CTV Advertising: What It Is and How Brands Can Make the Most of It

In case you haven’t noticed, the entertainment industry has been evolving at a rapid rate. The advent of digital streaming and web-based platforms like YouTube, Hulu, and Netflix have dramatically altered the way people interact with media.

As a consequence, brands must now find new ways to engage with consumers as they move inexorably away from traditional linear television. Connected TV, commonly referred to as CTV, presents these companies with a golden opportunity to regain audiences lost to cord-cutting.

What brands should know about digital streaming, cord-cutting, and the rise of CTV

At this point, the term “binge-watching” is familiar to just about everyone. And while it’s by no means a neologism of the Netflix era, it's hard to imagine its elevation into common parlance without the streaming service’s deliberate pro-binge business model.

Indeed, by coupling engagement-boosting features like autoplay with “everything-all-at-once” content releases, the streaming giant handed decision-making responsibilities over to viewers. While old school network TV giants like NBC, CBS, and ABC encouraged viewers to set up weekly appointments with a variety of shows over the course of nine or ten months, Netflix made it standard practice for viewers to consume a small number of shows all at once, at their leisure.

Now, whether or not this is a wise strategy in the long run is an ongoing debate; but the fact of the matter is that Netflix is extremely popular. Streaming platforms across the board have already replaced traditional linear TV in millions of households worldwide, and by placing a stronger emphasis on feature-length content and theatrical releases, offerings like Disney+, Amazon Prime Video, and HBO Max are even beginning to lure away movie goers.

To put a finer point on it, approximately 39.3 million households in the United States have already abandoned linear TV in favor of digital alternatives. This number is expected to rise to 46.6 million in 2024. What’s more, according to TechJury, commentators are predicting cable TV penetration to fall below 60% by 2030, with a younger generation of consumers leading the way. As TechJury notes, nearly all Americans aged 25-34 now access TV content through the Internet.

This phenomenon, known as cord-cutting, has led to diminishing returns for service providers, cable networks, and other businesses in the linear TV space. Indeed, contracting audiences mean TV ad space has become far less valuable. Since fewer people are tuning in, ad spots get less attention and advertisers are finding it increasingly difficult to justify their TV advertising budgets.

Fortunately, CTV offers a way forward. Members of the old guard have already taken note. NBC launched the streaming service Peacock back in 2020 and Paramount+ hit app stores shortly thereafter. Heck, Disney+ has more than 150 million subscribers and the Mouse isn’t exactly a spring chicken.

Savvy brands and advertisers will no doubt follow their lead.

So, what exactly is CTV?

A connected TV is any television capable of streaming video, or facilitating access to other digital content, over the Internet. TVs can be ‘connected’ either via built-in streaming and media platforms, like Roku TV, or external streaming devices, like the Amazon Fire TV Stick.

Typically, CTVs enable access to content via apps like Hulu, YouTube, Netflix, and Amazon Prime Video. These apps are made available on CTV app stores like the Roku Channel Store and Amazon Fire TV.

Broadly speaking, CTVs fall into three categories:

• Smart TVs — Smart TVs have built-in internet capabilities and come with media platforms that enable users to navigate the digital streaming landscape. With smart TVs, no additional streaming devices are necessary.
• Over-the-Top (OTT) Devices — OTTs are separate devices that are plugged into TVs and enable them to serve up streaming capabilities via the Internet. The most common OTT CTV devices are: Chromecast, Roku, Amazon Fire TV, and Apple TV.
• Gaming Consoles — Similar to OTTs, consoles like PlayStation 5 and Xbox Series X have built-in app stores that enable users to stream video content to their TVs.

How about CTV advertising?

As the name implies, CTV advertising refers to a form of digital advertising conducted on CTV platforms. It enables brands to engage with highly targeted audiences at lower costs. Moreover, due to the growing popularity of streaming platforms, CTV advertising is a great way for brands to regain the attention of cord-cutters.

CTV ads come in a variety of flavors. Video ads can be served up ‘in-stream’ or as online video (OLV) ads, which appear within video content on websites. Meanwhile, image ads can be served up alongside TV shows or live streams, and interactive ads that prompt viewers to perform specific actions can be shown to pre-defined audiences.

