An Advertiser’s Guide to OTT Advertising

By: Chris Harris, March 14, 2022

Why OTT Advertising Matters to Brands and Agencies

The global OTT market size was valued at $121.61 billion in 2019 and is projected to reach $1,039.03 billion by 2027, growing at a CAGR of 29.4% from 2020 to 2027 according to Allied Market Research. OTT or Over-the-Top refers to video content such as TV shows and movies that are available directly to consumers on-demand without a traditional or smart TV.

Clearly, this is an opportunity that advertisers such as brands and their agencies can’t ignore. An advantage of reaching audiences engaged in OTT content is that they are self-activating, that is, they’ve chosen the content they want rather than accepting what’s available via a services provider. This makes them more actively engaged in the viewing experience and more likely to pay attention during ads.

A surprisingly large percentage, about 52% of OTT content is AVOD, or Ad-supported Video on Demand, meaning that many consumers are willing to trade their attention for advertising. Even paid OTT services provide ample opportunities for advertisers to reach highly targeted audiences.

The Pros and Cons of OTT

OTT advertising has several advantages over traditional Linear TV advertising or even broadly targeted streaming TV advertising. While traditional Linear TV has the advantage of broad reach, a consumer watching Properties Brothers via traditional linear TV, for instance, may not be interested in or attracted to a particular brand that appears during the program. However, OTT advertising embedded in the same content can be targeted with additional layers of intelligence that provide signals that a consumer is looking for that specific content in a defined context. Advertising via OTT (and CTV) enables the use of enhanced data sets to activate a precise audience segment, on a more one-to-one basis. Using the right data sets, OTT advertisers can run effective conquest campaigns, that is, targeting consumers who have shown an interest or affinity for competing brands.

Like with any innovation, there are pros and cons to consider as you define your advertising mix, and OTT advertising is no exception.

OTT advertising enables the precise audience targeting of audiences with fewer wasted impressions. By embracing OTT advertising now, you’re tapping into a growing audience set as more and more people cut the cord and move to a broader array of devices to consume video content. By leveraging OTT advertising, you also have the opportunity to diversify your advertising reach to audiences that your traditional TV advertising might miss, in particular audiences that skew a bit younger.

A current challenge with OTT advertising is that it’s become increasingly attractive to advertisers and therefore your traditional measures of cost, like CPMs can seem high. However, with the right strategists by your side, you can often build a business case for the higher CPMs you might experience because by reaching the right audiences, your CPMs are more accurately placed and have higher intrinsic value to the advertiser. For very large campaigns that are designed to be very tightly targeted, it may be possible to exhaust the reach of a campaign before a budget is spent.

There are some surprising upsides to considering OTT advertising. While we all might assume that the audience skews a bit younger, there is a growing body of people who are scaling back their spending as they approach or enter retirement who are seeing OTT content as a viable alternative to a large monthly cable or satellite TV bill.

Getting Started with OTT Advertising

Getting started with OTT advertising as a brand or agency of course requires some analysis and planning. It’s important to have a clear definition of the right target audiences. Then you should have established your business goals and related KPIs for your ad campaigns, such as reach or frequency. It’s important to note that OTT advertising provides the ability to frequency cap like programmatic advertising, which can further increase the efficiency of your advertising budget.

Establishing a reasonable budget to meet your advertising goals can take some experience and this is where a partnership with people who specialize in building OTT audiences can matter. Targeting OTT advertising effectively often goes beyond context into leveraging first or third-party data. Third-party data does come with some costs so establishing a business case for a set of campaigns can take a bit of math. Building the right audiences that are effective and efficient in maximizing the value of your campaigns from a CPM perspective also takes some experience.

Planning OTT Advertising Campaigns

When planning OTT advertising campaigns, you should consider how and where the ads are served, does your partner have their own ad server, and do they have direct access to OTT advertising supply? Every step in the advertising tech chain introduces an “ad tax”, or a mark-up by each link in the chain. Direct supply lowers overall campaign costs.

Building OTT Advertising Campaigns

Of course, an essential element of all advertising campaigns is creative advertising. OTT advertising uses traditional 15, 30, and 60-second spots. However, since OTT advertising can be more tightly targeted than traditional TV ads, OTT advertising enables ads to be more closely aligned with context as well as to be more interactive. For instance, the ad might be tied to a content engagement mechanism like a trivia game that poses a question ahead of the ad and provides the answer at the back end of the ad. Remember, with OTT advertising, the viewer is on a device that can be engaged with as opposed to a lean-back passive engagement.

Measurement of OTT Advertising Campaigns

In addition to traditional measurements such as reach and frequency mentioned above, OTT advertising provides interesting analytics opportunities including VCR (Viewer Completion Rates) including VCR by individual creative, as well as the ability to measure the additional reach that your OTT advertising campaigns have delivered over your traditional TV media buy. That is, with the right attribution partners you can discern if you’ve added X% of additional viewership over and above your traditional TV campaigns by using OTT advertising. You can also answer the question, “did I reach the audience I was hoping to reach”. You can also reach viewers that ended up having low exposure to your traditional TV campaigns. With the right analytics platform, it’s also possible to connect the dots between advertising campaigns and behaviors like website visits.

What Questions Should You Ask an OTT Advertising Partner?

Your partner should be able to demonstrate experience running the types of campaigns against the types of audiences that you want to reach. They should be able to speak to and execute on OTT advertising campaigns as well as traditional and linear TV, being agnostic matters to your overall budget and effectiveness. The most important question to ask in our view is “what is your access to advertising supply?” As we noted above, this has huge implications for your campaign performance and cost.