20 min read
OTT Advertising Guide: What Over-The-Top Advertising Is & Why It Matters
Chances are you’ve watched over-the-top (OTT) video content by streaming TV, live events, or video on demand. OTT advertising consists of ads delivered to viewers within this video content.
Discover what you need to know about OTT advertising in this guide as we cover the benefits, platforms, and growing opportunities available to reach new audiences.
Table of Contents
- What is OTT?
- What is OTT Advertising?
- How is Over-The-Top Advertising Delivered?
- OTT Ad Delivery Process
- OTT Monetization Models
- Benefits of Programmatic OTT Advertising
- OTT Ad Growth
- OTT Advertising Examples
- OTT Advertising & The Streaming Landscape
- OTT Advertising FAQs
- Industry Expertise and Experience in OTT Advertising
What is OTT?
OTT is the shortened form of “over-the-top,” and it’s used to describe film and TV content accessed through an internet connection.
Instead of relying on traditional cable and satellite, streaming services deliver entertainment options over the top of another platform.
Once a dedicated OTT device or platform is connected to the internet, it opens access to various streaming services and apps.
For this reason, OTT streaming isn’t restricted to just a TV device. Instead, OTT content can be accessed on a mobile device, tablet, gaming console, desktop, and smart TV.
Examples of OTT
OTT services are applications that enable users to stream high-quality videos to their devices. This is how most streaming audiences watch HBO, Hulu, Netflix, Amazon, and Sling TV.
Some examples of the different types of OTT services include advertising-based video on demand (AVOD), subscription video on demand (SVOD), and multichannel video programming distributors (MVPD).
What is OTT Advertising?
What does OTT mean when it comes to advertising? OTT ads are shown on a TV screen through a connected TV (CTV) or streaming device and delivered to viewers via a streaming video service over the internet.
In other words, OTT ads can be understood as streaming TV ads. But what’s more important is the opportunity for advertisers to reach new audiences at scale as viewers embrace streaming video over traditional cable and broadcast TV.
Many OTT services run advertisements with ad-supported tiers that offer lower fees. Popular streaming platforms like Amazon’s Freevee, Paramount’s Pluto TV, and Fox’s Tubi make up some streaming TV apps combining ads with video streaming.
OTT advertising works like any direct response campaign for DTC brands. Still, it adds cross-device delivery and measurement, which means that OTT platforms can track viewers and serve additional ads until conversion.
How is Over-The-Top Advertising Delivered?
The streaming provider determines delivery methods and how the platform interacts with OTT devices, whether an Amazon Fire TV, Roku, or Apple TV. This may include using video ad serving templates (VAST) that provide the framework to embed video ads into a video stream.
Regarding the delivery of ads, there are two ways to insert them into the content — client-side ad insertion (CSAI) and server-side ad insertion (SSAI).
CSAI delivers ads on desktops, CTV, or gaming consoles, where the video player requests the ad server to stream an ad when it reaches ad markers in the stream.
SSAI, or dynamic ad insertion (DAI), stitches an ad directly into the streamed video. This method has a complex workflow, but the server handles ad insertion instead of the client.
The main advantage of server-side ad insertion is that it’s less susceptible to ad blockers and provides a better user experience, as ads do not need to buffer when displaying.
OTT Ad Delivery Process
First, develop your target audience for the campaign. The demographics and behaviors of this audience can be collected from first, second, or third-party data.
Next, produce your creative asset. The creative support should be visually appealing, attention-grabbing, and tailored to the target audience.
Then, choose the format of your ads based on your audience. Most of the time, OTT ads are between 15 to 30 seconds long.
After that, choose an inventory that matches your target audience.
OTT Monetization Models
OTT is closely related to video on demand (VOD). But, whereas OTT describes the distribution model (video content delivered over the internet), VOD describes the consumption model (video content that can be played back on demand).
