Since the pandemic the number of people streaming content in their homes has increased significantly. In the US for example 72% of all households can now be reached through in-stream OTT (over-the-top) advertising.
On top of this viewing times have increased too. People are now watching streaming services as much as traditional television channels. In 2020 YouTube recorded a 90% increase in the number of people watching its content on TV screens for more than 30 minutes.
As consumer behaviour changes and audiences move online advertisers are following. OTT advertising spend rose by 70% last year making it a staple of everyday life for both marketers and spectators.
The growth of OTT Ads
We can track the rise of OTT advertising directly against the decline of traditional cable TV. More people cutting the cord and switching to streaming services has opened up large-scale revenue opportunities for advertisers.
Google's 2006 purchase of the infant YouTube for $1.65 billion gave the green light to others who saw which way the tide was turning. By 2010 Netflix had all but abandoned their DVD delivery model in favour of streaming challenged by Amazon's launch of Prime Video.
At the same time old-fashioned pay TV viewership was in a steady decline. In the UK 2010 saw the average adult spend 242.15 minutes glued to the box. By 2019 that had sunk to 182.95 minutes. Worldwide it's estimated that 6 million people abandoned satellite and TV companies in 2019 alone.
So where does that leave advertisers? According to eMarketer OTT ad spend hit $9 billion in 2019 up 28% year on year. Half of US marketers plan to keep increasing the amount of money they're putting into these ads and it shows.
The volume of OTT advertising shot up 330% in 2019. In the US it saw a 74% rise in Q4 alone. The world's biggest ad agencies have clearly identified OTT ads as the future and they're doubling down.
Benefits of OTT Advertising?
Like TV advertising OTT ads are a great way to build brand awareness for your brand. But they come with other benefits and uses too.
1. They're More Cost-Effective
OTT advertising costs less than traditional cable or satellite advertising. Plus because you're not limited by set schedules or pre-defined geographic locations less of your advertising spend is wasted on presenting ads to irrelevant audiences. So this means you get more bang for your buck too.
While some streaming platforms offer set impressions for a set price platforms like Hulu offer a self-serve bidding system similar to that of Google Ads. A $500 investment is enough to launch a campaign. This means OTT ads are accessible to smaller brands including those who can't afford to run a TV campaign.
2. Better Targeting
Targeting options vary from platform to platform but most of them allow you to build an audience based on demographics location device interests and behaviour.
This means you can present your OTT ads to relevant audiences which is more likely to boost conversions brand awareness and recognition. According to eMarketer 58% of advertisers say the biggest benefit of OTT ads is their targeting capabilities.
3. Dynamic Ad Options
You can automatically change your ad's content depending on who is viewing it. Providing a personalised experience is more likely to influence your audience's behaviour and should improve the overall outcomes of your campaign.
With the help of technology like device fingerprinting website retargeting and IP retargeting it's also possible to retarget your audience across a variety of channels. So if someone checks out your website you can present them with an ad when they turn on their smart TV.
Brands who invest time in creating custom audiences and personalised content can use OTT ads to improve performance at any stage of the sales funnel.
4. Higher Engagement Rates
Of course with improved targeting and personalisation your OTT ads are going to engage more viewers than traditional television ads. But there's much more to it than that.
Many television ads aren't actually seen because viewers are too busy checking their phones making tea or going to the bathroom. In fact 29% of TV ads aren't considered viewable as there's nobody in the room when they're on.
On the other hand OTT ads fully engage viewers because they are short and non-skippable. On most platforms ad blockers don't work either.
As OTT advertising gains traction platforms are continually improving their advertising features too.
Challenges of OTT Ads
Because OTT ads are relatively new there are some teething problems associated with the medium. Here are some of the challenges you should be aware of.
Reporting lags behind other online platforms and according to eMarketer these measurement challenges have stifled investment in OTT ads in recent years.
This means advertisers can't track the journey of their users like they would with PPC ads on Google or Facebook. They can't always see where their ads are appearing either.
While there are advanced tracking options available like the device fingerprinting and IP retargeting mentioned above these require extra effort to implement and only offer limited insights.
Recent research suggests that 57% of the homes embracing connected TV own at least three streaming devices. On top of that each member of the household uses multiple streaming services - each with their own account or profile. Right now there is no tracking tool to unravel these complex scenarios and tell you exactly who has seen your ads.
Fragmented OTT Providers
In Tubi's latest audience insights report two-fifths of marketers said they were unclear about how streaming-based advertising worked. This isn't surprising because there are lots of different ways to do it.
