of smart devices and online video streaming channels. In 2020, the number of millennial CTV users in the US was 56.8 million, according to Statista. This number is expected to reach 62.5 million by 2025.
The increased usage of Connected TV has naturally led to CTV advertising. But what is connected television advertising, and how can it help marketers reach the right target audience? This guide helps simplify CTV advertising and its practical implications for marketers.
What is connected TV (CTV)?
Connected TV is television content streamed on smart TVs through connected devices like Roku, Amazon Fire Stick, Xbox, Apple TV, or even built into the television itself. Also referred to as CTV, Connected TV has become the main way that many people engage with content, through both apps and subscriptions.
CTV is the technical core for programmatic TV (PTV) support since the technology also supports advertising. This is also known as non-linear TV (since viewers watch the same TV show, but on demand). There is typically no scheduled time and no chance to replay, pause, or skip specific content. With non-linear TV or connected TV devices, viewers can watch content at their will; they can pause, replay, or simply stop it whenever they want.
What is streaming TV?
Streaming TV refers to online Television or Internet TV that you can watch either at your convenience or in real-time via the internet.
The difference between OTT and CTV/PTV
Most users get confused with Over-the-top (OTT) and CTV/PTV. The clear definition of CTV as explained by the Media Rating Council is: any nonlinear video delivered or played on a TV screen through smart TVs, streaming devices, and gaming consoles in CTV.
The keyword is television (TV). OTT or over-the-top is when you stream or view videos on your phone, tablet, or laptop. CTV is a form of OTT that is specific to television. For example: if a viewer is streaming Netflix content on their laptop, they are streaming OTT content, whereas if they watched that same Netflix content through the built-in app on a Samsung television, it would be CTV.
This difference affects how advertising works. Brands always look to reach the greatest number of consumers which necessitates co-viewing; this leads to greater ad spend on CTV since there are more viewers assumed to be watching a single device at once, and therefore has more coverage.
OTT, on the other hand, is viewed mostly on phones, laptops, or tablets, leading to a relatively lower viewership and a lower focus on specific categories of brands.
Another major difference between OTT and CTV is how ad performance is tracked and measured. The way TV screens can be tracked, measured, and analyzed varies greatly from mobile devices. OTT viewing uses viewability pixels to track how long someone views an ad, whereas CTV tracking is tougher since it requires more strategy and attribution models.
Knowing the differences between CTV and OTT is important so that marketers and advertisers can more effectively plan their strategy with contextual, device, and privacy restrictions in mind.
What is connected TV advertising?
Connected TV advertising is advertising on video streaming devices, ie: the video ads that play before or during content streaming. Programmatic TV buying or connected TV advertising uses algorithms to broadcast ads to the chosen target audience. Programmatic advertising platforms help advertisers to meet their advertising goals through smart ad purchasing and placements.
Through this, brands can place ads on virtually any device with an Internet connection, anywhere is the world. Connected TV advertising also lets brands run different ads for different audiences based on their age, interests, and various personas.
Advantages of connected TV advertising
CTV advertising offers a competitive advantage to advertisers since more global consumers are moving towards streaming services, leaving behind traditional satellite and cable options. According to eMarketer, ad spending on CTV is expected to hit $21.4 billion USD in 2023. With increasing ad budgets and a growing consumer base, CTV advertising is assumed to evolve and convert at a higher pace.
These are 9 reasons why CTV advertising will help advertisers meet their goals and KPIs:
1. Increased reach to a highly fragmented audience
CTV advertising is for everyone; the sheer number of houses turning to CTV/OTT as their only viewing platform is increasing year after year. This audience can be segmented into four types based on their usage or shifts to CTV:
- TV viewers who use both cable and streaming services of their choice
- TV viewers who have reduced or downgraded their cable packages, cut the number of channels they subscribe to, and replaced that with streaming services
- TV viewers who have canceled their satellite and cable or any paid broadcast TV services in favor of streaming services
- Viewers who have never paid for a satellite or cable subscriptions and most likely never will
As generations age and change, there is an increase in millennials and Gen Zers choosing CTV as their main viewing platform. According to HubSpot, one-third of all TV watching among millennials is on CTV and 45% of them are happy to watch ads. The report also noted that 30% of them share ads they like or find relevant with family and friends. CTV gives agencies and brands a chance to reach this section of their audience.