Here’s a summary of the different monetization models used by OTT services:
Subscription-Based Video on Demand (SVOD)
SVOD is a streaming service where users enter a subscription agreement and are charged recurring fees. In return, the user can watch video content without any limits.
SVOD is similar to traditional cable TV packages, allowing subscribers to consume content at a monthly flat rate. Streaming giants like Netflix, Hulu, and Amazon Prime Video have the highest subscriptions.
Advertising-Based Video on Demand (AVOD)
For the most part, AVOD is free to consumers. However, consumers need to sit through advertisements to watch content.
The primary source of revenue in AVOD is advertising to offset costs. Still, it enables viewers to access more on-demand content for a lower overall price when compared to SVOD.
Transactional Video on Demand (TVOD)
TVOD can be seen as the opposite of subscription-based. In this model, users can purchase specific video content on a pay-per-view basis.
An easy way to think about TVOD is as a digital Blockbuster. Viewers can either rent or buy each movie or TV show.
Premium Video on Demand (PVOD)
PVOD offers viewers early access to newly released content for a premium fee. Unlike TVOD, which lets consumers buy or rent already-released TV shows or movies, premium VOD is the go-between from theaters to streaming platforms.
Due mainly to the pandemic, this OTT model became popular as fewer people visited theaters. As a result, purchased PVOD content rose 33% in 2021.
Hybrid Video on Demand (HVOD)
The latest OTT monetization model, HVOD, is a mix of the traditional models. It offers ad-free content for a fixed monthly subscription fee and ad-supported content for a lower price or for free.
In addition, HVOD services will include TVOD and PVOD content, offering customers multiple ways to enjoy the video content they want at an affordable price.
Free Ad-Supported TV (FAST)
Commonly abbreviated as FAST, this streaming service offers content without a subscription in exchange for watching ads.
Most of the video content on these services is from traditional television programming. FAST apps host linear channels that deliver scheduled programming to a mass audience through connected devices,
As a comparison, AVOD offers users more control, letting them choose the content they want to watch with ads integrated into the viewing experience.
With the streaming world oversaturated with choices, FAST channels represent simplicity. It’s why the number of FAST channels doubled to more than 1,000 in 2021, and revenues are expected to double again by 2023, reaching $4.1 billion.
Benefits of Programmatic OTT Advertising
When purchasing traditional TV ads, you’re buying based on anticipated audience numbers, and the ad runs whether or not anyone is watching.
Advertisers can only estimate campaign results and ad impact on linear TV. Plus, compared to traditional TV viewership, OTT audiences are rising.
For performance marketers, OTT holds a ton of advantages.
Adding the hyper-targeting capabilities of OTT, advertisers enjoy the power to message only relevant audiences and show them personalized ads.
OTT advertising can merge audience identifiers with household data, providing pinpoint accuracy based on consumer intent:
Significant life event indicators: recent move, graduation, and having a baby
In-market signs: house renovation, seasonal conditions, and auto shopping
Activities, interests, and opinions: outdoor enthusiasts, gardening, and preferred TV shows
You can manage your advertising reach based on geography, but you can also add the types of media watched, online shopping habits, seasonality, and interests.
Most households are digital and can stream video on demand on their smart TVs or on the go with mobile devices.
Advertising on OTT finds your exact audience through massive amounts of data to connect with the most receptive viewers on the big screen.
The increasing access to OTT offers flexible options to scale for different DMA or localized advertising to maximize reach nearby.
Not to mention, leveraging your data and internet access streamlines audience reach and makes your ad dollars go further.
Ad Frequency Capping
Once you've reached your target audience, you must ensure that your ad frequency is effective. Depending on the effective range, you can control frequency by capping ads per viewer to once an hour or once a day.
For streaming audiences, you can set the conditions for each viewer over a specific time of day, month, and season. Then, ramp up efforts when the timing is right.
Achieve efficient marketing spend and a higher ROI per ad view by ensuring ad exposure is tailored for each household.
Measurement & Reporting
Advertisers need to see how many people saw the ad, how long they watched it, and what actions they took after watching it.