Right now there are more than 300 OTT streaming services available in the US. While the likes of Netflix are ad-free many others offer OTT advertising options.
You can advertise on free-to-watch news platforms like Crackle Cheddar or Newsy. Then there are streaming services for TV series and movies like Tubi Hulu and Roku. There's also live TV options like YouTube TV and Sling.
Because there are so many platforms all using different business models things can get confusing and complicated for advertisers.
How Are OTT Ads Delivered?
OTT ads are presented to viewers through streaming services or devices like HDMI sticks smart TVs and game consoles. There are two ways these ads can be added to streaming content and your options will depend on the platform you choose to advertise with.
OTT Ad Insertion Methods
- Client-Side Ad Insertion (CSAI): With CSAI OTT ads need to load on a user's device before being played. This can lead to buffering freezing and perhaps a frustrating experience for viewers. Because these ads are separate from the content being streamed ad blockers may also work on them.
- Server-Side Ad Insertion (SSAI): With this insertion method ads seamlessly become part of the core content. There's no freezing buffering or ad blocking with SSAI. Large OTT providers like Hulu and Sling use SSAI - which is also referred to as ad stitching.
Before choosing your OTT ad provider it's worth investigating which ad insertion method it uses.
Top OTT Platforms
Streaming platforms that allow OTT ads can sometimes be fairly niche but let's get a sense of who the biggest streamers are overall. As of Q4 2020:
- Netflix has 204 million subscribers
- Amazon Prime Video has 150 million subscribers
- China's Tencent Video has 120 million subscribers including its international arm WeTV
- Disney+ already has 95 million subscribers within a year of launch
While these services are mostly ad-free (for now) we can use their stats to make some informed predictions about OTT platforms which do provide opportunities for advertisers. Those who emulate these experiences are likely to represent wise investments.
Product cannibalization can affect companies of all shapes and sizes. It's happened toKodakand Coca-Cola while the likes of Apple andP&Ghave done it intentionally. Read on to find out everything you need to know about product cannibalization.
How to Get Started with OTT Advertising?
This process will vary depending on the ad provider you choose but usually there are the five steps involved in launching an OTT ad campaign.
1.Create Your Ad
Most platforms like Roku and Tubi accept ads that are 15-30 seconds long so you'll need to keep your video short. Although you should check each platform's individual ad specs for ideal length size aspect ratio and file size. You may also need to include a branded companion banner.
It's also a good idea to create a variety of videos to target different personas and demographics as well as people in different stages of the sales funnel
2.Tag Your Videos
Make sure your video looks good on any device and use VAST tags so different video players will know how to handle your ad. This is particularly important if your ad will be used across multiple ad servers.
Some platforms also facilitate VPAID tags which provide better performance tracking. They also allow you to add interactive features and extra personalization to your ads.
3.Create an audience
You can choose the age gender location and interests of the people you would like to target. In some cases you can also choose the genre of shows they watch or even a specific TV programme that you'd like to target.
Once you've created your audience your chosen platform will start matching your audience with real-life users.
4. Ads Start Running
Your ads will be displayed across your provider's OTT platforms. Your VAST or VPAID tags will interact with the platform's video player to ensure your ad appears correctly.
5. Reading Your Reports
Most OTT providers send back data on impressions and costs which is then put into a report for advertisers. They sometimes include third-party data too. Your VAST and VPAID tags may be able to collect extra information on ad interactions such as mutes pauses full screens replays and completion rates.
The future of OTT ads
It's highly unlikely barring unforeseeable market disruption that OTT advertising is going to do anything but grow for a long time to come. Between Q1 2020 and Q4 2026 Statista predicts a shakeup of the biggest streaming players:
- Netflix is set to go from 186.55 million subscribers to 286 million
- Amazon Prime Video may well go from 100.46 million subscribers to 184 million
- Disney+ could rocket from 'just' 46.7 million subscribers to 294 million
The total OTT market is predicted to reach a value of $194 billion by 2025 but advertisers can't take their cut of that growth for granted. We're already seeing so-called 'subscription fatigue' take its toll where consumers actually cut back on the number of OTT services they pay for (even if they're not turning their back on OTT itself).
OTT advertising's future then rests on a close connection and deep understanding between brands and consumers. Advertisers need to know which services their prospects use most and deliver unique experiences which resonate. The raw power of data and analytics provided by OTT platforms will help identify the shape of those experiences. But the advertisers who truly win the future will be those who blend creativity in with the stats and give consumers something truly special something which cuts through the growing noise.