What is OTT advertising?
Over-the-top (OTT) is any streaming video service offered to viewers via the internet as opposed to delivered via traditional cable, satellite, or OTA (Over-the-air) methods. Examples of popular OTT platforms include YouTube, Netflix, Hulu, Sling TV, Pluto TV, and many more. While these platforms deliver video content to desktop and mobile devices, a growing number of users are choosing to stream content directly to internet connected televisions (aka Smart TVs or CTVs), or internet connected devices displayed on television screens (Chromecast, Roku, Apple TV, Amazon Fire TV Stick, Xbox, Playstation, etc.).
Advertising on OTT platforms has seen dramatic increases in recent years. Rising to $2.7 billion in revenue in 2018, which represents a year-over-year growth of 54%, according to estimates from Magna Global. This can largely be attributed to the growing trend of viewers ditching their cable and satellite subscriptions in favor of lower cost streaming services. According to Roku’s Cord Cutting 2019 study, “60 million [US] TV households, could be cordless and exclusively use streaming to access video on their TV over the next five years.” These services can be grouped into 4 main vendor types categorized by service offering and monetization model.
What is SVOD?
SVOD is an aconym for, Subscription Supported Video-on-Demand Services. Many of the most popular video on demand services currently use a subscription model (SVOD) as opposed to monetizing via advertising on their platforms. Netflix, Amazon Prime Video, Disney+ and HBO Now have captured a large share of the market, but recent surveys have shown there is a ceiling to how many paid subscription services consumers are willing to shell out for each month.
There has been recent speculation Netflix may explore offering an advertising supported service in the future, but for now, no such plans have been made official.
What does AVOD stand for?
Advertising supported video on demand services (AVOD) typically offer lower cost or free subscriptions, while relying on pre, mid, and post-roll video ads as opposed to just paid subscriptions. YouTube, Hulu, Pluto TV, and Crackle provide an attractive opportunity to advertisers who are looking to effectively target audiences that have been moving away from traditional linear TV.
How to use watch tv everywhere?
Pay TV services such as Sling TV, YouTubeTV, Hulu + Live TV, and AT&T TV Now offer a similar user experience to traditional linear TV by providing a package of live TV channels to stream, as well as offering on-demand content.
Pay TV (TVE) Channel Extensions
Many traditional television networks offer a Pay TV Channel Extension which provides access to the network’s live or on-demand content through internet connected devices. Most Pay TV Channel Extensions require a cable or satellite provider subscription for full access to content, while others offer a direct paid subscription to access content (ex: CBS All Access).
What Are the Advantages of OTT Advertising Compared to Traditional TV?
Advanced Targeting Capabilities
OTT allows advertisers to target their messaging by geographic location, demographic, content, behavior, and interest using both 1st and 3rd party data. This leads to vastly improved ad relevancy to consumers when compared to traditional TV advertising. According to Roku, OTT ads delivered on their platform in Q2 2018 had a 67% increase per exposure in purchase intent compared to linear TV.
With the sheer amount of video content on platforms like YouTube, Hulu, and Roku, advertisers can choose to run their ads in ultra-specific areas of consumer interest. A local shoe retailer could for example run geographically targeted video ads on content entirely focused on covering the sneakerhead culture.
High Quality Creative
Advertisers can use high quality video creative with the guarantee it will be viewed full screen on a user’s TV. Some OTT vendors also offer interactive advertising units. Hulu for example offers various instream and outstream video ad units, high impact display ad units, and an “interactive living room” ad unit.
OTT advertising allows for much more nimble campaign management and optimization compared to traditional linear TV. Advertisers can setup unique impression goals for specific target audiences. Campaign managers can constantly test various creatives against different target audiences, while also having the ability to shift campaign budgets in near real-time.
What Are the Major Challenges Facing OTT Advertisers?
Challenges in Measuring Results
Connected TVs and most TV streaming devices don’t have the ability to track cookies, which can severely impact the trackability of OTT campaigns. No cookie tracking means no standardized method of tracking conversions or retargeting users who’ve already engaged with your brand online. There are some solutions to get around cookie tracking such as collecting a streaming device’s IP address and matching other devices connected to the same network, but this approach is not nearly as accurate and collecting IP addresses has been flat out disabled by some OTT platforms.
Lack of High-quality Inventory Available
When browsing through channel options on an OTT platform like Roku, you’ll be greeted with dozens if not hundreds of apps offering a wide array of video content for easy consumption. The number of apps and the sheer volume of content would suggest there is an overabundance of high-quality inventory available for purchase. Unfortunately, this is not yet the case. According to ComScore, just 4 apps make up 75% of the time people spend streaming video their connect TVs (Netflix, Amazon Prime Video, Hulu, and YouTube). Netflix and Amazon Prime Video are SVOD services and do not support advertising on their platforms. Hulu and YouTube are AVOD services (with Hulu using a hybrid model by offering both an AVOD service and an ad-free SVOD experience at a higher price point). This means that only 2 out of the top 4 apps that make up the majority of the time people spend streaming to their TVs even carry ads on their platforms. The lack of available high-quality inventory makes it difficult to effectively scale campaigns without running the risk of ads running on less than optimal content.
Advertisers can purchase OTT ad inventory programmatically, direct through an OTT platform, or direct through a content publisher. Some platforms restrict the sale of their inventory programmatically, while some content publishers only sell their inventory directly. These restrictions can make it difficult to for advertisers to target specific content. Imagine you’re an advertiser who wants to purchase inventory running on a certain NBC sitcom. The sitcom is available to stream on the NBC app, Sling TV, Hulu, and through Roku’s on-demand service. If you want to run the ad to all users streaming the show regardless of what app they use, you would most likely have to broker separate agreements with multiple vendors each with their own restrictions and advertising rates.
What Will the Next Year Bring in OTT?
Cords Will Continue to Be Cut
The “cord cutter” trend isn’t slowing down anytime soon. The Convergence Research Group conducted a recent study stating that, “as of 2018 30% of households did not have a traditional TV subscription, up from 26% in 2017. By the end of , the researcher predicts that 34% of households won’t have a traditional TV subscription”. The gradual shift from traditional TV to streaming services is accelerating as more streaming platforms become available, and the traditional TV player’s monopoly on high quality content evaporates.
More Streaming Service Options
NBC is scheduled to launch their own streaming service, Peacock, in April 2020. The pricing of the service has not yet been released, but there has been speculation NBC will offer a free ad-supported version as well as a paid ad-free version akin to Hulu’s hybrid model of offering both an AVOD and SVOD service.
Amazon launched IMDb TV in January 2019 (originally launched as Freedive) as an AVOD platform to compliment it’s SVOD platform, Amazon Prime Video. The service is marketed as containing “half the ads of network TV”. A thinly veiled tagline to attract more users away from linear TV and onto their platform.
Standardization on How Inventory Is Purchased and How Results Are Measured
The OTT advertising landscape is currently fragmented with multiple platforms acting as walled gardens with little transparency on inventory and analytics across networks. For the shift of advertising dollars to truly accelerate, the industry must standardize and streamline the processes around purchasing inventory. The current environment of the same inventory being offered through an array of programmatic exchanges, OTT platforms, and content publishers at varying rates and restrictions places a stranglehold on the scalability and accurate measurement of large-scale campaigns. The industry would benefit greatly from a clear set of restrictions and standardized analytics agreed upon by all the major OTT players.
For more information about OTT advertising, contact Anvil
Watch Anvil’s webinar Paid Media: Digital Ad Trends