2. CTV advertising allows for precise targeting
CTV advertising or PTV advertising work on goals, metrics, and media buys, just like their display, audio, and native counterparts. Precise targeting is also possible in CTV since there are similar targeting metrics as programmatic options. Marketers and advertisers can target:
- Audiences who visited a home or landing page
- Audiences that have made a past purchase
- Viewers of a specific persona, intent, and/or demographic
- Similar audiences or look-alike audiences
This form of precise mapping also helps with retargeting campaigns and lead conversions. CTV ads work on data, so users can be tracked across platforms and devices. This leads to an increased recall rate and boosts conversions helping advertisers reach their goals.
3. CTV advertising is cost-effective
CTV advertising better targets and delivers ads to specific audiences. There is also a lower cost of entry and less commitment as compared to traditional TV commercial spots. This offers tremendous value to clients and brands and ensures no ad spend goes to waste. Additionally, CTV advertising increases ad relevance and connects your campaign to consumers who may prefer the product. Advertisers can choose a price structure (such as cost per completed view or cost per metric) in order to stay within ad budgets and meet KPIs.
4. Harder to opt out or change
CTV ads are typically shorter and harder to skip once viewers have hit “play”. It is tough (if not impossible) to opt out or change the steam once it has started. Although most streaming platforms offer ad-free viewing for a subscription fee or additional cost, many consumers will choose to watch ads in order to save money. This increases overall reach and conversion.
5. Accurate optimization and measurement
CTV advertising is different from cable or linear advertising due to the high level of optimization and measurement it offers. CTV, through data, allows advertisers to more effectively target their audience. Advertisers can proactively check who is seeing ads and optimize or retarget accordingly. Ad performance reports can also be viewed in real time and adjustments can be made in order to add material and meet preference goals. Since advertisers have deep customer data at their behest, it is easier for them to optimize campaigns and language as needed.
6. Scope for unique advertising opportunities
Unlike linear advertising, CTV advertising offers more opportunities for advertisers in terms of creative space. Advertisers have the ability to track what kind and type of ads consumers and audiences are responding to. Advertisers can run innovative creatives on CTV.
For example, advertisers can use QR codes to help users find the nearest stores or include a CTA that leads to a product landing page. Ads can be based on language, local, and hyper-local data in order to increase product understanding.
7. Higher engagement
For effective digital advertising, advertisers need to combine CTV advertising, native, display, and audio. CTV advertising campaigns can also be made omnichannel for better results. This helps tackle two-screen behavior (using a mobile device such as a phone or laptop while watching TV) which is prolific in today’s audiences. Keeping users or viewers invested across multiple platforms helps increase their chances of seeing and watching the ad and taking appropriate actions.
8. Increased viewability rates
Advertisers are continually focused on viewability and accurate reporting. At the outset of increasing ad fraud, it is important to look at CTV advertising as an ideal format. Ads in CTV are mostly non-skippable. This leads to 100% viewability and often more than a 90% ad video completion rate. It is also possible to view other metrics, like conversion rates, frequency, reach, and cost per visit.
9. Contextual targeting and placements
CTV advertising ensures you reach a growing audience. Advertisers can segment further and better target relevant customers. CTV advertising helps you place ads if they are contextually relevant for consumers and makes it easier to avoid sensitive categories and place ads based on context.
Common challenges of CTV advertising
According to Innovid, over 80% of all American households will have at least one CTV device by 2023. And though CTV advertising is growing, there are common challenges and nuances to consider.
CTV advertising faces a challenge with the assortment of available devices, apps, and platforms. This quantity of options means content and data is spread across different channels, devices, and technologies. Marketers can buy from smart TV companies, streaming device companies, programmatic ad exchanges, and networks, enlarging the viewing footprint and making it tougher for marketers to reach and measure their ad performance. It is also tough to gain quality ad inventory to improve and scale CTV campaigns.