Compared to linear TV advertising, CTV offers brands:

• Superior Targeting — When it comes to launching successful ad campaigns, targeting is key. With the right tools CTV platforms make it possible for brands to reach ultra-specific customer profiles. For example, CTV app intelligence can be used to identify which apps are most likely to attract a brand’s target audience. This will help them improve ad placement and maximize the return on investment for each served ad.
• Easy to Measure Results — Programmatic platforms let businesses measure the results of their ad campaigns in real-time, with insight into attributions. They also tend to provide a host of useful advertising metrics, such as campaign impressions, total reach, video completion rate (VCR), ad viewability score, cost per mille (CPM), and cost per completed view. Of course, the metrics on offer will differ from platform to platform.
• Flourishing Audiences — While the old-school cable and satellite industry is contracting, CTV and streaming markets are flourishing. And by all indications, cord-cutting won’t abate any time soon.

In any case, while it's hard to beat primetime ad spots during the Super Bowl, traditional TV commercials don’t reach the audiences they used to. This has had a predictable effect on global TV ad spend.

The lone exception is CTV advertising. While the media investment company GroupM recently revised their predictions for global ad spend in 2022 downwards, they remain bullish on CTV, which they predict will grow by 24% this year. If so, that would make CTV 12% of the global TV ad market. Not too shabby!

Okay, so how can brands and Ad Tech companies improve CTV advertising?

Brands looking to get the most out of CTV advertising should focus on three key areas: ad targeting, brand safety, and fraud prevention.  

Improve Ad Targeting

First things first. Targeting. This is the practice of directing ads towards pre-defined audiences that share certain interests or traits. CTV platforms allow for high-precision targeting since the apps and games they offer were designed to appeal to specific user bases.

A great example of this is in the sports vertical. ESPN is one of the most popular apps on the CTV market; but since it caters to sports in general, it may not offer ideal ad space for all advertisers. The NFL app, which appeals to fans of professional football, or the Cowboys Now app, which is specifically for fans of the Dallas Cowboys, might offer more precision and higher value impressions than the ESPN app.

CTV apps can be segmented in a variety ways — via keywords, categories, content ratings, parental warnings, languages, country availability, user ratings, and more. As such, brands can leverage each of these elements to enhance ad targeting. The best approach here is for brands to find a CTV app intelligence provider that can help them home in on their ideal customer profiles.

One last thing to note before moving on: the Interactive Advertising Bureau’s (IAB) content taxonomy. Typically, when an app publisher releases a CTV app, they place it in the category that’s most likely to help them generate downloads and not necessarily the one that best describes the app’s content. As a result, many apps are slightly mis-categorized, degrading the ability of advertisers to target their ads. To solve this, the IAB developed their own taxonomy, which offers more precision than standard CTV app store categories.

Ensure Brand Safety

Suffice it to say, brand safety is super important. The last thing businesses want is to put their reputation in jeopardy by unwittingly placing their logo alongside disagreeable content. One way to avoid this in the CTV space is to create whitelists and blacklists composed of approved and unapproved CTV apps. These lists can then be used to inform future ad campaigns.

Additionally, ensuring brand safety in this way has the added benefit of improving ad quality. By blacklisting apps with unsavory content, brands avoid spending ad dollars where they’re unlikely to result in new business.

Fight Ad Fraud

As digital advertising has become more prevalent, so too has digital ad fraud. According to some estimates, the digital ad industry is expected to suffer a whopping $81 billion in losses in 2022. Fortunately, there are a number of ways brands can fight back.

Take, as an example, the IAB’s app-ads.txt standard. This enables demand-side platforms (DSPs) to acquire ad space from authorized suppliers by allowing app publishers to declare which companies are explicitly allowed to sell their ad inventory. In other words, brands can leverage the IAB’s standard to proactively block unverified ad space sellers that may be attempting to siphon off ad dollars.

Takeaways

For those of you that skipped to the bottom, here’s the TL;DR. Digital streaming is on the rise and consumers are getting rid of traditional linear TV in growing numbers. As a replacement, they’re switching over to connected TV technologies like Roku, Fire TV, Apple TV, and Chromecast.

This trend of ‘cord-cutting’ has resulted in substantial realignments in the entertainment industry. With linear TV audiences on the decline, ad spots no longer reach as many people as they used to. To counter this, companies have invested more resources in the digital space. 

Indeed, brands are turning to CTV platforms to recapture lost audiences. And for good reason. CTV advertising offers superior targeting, easy to measure results, and flourishing viewership.

Nevertheless, in order to get the most out of their CTV ad campaigns, brands will need to take steps to improve ad targeting, ensure brand safety, and fight ad fraud.