OTT versus traditional TV advertising

video marketing Television advertising has been around for many years. It has been and still is a very common medium for advertisers to allocate their ad budget. However, it has been changing dramatically for the past few years with a significant shift from traditional cable TVs to over-the-top (OTT) devices like smart TVs, phones, tablets, and many streaming sticks (Roku, Amazon Fire, Google Chromecast, AppleTV) that are Internet-connected and can download videos from content delivery networks (CDN) and ads from online adservers. The rise of online video consumption creates a huge inventory for video advertising. It’s useful to understand the history and the differences with OTT advertising so you can make smart decisions on media buying or selling.

Traditional TV advertising

When video advertising was initially launched on traditional TVs, it was just a way to fill the empty air time between programs and earn some additional revenue. The relationship was often directly between the advertiser and the TV station. As TV watching got more popular, TV ads became a more important source of revenue for the stations.

However, targeting options were still very limited and basic. Targeting at the individual level was unheard of. Many, if not all, viewers often watched the same ads on TV regardless of their preferences or interests. The viewers must turn on their TVs to a specified channel at specific time to watch content and the accompanied commercials. The advertisers could choose the station, program and time based on ratings and audience data provided by a few big research firms. This selection process had some correlations to the target audience. However, it was not precise or directly measurable. There were a lot of estimates, projections and hopes on return-on-investment (ROI). The goal was simply to reach the masses, basically whoever had their TV on. The location and engagement activities of viewers were not clearly known or reported. These limitations gave digital OTT advertising many advantages.

OTT Advertising

Traditional TV advertising was able to reach many eyeballs but the shift to a more customized and targeted marketing approach became more and more popular as more devices are connected to the Internet and get all their data from the cloud. Therefore, these devices are cheaper to make, more affordable to consumers and also more popular for the very same reason. Viewers use a variety of devices to watch their video content on demand, basically anywhere and anytime. This big change in media consuming’s behavior requires an entirely new ad serving solution.

Digital ad serving is much more efficient and measurable. Modern advertisers appreciate OTT advertising because it opens up advertising to all businesses, small and large, regardless of their size. It is cheap and can scale up indefinitely. It is highly effective because it offers better value and reach. There are many more targeting options with more data points available than ever before. Ads can be shown to individual viewers depending on the many and specific targeting criteria and restrictions. Every ad view, or ad impression, involves many advanced algorithms that select the most suitable ad. The process sounds complicated but thanks to ad technology, each ad selection can be completed in milliseconds and it can scale up to many thousands of ad servings per second. The limitations are often not technical or data limitations but with ethical and regulation concerns. Advertisers have to walk a fine line between being relevant and being creepy. Privacy is an on-going issue that needs to be considered and addressed in order to maintain a healthy ecosystem for online advertising.

Instead of paying for projections, advertisers pay for individual ad views, often calculated using CPM rates. CPM is the advertising cost per one thousand impressions. With access to real-time reports of many ad metrics, advertisers can make adjustments and optimize their ad campaigns as frequently as they want. Viewership location is one of the available ad reports and can be used to understand patterns and trends in ad optimization. Viewers of streaming OTT content and ads are already on smart devices with interactive features so they can bring a higher level of engagement than traditional TV ads. They can respond immediately to the advertisement by clicking on it and proceeding with the offer. There is often no need for viewers to transfer or switch to another device, which is not only inconvenient but also makes lead attribution and conversion reporting less accurate.