Since the start of the pandemic in 2020, OTT video has seen a dramatic rise in popularity and use across the world. CTV and OTT was once seen as merely an alternative to traditional cable and other linear television platforms amongst a small contingent of cord-cutters. Now, they are the industry norm.
Driven by a combination of lockdown measures, improvements in internet connectivity, and the widespread adoption of connected TV devices, this rise has sparked a significant opportunity for digital advertisers.
This guide will walk you through the similarities, differences, and overlaps between OTT and CTV, and discuss the opportunities and challenges facing digital advertisers who aim to use these platforms as part of their ad campaigns.
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Connected TV (CTV) refers to any device that connects to—or is embedded within—a television to support video content streaming over the internet.
It’s important to emphasize this definition when comparing CTV to OTT. To emphasize, CTV is the internet-connected device that a customer uses to watch TV or video content online through a streaming platform.
There are three categories of devices that can be classified as CTV. They include:
While we did mention OTT devices, in this list, it’s important to delineate the hardware from the software. OTT devices enable a device to stream OTT content. They themselves do not constitute OTT.
OTT stands for over-the-top, a term taken from broadcasting that explains the delivery method for film and TV content over the internet. OTT platforms deliver content across many different devices (i.e. CTV devices) without the need for traditional broadcast, cable, or satellite providers.
Content is delivered through OTT applications in either a streaming or video-on-demand (VOD) format, making it highly accessible and affordable across many connected devices.
Customers only need an internet connection and a compliant device that can support either an OTT app or browser window to watch OTT content, Devices include smartphones, desktops, laptops, and connected TV devices that are compatible with OTT apps.
As mentioned OTT content is delivered to internet-connected streaming devices through a variety of channels or video streaming services and apps. These services and platforms employ one of three monetization models that dictates how users access information.
These models include:
According to Statisa, the revenue share in the OTT market splits as follows:
The diagram below illustrates how these OTT services and devices interact to create the streaming and video on-demand services that we all know and love.
OTT advertising is the process by which digital marketers service ads to clients within video content. CTV advertising, therefore, allows brands to reach their target audiences through streaming and video on-demand platforms on smart TVs, OTT devices, and gaming consoles.
OTT and CTV advertising helps marketers reach new audiences at scale, and connect with them across numerous devices.
OTT content is an increasingly attractive option for digital advertisers due to its rapid speed of growth, strong consumer adoption, and the level of attention that can be achieved from embedded video ads.
CTV advertising, by extension, lets those same advertisers connect with audiences at various times of day, on various devices, and in various settings and contexts. And because CTV advertising is digital, advertisers also gain access to familiar targeting levers like geo- and audience-targeting. This affords a high level of experimentation for advertisers to learn which formats and targeting parameters for TV ads are most effective for their audience at a fraction of the cost of linear TV.
Trackable metrics for OTT and CTV advertising include:
In general, advertisers see the following benefits from CTV and OTT ads compared to other digital platforms:
The graph below, for example, shows video completion rates across different devices and environments.
Of course, while OTT and CTV are both growing rapidly, TV advertising through these platforms and devices is not without its challenges.
Ad targeting through CTV, for example, is not straightforward. There is currently no simple, single way to buy ads for CTV. Instead, advertisers have to decide whether to buy from the content owner (video publisher), TV network, distribution, streaming service provider, device manufacturer, specialized programmatic platforms, aggregators, and/or marketplaces.
Each of these inventory providers has their own pricing model, delivery specs, data-driven reporting models, and workflows. This makes CTV buys time-consuming, complex, and often inefficient.
Out of that comes four key challenges associated with OTT and CTV advertising:
Despite these challenges, however, advertisers would be unwise to ignore the explosive growth trends we’re seeing in CTV and OTT consumption.
The growth of CTV technology is inextricably linked with the rise in popularity of OTT video services in recent years.
Currently, there are more subscriptions to video streaming services in the United States than there are people (340 million subscriptions to 330 million citizens).
Some 98% of all US consumers subscribe to at least one OTT streaming app. This shouldn’t come as a surprise, given the pervasiveness of video streaming since the pandemic started, and the associated rise in CTV device usage.
As of 2021, the top five most popular CTV devices include:
That relationship is not coincidental. What we’re seeing is a direct correlation between the increase of CTV device adoption, subscriptions to OTT, and a drop in cable and satellite TV usage. In fact, it’s expected that less than half of Americans will have used these traditional TV services by the end of 2024.
Unsurprisingly, advertisers are paying attention and starting to pump big money into CTV and OTT ad spend.
In 2021, CTV ad spend jumped 34%, a growth rate three times faster than linear TV. But 2026, ad-supported video-on demand revenue is expected to triple 2021 levels, hitting $31.5 billion. OTT advertising is also on a torrid growth pace. Video advertising from OTT services is expected to hit $119 billion in revenue by 2023.
It’s clear that advertising on CTV is a growing trend that’s being driven by a combination of the ease of online advertising, and the reach of connected TV and OTT services. In fact, as of Q1 2022, 92% of US households are reachable via connected TV programmatic advertising.
As a result of that access, 66% of advertisers and marketers plan to increase their CTV ad budgets, which is expected to top out at $18.89 billion total for all advertisers in the US in 2022.
With CTV and OTT advertising budgets soaring, and the challenges of advertising through these channels remaining, it’s important for advertisers to understand how to best optimize their ad spend going forward.
When running ads on OTT and CTV, it’s important to have meaningful discussions as a team that answer questions like:
These questions are important, because there may be an assumption that, if you’re buying CTV ad space, that you’re getting premium OTT content. That’s not necessarily the case. You may, in fact, be showing up on mobile apps or content that’s not brand suitable or contextually-relevant.
Luckily, Peer39 offers a variety of tools and features that can help you answer these questions, plan your CTV ad spend efficiently, and track and report results transparently.
This toolset includes transparency reporting, contextual planning and targeting, and brand suitability.
Advertisers using Peer39’s technology can access new levels of reporting granularity from their programmatic CTV buys, including channel, show-level and demographics data.
Each CTV report general includes the following insights for each campaign:
This level of transparency creates opportunity for innovation, campaign analysis, and optimization that was previously unavailable due to a lack of visibility.
Learn more about CTV transparency reporting.
Peer39 also offers cookie-free planning and targeting tools that let advertisers target contextually-relevant content and topics on CTV.
This gives advertisers the ability to target users for specific contextual signals based on what they’re watching at an exact moment in time. Not only do they help advertisers understand the programming of CTV ad impressions, they also give deeper insights for better planning, targeting, retargeting, conversions, and campaign tracking.
Most importantly, this toolset helps advertisers overcome the ongoing challenges of fragmentation, insufficient inventory data, and inefficient buying processes.
Learn more about CTV contextual planning and targeting.
Lastly, the explosion of CTV has created an urgency for advertisers to find ways to ensure brand suitability and safety in their buys. This is how advertisers ensure that their ads appear alongside appropriate and relevant content in traditional digital channels, and should be accessible on CTV as well.
Peer39 offers a brand safety solution and custom brand suitability controls to address this important issue. The tool includes a group of pre-bid contextual categories that help CTV buyers avoid unsafe, unknown, or unverified channels during campaign planning.
Learn more about CTV brand suitability.