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Massive changes are on the horizon for marketing agencies, especially when it comes to digital advertising. Due to the pandemic, advertising on streaming media, such as connected television (CTV), has become much more popular than more traditional forms.
CTV distributes over the counter (OTT) advertisements to consumers via various streaming services. OTT basically refers to everything the Internet, and is similar to traditional television, except viewers see it through a different portal. As more consumers choose to stream over cable or satellite TV, advertisers must find new ways to reach this vast audience. Advertising through CTV and OTT is the solution to this problem.
CTV/OTT advertising is one of the fastest growing advertising channels. Mid-June 2021 data from Statistical reported that CTV’s advertising spending in the United States in 2020 was $13.41 billion, and then estimated a market of $27.5 billion by the end of 2025. In the same report, Statista estimated the number of CTV users in the United States in 2020 at a staggering level. 203 million. Although the pace of growth may slow down a bit as the government continues to lift pandemic-related restrictions, these numbers will increase, and as the advertising industry evolves, marketers should include a strong CTV/OTT advertising strategy in a brand’s business plan.
What is CTV and OTT marketing?
Connected TV and OTT advertising allow brands to reach viewers beyond traditional cable and satellite TV, and essentially means serving ads through streaming services. Marketing agencies such as Valux Digital professionally produce CTV advertising content that targets relevant channels and audience groups, and these rapidly growing forms of promotion reach households while they watch their preferred form of TV streaming. .
CTV commercials mirror traditional television commercials and cannot be ignored by viewers. Pre-roll and mid-roll ads play on connected devices, including smart TVs and game consoles. These highly effective advertisements reach cord-cutting consumers otherwise unreachable with traditional television commercials. Simply put, OTT ads give marketers a powerful tool to reach audiences directly, with the same upper funnel benefits of traditional TV advertising.
There are three structures for OTT ads:
• Programmatic: Here, advertisers use automation to serve ads through demand-side platforms (DSPs), which software agencies can use to buy and display ads through video, mobile, and search ads. Programmatic ads offer the best targeting and are less expensive, but advertisers have less control over where they appear.
• Direct editor: In this form, the exchange takes place directly with the OTT provider. It offers more control over ad placement, but is also more expensive.
• Direct platform: Here, ads are purchased directly from the OTT provider, such as RokuNetflix or Amazon.
OTT advertising works without using third-party cookies
Earlier this year, Google announced a plan that long-read Chrome and Chromium browsers would no longer support third-party cookies. The company made this decision due to both regulatory laws and privacy concerns, and hasn’t set an exact phase-out date, but the process will likely begin by the end of 2023. Unless the advertising agencies prepare, the resulting changes will be significant, including difficulty in tracking and understanding consumer behavior online.
OTT advertising uses a contextual structure that protects consumer privacy. It allows marketers to target consumers based on content rather than individual. Additionally, streaming service providers collect first-party data from streamers — information that streaming services collect directly from consumers when they sign up and log in. This form of data reduces the need for other types of data collection, and OTT advertising allows it to be used without actually accessing the information. Finally, OTT advertising will allow you to check the effectiveness of advertisements using IP addresses and timestamps.
The OTT market generates revenue using different VOD models
VOD stands for “video on demand” – content that consumers can access online whenever they want. The same Statista report mentioned above estimates that digital video ad spending in the United States will grow to $78.5 billion by the end of 2023, which will represent approximately 51% of all revenue that advertisers will spend. in OTT. Another prediction is that total digital advertising spending will grow from $191 billion to $250 billion over the same period. The breakdown is as follows:
• AVOD (advertising-based video on demand): Video on demand allows viewers to watch content online without paying a subscription. Ad-based video on demand will account for 51.58% of revenue.
• SVOD (video on demand by subscription): Here, users have to subscribe and pay access fees. Figures show that 40.16% of ad revenue will come from video-on-demand subscriptions.
• TVOD (transactional video on demand): This more traditional format allows users to purchase content a la carte. It will represent 5.1% of advertising revenue.
• EST (electronic sale): This structure allows consumers to pay a fee for a one-time download. Figures show it will account for 3.16% of marketing revenue by 2023.