OTT vs. CTV: What's the Difference and What You Need to Know
Few advertising methods have impacted the industry as much, as quickly, and as efficiently as OTT/CTV advertising. Chances are you have already heard a lot of talk about OTT (over-the-top), but, have you seen the research that is backing this claim?
According to Statista, the average revenue per user (ARPU) for OTT/CTV advertising is expected to amount to $52.25 by 2025, with a prediction of more than 3,777.9 million users by the same year. The report also found that user penetration is already at 40.9% in 2021 and is expected to reach at least 48.3% by 2025.
To fully take advantage of OTT benefits and drive real results, you must know what OTT is, how OTT works, and the difference between OTT and CTV. Here, we have the whole breakdown and more, including OTT and CTV examples and a platform that will optimize your experience.
What is Over-the-Top (OTT)?
Over the top OTT refers to the delivery of video content going over traditional cable and directly to viewers via an internet connection. Some of the most popular streaming platforms that deliver this content through the internet include Netflix, Hulu, Disney Plus, and Amazon Prime Video. However, those are subscriptions, and only cover a third of what can be represented under OTT.
Types of OTT
Subscription Video on Demand (SVOD)
This category is where your most popular platforms that charge a subscription fee reside, including Netflix, Hulu, Amazon Prime Video, and HBO Max. Consumers pay monthly to access all the content provided on the platform
Advertising Video on Demand (AVOD)
With AVOD, viewers can consume content for free. Nothing in life is truly free, however, so viewers exchange sitting through ads for content. Examples of this category include YouTube and DailyMotion.
Transactional Video on Demand (TVOD)
Consumers pay for TVOD content, either for permanent access or through DTR (download to rent—particularly popular for new movie releases) for an allotted time frame. Examples of this can be seen in Amazon's video store, Google Play, and Apple's iTunes.
The Role of OTT in Advertising
Since OTT is not limited to a TV schedule or in-house access, advertising for marketers has been upgraded to 24/7 access to specific audiences. Today, TV and movie content can now be accessed by TV and smartphones, gaming consoles, tablets, laptops, and desktops — as long as there is a high-speed internet connection available for the user.
This means advertisers can work with streaming platforms like Netflix, HBO, and Peacock to deliver ad content to a hyper-targeted viewer via their favorite streaming content, working its way into designated time slots within relevant content.
In fact, these ads are more accepted by viewers because users opt to pay less in exchange for advertisements. Multiple studies have found that 76% of consumers said they're willing to view ads to watch content for free on streaming platforms, and 60% are ready to watch ads for cheaper streaming subscriptions.
The Factors That Have Lead to Cord Cutting
Cord-cutting has already been gaining traction in the last decade. However, some factors have fast-tracked it into success quicker than many experts anticipated:
- Quality content is being poured into streaming by major platforms.
- Consumers find value in the options for ad-supported free services and cheaper services.
- Traditional cable costs significantly more.
- 24/7 access/binge-able content versus conventional broadcast schedules.
Why Do Marketers Use OTT Advertising?
According to Media Post's research, marketers have already upped their 2021 digital video advertising spend (including OTT/CTV), accounting for 20% of their total media budgets for the year. This is up from just 13% reported in a November 2020 survey by the Interactive Advertising Bureau.
That figure is expected to continue growing in the coming years. Statista reports that ad revenue for OTT video advertising is set to account for more than half (51%) of all OTT revenues, reaching $119 billion by 2023.
So, why are these marketers increasing their OTT advertising budgets? The answer is simple: It's more efficient, at a more desirable cost. Out of its many benefits, here are the most notable reasons marketers invest more in OTT.
The Focused Reach of OTT Advertising
Although linear TV advertising has an incredible reach with a large audience, OTT advertising gives marketers a narrow and targeted opportunity. This means your brand messages aren't just going to anyone — they're getting the right message, to the right person, at the right time when they are more susceptible to it. Essentially, you'll spend less and reach only the right audience.
Effective Targeting Capabilities
When you hear about OTT, the center of conversations is always its targeting capabilities. While traditional cable lacks superior digital tracking and measuring potential, OTT will give you access to all the data you need to ensure your campaigns are optimized to their full potential. This means real-time data for real-time tweaks and adjustments.
Another shortcoming traditional TV has in advertising is geo targeting. Reaching a local audience is essential for businesses that depend on in-store traffic and local support. OTT allows you to geo target your specific audience to ensure you're reaching and resonating with the right people in your area, increasing local reach.
The analytics behind OTT are compelling, including access to:
- Demographic: age, gender, income, marital status, etc.
- Psychographic:interests, lifestyle, behavior, etc.
It’s easier on the budget than traditional TV advertising.
Another benefit that marketers are taking advantage of with OTT is cost. Not only does it often cost much less for ad space in OTT compared to traditional TV advertising, but you can also enjoy less ad spend waste. There are often many TV viewers for ad space, but there is no guarantee that you're reaching your audience specifically. That is not the case with OTT.
OTT appeals to younger audiences
Not only has research found that more than 85% of Millennials subscribe to at least one OTT service, but Gen Z also accounts for a large portion of OTT. Here’s what the statistics show about Gen Z cord-cutters:
- 70% of Gen Z associate watching TV with watching via an online source
- 51% of Gen Z allocate more than one hour per day streaming television and videos
- 72% visit YouTube daily to watch their favorite videos
- More than 50% don't mind watching streaming TV ads
OTT ads are often non-skippable
Finally, OTT ads aren't often skippable. Since users opt-in to watch advertisements in exchange for free or cheaper services, they must watch the delivered ads. Even better, many have been shown to even be more open and engaged with ads on OTT because they had the choice to opt in to see them (so they feel less intrusive and annoying).
What is CTV?
Connected-TV (CTV) and OTT are often mixed-up terms in marketing. However, they're distinctly different. While OTT refers to the content streaming via the internet, CTV relates to the devices providing streaming content to viewers. Essentially, CTV is a subset of OTT. It includes apps and services that don't require the services of traditional TV.
CTV devices also stream OTT ads, using products like:
- Smart TVs
- Connected TV streaming devices (i.e. Roku, Chrome Cast, or Amazon Fire Stick)
- Gaming consoles (i.e. Xbox or PlayStation)
According to Statista reports, CTV ad spending amounted to around 8.11 billion U.S. dollars in 2018 and is expected to more than double and surpass 18 billion by 2024. The report also found that almost half (40%) of U.S. media buyers plan to increase their CTV advertising spend in 2021, while 60% plan to decrease traditional TV ad spend.
The truth is, you can reach viewers through CTV that you can't reach with traditional, and CTV has impressive targeting capabilities. You'll get quantifiable data (example: ad completion rate) and the opportunity to expand your audience, especially to younger generations.
Starting OTT Campaigns with Motto
Wondering just how you're going to take full advantage of OTT and CTV advertising in your next campaign?
Motto is a reporting and attribution visualization platform that gives you the full scope of your OTT/CTV campaign. Insight includes conversion metrics like foot traffic, site visits, online checkouts, and app installs. There's also total return on ad spend (ROAS) or cost-per-action (CPA) tracking, a daily campaign performance report, and exportable conversion data for the best campaign performance results.
Produce Better OTT Ads With MNI
There are many benefits of OTT advertising for your business and brand to tap into. Still, like with any great marketing method, you need significant expertise and experience to ensure it's executed efficiently. MNI can help you create successful campaigns that get results with a team of experts that have specialized in OTT and CTV for years. Contact us for more insight and resources regarding OTT and CTV.