OTT measurements track and synthesize the performance of your ad campaign to include client-specific metrics that measure success on your terms.
OTT can connect who saw your ad and its impact on:
Audience reach and brand lift
Online visits and purchases
Ad-Supported Streaming Is on the Rise
Streaming is expected to steadily overtake the TV experience as more audiences choose digital over linear. This presents long-term advertising solutions as the streaming market matures.
The AVOD, HVOD, and FAST models are becoming increasingly common. Ever since their arrival, they have captured a significant amount of the streaming market:
Last year, AVOD saw higher adoption rates than subscription video on demand, with a 29% increase in households streaming AVODs, compared to a 21% increase for SVOD in the same period.
Top FAST services reach 20 million or more American households monthly with free movies, TV series, news, and sports programming.
In a recent survey, nearly 75% of viewers would switch to a free or lower-cost tier of a streaming service when given a choice.
Delivering targeted ads to relevant audiences creates quality leads and higher conversion rates.
That’s where the flexibility of programmatic OTT comes into play. This algorithmic software easily applies audience-based buying across multiple inventory channels on a single buy.
Managing targeted delivery and frequency control improves the market proposition between brand and consumer because relevance is critical for user engagement.
Better Viewing Experience
Better targeting goes hand-in-hand with a better viewing experience. A meaningful connection between the brand and the consumer is crucial to maintain viewers.
This means considering ad placements before, during, and after video content impacts the overall perception of the ad.
Most complaints from ad-supported streamers point to oversaturation, irrelevant ads, and excessive ads. While streaming services compete, the ones with the fewest and most relevant ads will come out on top.
Tracking and Attribution
Tracking success with the right metrics and feedback allows for adapting new information, experimenting, or learning something new.
By doing so, you’ll get to know your audience or reveal additional information about your ideal consumer. Ultimately, you’ll have the confidence of attribution tracking to make the right decisions by measuring each touchpoint to conversion.
OTT advertising generally costs less than linear TV advertising, and these digital capabilities ensure proficiency from top to bottom.
Advertisers can reach their intended audience with accuracy and save money by not wasting impressions on consumers who are not interested.
OTT Ad Growth
Already, businesses are utilizing the benefits of the OTT space to target audiences in an increasingly digital-only world.
Modern marketers can leverage OTT services and connected TV to improve advertising revenue. It’s why OTT advertising has seen considerable growth:
By the end of 2023, subscription OTT video ad spending is expected to reach $10 billion and account for 3.4% of all digital ad spending — 10.2% of total video ad spending.
CTV ad spending exceeded $21 billion in 2022 and will likely grow to $26 billion in 2023.
In 2026, AVOD viewers will reach 174 million, with 68.6% of them being OTT video services users.
OTT Advertising Examples
Advertisers can target and retarget the same audience on multiple channels, combining OTT advertisements, programmatic audio, display, website, and more.
Here are some examples of businesses from different industries using OTT advertising to enhance their marketing efforts.
Healthcare Case Study
An innovative healthcare provider needed to enhance brand awareness tactics to take in more patient referrals. By partnering with Strategus, a connected TV (CTV) campaign pinpointed physicians and their support staff and only served ads to this specific audience to help drive patients to this rehab center.
Initiating ad exposure on CTVs and adding sequential messaging on other devices in the household extended audience reach wherever they stream content. As a result, this campaign achieved the patient referral benchmark within the first two months.
Higher Education Case Study
A higher education school was looking for ways to target 18-34-year-old females living near the schools’ campuses. In partnership with Strategus, geo-locating techniques identified relevant audiences living close to one of the eight campuses.
What started as a month-to-month partnership steadily grew into a nine-month ad campaign. In the end, the school’s targeting strategy was optimized to significantly boost student applications in a competitive region.
Political Case Study
An agency wanted to enhance two political campaigns in a densely populated California county over the final weeks leading up to the county election. By partnering with Strategus, they gained access to an abundance of audience data to target viewers based on political affiliation, voting propensity, and demographics.