Inconsistent campaign metrics
For linear advertising stats, the go-to source and assumed industry standard is Nielsen for most brands. In CTV advertising, there is no standard measurement to report how campaigns perform. Additionally, some CTV advertising partners do not offer non-skippable formats which affect standard campaign metrics, including viewability, reach rate, and completed views.
Complex campaign management
It is tough to manage campaigns via CTV since there is no blanket strategy for omnichannel campaigns. These campaigns can start with a short video and finish with an audio ad or still image. Another campaign can include a QR code to measure the effectiveness or capture feedback. Some campaigns may even involve attracting users to a physical store. In such cases, the campaign needs to be managed through first-party data, footfall measurement, and other possible outcomes.
What types of CTV advertising are there?
Broadly, there are three types of CTV ads.
- Home screen ads: These are ads that are placed on the home screen of the device’s operating system, leading to more product information. These could be ad banners, landing pages, or images.
- Pre-roll ads: These are video ads that roll just before a movie or any selected content.
- In-stream video ads: These are unskippable video ads that appear in between video content. In-stream ads are short and typically run for ten to thirty seconds.
CTV metrics and measurement
Advertisers need to track several CTV advertising metrics. These KPIs help to understand the effectiveness of CTV ads.
- Video Completion Rate or VCR lets advertisers know how many viewers watched an ad until completion.
- Video starts is a metric that shows how many users started watching an ad.
- The Quartile completion rate is a popular metric that indicates how many users watched the first quarter of the video. A retargeting campaign can benefit from this in particular.
- Cost per mille (french for a thousand) or CPM reflects the cost per 1000 views of an ad campaign. It shows the total cost of an ad irrespective of levels of completion.
- Cost-per-completed-view or CPCV lets advertisers know how much it costs for messaging per person. If more people watch an ad till the end, the CPCV will be lower.
- Viewability scores measure whether an ad is actually appearing for the target audience.
- Cost per walk-in is the ad spend needed to ensure a consumer or viewer visits a physical showroom.
- Return on Ad Spend (ROAS) is another performance metric that helps advertisers know how much revenue a campaign has generated as compared to the ad spend.
What targeting options are available to reach the right connected TV audiences?
Just like how programmatic advertising targets based on age, income, and location, CTV advertising can narrow down audiences based on shopping habits, preferred devices, and more. Here are some connected TV advertising targeting options:
Placing digital video ads based on individual personalities, lifestyle, hobbies, and online behavior is called behavioral targeting. Based on these traits, advertisers can stream CTV/PTV ads for specific products or content to specific audience categories. Companies like Netflix and Amazon depend on behavioral targeting to amplify and strengthen their advertising campaigns.
This form of targeting is simply being “in the right place at the right time”. Advertisers can identify which users are consuming ads or content within the context of your campaign. This is then used to drive other relevant campaigns. A user might notice a bunch of products from a shopping website they visited earlier. Another viewer could watch a styling video and get ads for similar products or options. This is a great way to push the user into action.
CTV ad campaigns can include more than location, age, and gender data points. You can create deep-level demographic personas for precise targeting. A CTV ad campaign for a food delivery startup could be centered around cuisines available, earning capacity, or famous eateries.
In this CTV targeting, ads are placed based on browser, connection speed, operating system, and any technographic specifications. An Android user will not be able to use an iPhone-specific product regardless of how good the ad is. This can be reduced with technographic CTV advertising.
CTV advertising is more helpful for marketers than traditional TV advertising due to its lower barrier to entry and precise targeting options. While Connected TV advertising is definitely on the rise and signals a massive shift in programmatic advertising itself, it won’t fully replace cable advertising quite yet. Adding CTV advertising into a media mix can help increase advertising success, however, it can be complex and confusing if marketers don’t know or understand the consumer journey of their intended audiences in the process.