Connected TV Advertising: How CTV Advertising Works

CTV advertising stands for connected TV advertising, and it refers to the type of digital advertising that runs on TVs streaming content from the internet. CTV devices include smart TVs running software that allows them to stream content, as well as televisions that get OTT content from HDMI devices. Using an internet connection, these devices pull content from OTT streaming services. CTV campaigns use these streaming services to serve connected TV ads to a show’s viewership.

CTV campaigns work more like digital marketing campaigns than linear TV campaigns. Here’s how:

• CTV allows for customization. Traditional linear TV is delivered directly to viewers without use of the internet. It does so either via broadcast airwaves or through a cable or satellite connection. Advertisers buy spots during commercial breaks and they roll out to everyone watching that program in a specific market. CTR allows advertisers to tailor the ads they serve to the viewing preferences of the consumer. Thus, not all viewers of a certain OTT program will see the same CTV ads. The technology allows providers to show different ads to different demographic groups. Ultimately, this is more nimble than the linear TV advertising model.
• CTV advertising leverages user data. CTV advertising is a branch of OTT advertising, and it allows marketers to hone in directly on a target audience. CTV device manufacturers provide viewership information to their advertising partners. They offer those advertisers to deliver specific video ads to specific audiences, under the premise that demographic information and usage habits will be predictors of whether a viewer is interested in a product.
• CTV ads can be highly specific. The audience targeting used by CTV and OTT providers mimics the specificity of digital ads served on websites, which leverage user profiles to create hyper-targeted ad campaigns. This is called programmatic advertising.

Connected TVs (CTV) and over-the-top content (OTT) exist in the same ecosystem. OTT content is produced by content providers—namely streaming services. These content providers host libraries of TV shows and movies for users to select. When a user chooses to watch a program, it gets beamed over the internet and can be streamed in real-time by a connected TV (or an equivalent device like a tablet or a smartphone). OTT formats are important for e-marketers, who may spend part of their video advertising budgets on CTV ads; doing so allows them to reach cord-cutters and leverage third-party data to hone in on their target audience.

Three types of CTV ads dominate the marketplace.

1. 1. Home screen placement ads: These ads sit on the home screen of certain OTT services. Users can often click on them to get more product information.
2. 2. In-stream video ads: These are video ads integrated into the streamed video content. Most are either fifteen seconds long or thirty seconds long. They serve as non-skippable commercial breaks, creating a similar user experience to that of linear TV.
3. 3. Pre-roll ads: These are ads that roll before the viewer’s selected content. These ads may feature links that take you to websites and retailers. On OTT TV services that are ad-supported, pre-roll ads run before longer content like a movie.

By embracing a CTV advertising strategy, you can access the vast amounts of consumer information gleaned by device manufacturers, OTT providers, and third-party advertisers. A linear TV campaign is limited in its demographic targeting: It can only align with the viewership demographics reported by the show itself. As digital advertising evolves, a CTV campaign can get far more precise. You won’t have to waste money reaching all of a show’s viewers when you really want to get your product in front of a smaller subset. CTV advertising technology allows brands to do this.

CTV advertising is still in a relatively nascent stage, and early adopters face certain drawbacks. Namely, some programs and OTT services only have a few advertisers running CTV campaigns, and the repetitive nature of those campaigns can annoy some viewers. Instead of seeing an array of ads on a broadcast network, they must watch the same ad again and again on a streaming service.

It’s also worth considering that CTV advertising is only as good as the companies doing data collection. Because the technique is still evolving, some companies better understand their viewership than others. Today’s CTV campaigns may not be as precise as those that will run in the future.

Advertisers use several metrics for measuring CTV advertising success. Here are five of them.

1. 1. Video starts: This metric tells you how many times a person started watching your video ad. It does not reveal whether or not they finished it.
2. 2. Quartile completion: This metric reveals how many people watched the first quarter (quartile) of your complete video. You can retarget this metric to reach a different point in the middle of the video—like the halfway point, or the point where you reach your big sales pitch.
3. 3. Video completion rate (VCR): This metric specifically tells you how many viewers watched your video ad all the way to the end.
4. 4. Cost-per-completed-view (CPCV): This metric measures messaging costs. It tells an advertiser how much their campaign costs for each person who watched the ad all the way to the end. The more people who watch all the way to the end, the lower your CPCV will be.
5. 5. Cost per mille (CPM): This metric refers to the cost per 1000 views of a video ad campaign. This simply reflects the cost an advertiser pays for total views of an ad, regardless of completion. Because many people use ad-blockers on their computers and smartphones, CPM rates tend to be most favorable on full-screen TVs, where ads are hard to block or skip.

Learn more about advertising and creativity from Jeff Goodby & Rich Silverstein. Break rules, change minds, and create the best work of your life with the MasterClass Annual Membership.