Once this audience was identified, Strategus modified ad frequency to avoid oversaturation and manage message retention. As a result, this campaign's comprehensive targeting and measurement solutions supported both candidates' success in this election.
OTT Advertising & The Streaming Landscape
Simplifying the complexities of this landscape is why we created this section. By depicting all the moving pieces, you see the complete picture of placing a streaming advertisement.
Partnering with Strategus puts your brand in the right place within this landscape to drive meaningful growth.
Advertisers represent a brand or company that leverages advertising to reach a larger audience, establish credibility and awareness, and drive online and in-person traffic.
When it comes to streaming, advertisers have the option of self-service or partnering with an experienced agency.
An agency fulfills an intermediary role between an advertiser and the streaming landscape. By adding OTT video ads to your media strategy, an agency will ensure you reach receptive audiences and achieve desired results.
Strategus views OTT as a performance channel because of its advanced targeting and measurement solutions, providing a TV-like experience on the largest screen in the house to drive key performance indicators.
Demand-Side Platforms (DSP)
A demand-side platform (DSP) is software that automates the online ad inventory buying processes.
Here are the main points of the DSP process:
Integrating with ad exchanges and supply-side platforms (SSPs)
Accessing inventory from publishers
Algorithms help evaluate and bid on each ad impression in real time based on various targeting criteria
A DSP also lets advertisers set specific targeting parameters for the ads they want to purchase based on the following:
Interests and hobbies
Target designated websites or apps
Supply-Side Platform (SSP)
A supply-side platform (SSP) is software that automates the selling side of advertising, most often used by online publishers to sell display and video ads. Similar technology powers both SSPs and DSPs.
While advertisers use DSPs to buy ad impressions, SSPs are designed to do the opposite, which allows publishers to connect their inventory to multiple ad exchanges and networks simultaneously.
Data providers are the firms that improve user data for advertisers and agencies, so audience targeting is precise.
These providers build profiles of digital users, so advertisers can pull from these profiles when setting up campaign targeting.
An ad server is a technological engine advertisers, publishers, ad networks, and agencies use to distribute ads across paid channels.
When audiences browse the web or tune into a streaming video service, the ad servers instantly talk to one another.
This process loops in different ad servers to deliver the most relevant ads based on the campaign parameters, such as audience segments, budget, and timeline.
Analytics and Optimization
To refine ad relevancy, OTT analytics uses tools and technology to collect and analyze data on streaming ad campaigns.
These services can also be leveraged to optimize campaign performance by ensuring ads are relevant to users — compiling their current viewing, location, age, gender, and more.
OTT analytics take control of data to track how well an ad performs, connecting how many viewers purchased or signed up for additional information after seeing the targeted ad.
In digital advertising, publishers prepare, issue, and distribute content online through websites and apps. In addition, these streaming providers serve as an entertainment source for TV, movies, and other streaming media.
Some famous publishers include Hulu, Peacock, and Tubi. Selling ad space to the publisher’s audience represents a major revenue stream for these companies.
An OTT aggregator is a platform that lets users discover and view streaming content from multiple sources all-in-one place.
Aggregators scan multiple video streaming publishers to list movies and TV shows on various platforms. These sites generally do not produce the content but control a portion of the ad inventory and play a key role in the streaming landscape.
OTT aggregators save users from searching through different apps for the same content, making it easier to find exactly what they want without hassle.
OTT Advertising FAQs
What is the cost of OTT advertising, and how does it differ from traditional advertising?
Between self-service and managed service, which one is best for OTT?
Industry Expertise and Experience in OTT Advertising
The Strategus team has been running OTT campaigns since the very beginning. As the leading edge of the programmatic OTT industry, Strategus has the proficiency to make OTT work for your brand. We are always happy to dive deep into the topic.
Contact us to talk about leveraging OTT advertising as a part of your media strategy.
Posted by Andy Dixon
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