I can almost guarantee if you're reading this, you've experienced consuming content through a CTV device. Despite this, most people couldn't explain CTV or where they've encountered it. With an increasing number of people unconsciously switching from linear (traditional) TV to CTV (Connected TV), it's time to better understand this new world of content consumption and advertising.
Before understanding CTV, it's essential to have some background in linear TV and Over the Top TV (OTT). Linear TV is traditional broadcast television, delivered through cable, satellite, or 'over the air'. This type of content consumption is called 'linear' because the viewer can only watch what the network has "lined up" in its broadcast schedule. Users need to subscribe to the cable or satellite provider to see the content, and purchasing ads requires buying a specific spot within the content stream.
Over the Top TV, better known as OTT content, is pulled directly from the internet and streamed on any device with a screen. Therefore, OTT includes all multimedia devices, apps, and streaming services that deliver digital content via an internet connection instead of traditional cable, antenna, or satellite connections. Netflix and Hulu are two of the most popular OTT services, but traditional networks are also launching their own OTT services, such as HBO Max or Peacock. Put simply, OTT is the content delivery method, and CTV is an internet-connected device the content is viewed on. In this sense, you can use a CTV device (such as Apple TV) to stream OTT content (such as Netflix).
CTV can also be defined as any TV set connected to the internet through an OTT device or has additional built-in internet capabilities. In the early days of internet-connected TVs, game consoles and streaming boxes like Roku provided streaming abilities to the bigger screen that our TV offers. Eventually, manufacturers built an internet connection directly into the TV, opening up a new landscape for viewing content on increasingly bigger and higher-resolution screens.
Opposed to standard OTT offerings, CTV initiatives focus on an internet-delivered video viewed on a TV.
Within the OTT & CTV ecosystem, it's also essential to understand the fundamental differences between Subscription Video-On-Demand (SVOD), Transactional Video-On-Demand (TVOD), Ad-Supported Video-On-Demand (AVOD), and Hybrid Video-On-Demand.
Subscription VOD services deliver content once users agree to pay a recurring subscription fee and are generally non-ad-supported. Popular SVOD platforms include Netflix, Amazon Prime Video, and HBO Max.
Ad-supported VOD platforms supply on-demand content with ads through pre-roll, mid-roll, or any other type of ad unit supported by the ad server. Major players in the AVOD space include The Roku Channel and Facebook Watch.
Transactional on-demand services give users a limited time to consume a specific piece of content before they have to pay or rent it again. TVOD platforms are traditionally used for significant sporting events or new-release content that's not widely available to the public.
Finally, the Hybrid model combines a free, ad-supported framework and a premium subscription offering. Sometimes, Hybrid models may also contain some elements of TVOD platforms, like ESPN+ or HBO.
What are CTV Ads?
Connected TV advertising includes any advertising placed on a CTV device. These ads could be in-stream video ads integrated into the streamed video and aren't skippable, interactive pre-roll ads that appear before the content and have some clickable feature for the viewer, or home screen placement that most closely resembles traditional display ads.
CTV ads make up the most comprehensive intersection of digital advertising technology with linear TV. CTV advertising uses targeting capabilities to serve different ads to viewers watching the same show. Advertisers save money because their ads are only shown to their intended audience, and viewers are more satisfied because they are closely tailored to their interests. Combining the targeting capabilities of digital advertising with the reach and scale of conventional TV makes it easy to see why the market is so interested.
According to a recent report from Group M (via TVTechnology), "While traditional TV is expected to be relatively flat in years ahead, the connected TV+ ad spend is set to see rapid growth, GroupM predicted. After growing from $12.9 billion in 2020 to $16.6 billion in 2021, it will hit $20.3 billion in 2022 and $32.6 billion in 2026, tripling the $10.9 billion spent in 2019."
Benefits of CTV Advertising
The main benefit of CTV advertising brings us back to its targeting capabilities. Advertisers can typically only target ads by location when advertising on traditional TV networks, such as city, county, or market.
Contradictorily, CTV and OTT advertising technology allows advertisers to create similar cohorts of users based on the viewer's IP addresses. This means once you've collected the correct data, you can target users on a deeper level than just where they reside.
By locking in on particular audiences, advertisers can dramatically improve the conversion rates of their CTV campaigns, opposed to the same campaign run on linear TV.
Secondly, most people generally use multiple devices simultaneously when consuming content in the present climate. CTV ads are specifically designed to take advantage of this tendency in ways that traditional advertising can't compete with. The technology behind CTV advertising allows both publishers and advertisers to diversify the types of ads they can serve.
For example, interactive video campaigns that display a URL or QR code effectively turn the screen into what's known as a "shoppable TV" screen, allowing viewers to access more information or make a purchase through another device without interrupting their viewing experience.
According to Google, "With a quarter of logged-in YouTube CTV viewers watching primarily on TVs, the living room is becoming an essential place for brands to drive incremental conversions with new audiences. In early experiments for video action campaigns on TV screens, over 90% of conversions coming from CTV would not have been reachable on mobile and desktop devices."
The size of the screen, combined with the new consumption trends in viewing and timing, makes CTV the perfect hotbed for conversions.
We don't see the growth of CTV slowing down any time soon. With conservative estimates showing CTV advertising growth will double (again) over the next two to three years, every publisher and advertiser should be pursuing opportunities in the CTV/OTT space.