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The Ultimate Guide to Connected TV Advertising

Updated: Apr. 22, 2024
Published: Jul. 07, 2023

The cord-cutting revolution is officially here. A look at the numbers is telling: U.S. adults will spend over 7.5 hours on connected devices per day this year.

As the playing field changes, marketers and advertisers must adapt — or risk falling behind. But it's easy to get lost without understanding the terms, strategies, and tactics that make up this ecosystem.

Whether you're just starting or looking to jog your memory, we'll cover everything you need to know about CTV advertising to set your campaigns up for success.

What is connected TV?

Connected TV (CTV) refers to any internet-equipped device connected or embedded into a TV set for streaming video content. Think of smart TVs, gaming consoles, and streaming devices such as the Amazon Fire Stick.

Types of OTT devices

Source: https://iabtechlab.com/blog/ott-vs-ctv-what-is-in-a-name/

Is connected TV the same as over-the-top? What about streaming? Contrary to popular belief, connected TV (CTV), over-the-top (OTT), and streaming are not interchangeable terms. CTV is the television device used to watch video content over the internet, while OTT is the method for delivering video content. Streaming, on the other hand, includes data or content transmitted through a continuous stream and can include content beyond video.

An iPhone, for instance, can be referred to as a streaming device. If you use your iPhone to watch a TV show, that video content is delivered via OTT. It would be wrong to call this device a connected TV because it does not connect to a television.

In other words, all connected TV is over-the-top, but not all over-the-top is connected TV.

As more and more consumers cut the cord on traditional cable TV and move towards internet-based viewing options, CTV advertising has become an increasingly important tool for marketers looking to reach their target audiences.

Exploring a new approach can come with excitement and anxiety about the unknown, so let's break down the terminology advertisers need to know.

Important CTV terms to know

AVOD, SVOD, FAST — the acronyms dominating the CTV space are enough to make any marketer’s head spin. Fear not, we have you covered.

Think of this as a quick cheat sheet rather than a rule book. Just as TV continues to evolve, so too do the terms industry leaders use.

  • Advanced TV: An umbrella term used to encompass all non-traditional television
  • Addressable TV: A TV advertising solution that 1) targets specific households based on their demographics, habits, and interests instead of the program they're watching 2) is often injected by the cable/TV provider's set-top box 3) is typically provided by MVPDs (multichannel video programming distributors)
  • Convergent TV: The convergence of all forms of TV — linear, connected TV, and OTT. In this unified space, ad buying can take place across all screens, platforms, and channels. At present, this is more of an idea than a reality, but the industry is moving closer to this future as technology advances.
  • CTV (connected TV): A television — or device connected to a television — able to stream video content from the web
  • FAST (free ad-supported TV): An over-the-top content distribution model where users have free access to linear (or FAST) channels and on-demand video content
  • MVPDs (multichannel video programming distributors): A traditional pay-TV provider such as a cable or satellite TV company
  • OTT (over-the-top): The delivery of video content over the internet through any device
  • Smart TV: A television equipped with an internet connection, either through an ethernet port, built-in wifi or both
  • Streaming: Data or content transmitted through a continuous stream
  • VOD (video on demand): Content consumed on demand at any time, anywhere, and on any device. There are three types of video-on-demand, including:
    • AVOD, where consumers watch ads to access free or discounted streaming content
    • SVOD, where viewers access on-demand video content in exchange for a recurring rate or subscription
    • TVOD, where consumers purchase streaming content on a pay-per-view basis
  • vMVPDs (virtual multichannel video programming distributor): Digital pay-TV providers that deliver live TV just as MVPDs do — but over the internet, removing the need for a cable or satellite set-top box

What are the benefits of connected TV advertising?

Connected TV is rapidly emerging as a key part of any marketer's media mix — and for good reason.

Reach viewers where they’re watching

Households are cutting the cord at an explosive rate. Just take a look at the numbers:

  • Time spent on CTV has almost doubled in four years.
  • US adults will spend nearly 2 hours a day with CTV devices in 2023.
  • CTV is in most households: More than two-thirds of the US population will use CTV in 2023, and more than 85% of US households will have at least one internet-connected TV set this year.

The trend shows no signs of slowing down, and providers are taking notice. Amazon Prime, for instance, put its streaming capabilities to the test during a live stream of Coachella's main stage. Live sports, news, and other content once exclusive to cable TV are joining the mix too.

eMarketer graph showing daily average time spent with CTV among US adults, 2019-2024

The takeaway? If advertisers are to reach viewers where they're watching video, they need to be on CTV.

Optimize campaigns with real-time analytics

Connected TV bridges the gap between traditional TV's massive reach and digital marketing's targeting and measurement capabilities. The result: A growth channel full of measurable outcomes, from tracking the return on your advertising budget to attributing ad viewers to website visits.

This is especially important in today's economy. Advertisers and brands can make more impactful investments and continuously optimize their performance with greater transparency into their campaign's performance by leveraging the real-time analytics CTV offers.

Drive video completion rates

CTV advertising campaigns reach the right viewers and capture their full attention. According to Statista, video completion rates on CTV average out to 97%.

It's all thanks to the unique traits CTV brings to the table. Take precise targeting, for instance. Data-driven insights and powerful technology ensure that the ads shown are relevant to the viewer's interests. With highly personalized ads, viewers are more likely to engage with and watch CTV ads to completion.

Another factor contributing to high completion rates is TV's inherent "lean back" viewer experience. Whereas those on the phone actively scroll through content and are ready to skip through ads with the swipe of their thumb, TV viewers sit (or lean) back to enjoy content and are less likely to click to scroll through an ad. Plus, on-demand video requires the viewer to specifically request the content, meaning they often have no choice but to watch the ad — otherwise, they can't watch their programming.

Empower performance campaigns

Because audiences are more fragmented than ever, there's been a push for new measurement solutions that determine the effectiveness of TV advertising based on business metrics — rather than GRPs (gross rating points) and basic demos.

This is where connected TV comes into play. From tracking conversions to measuring brand lift and beyond, connected TV's robust targeting and reporting capabilities give marketers a complete picture of how their campaigns perform, transforming TV into a full-funnel performance marketing channel.

Common performance metrics for CTV campaigns include:

  • Video completion rate: the percentage of viewers who watched a video ad from beginning to end
  • Engagement rate: how many viewers of your ad go to your website/install your app
  • Action/Conversion rate: how many people saw the ad on TV and then added items to their cart, registered for an account, or started a form — — usually on a different household device

Advanced measurement techniques, such as attribution modeling, can help advertisers understand the impact of their CTV campaigns on downstream engagement, actions, conversions, and revenue.

How do you advertise on connected TV?

CTV advertisers can buy inventory in a variety of ways. Let's break it down by first looking at the two buckets comprising this process: Non-programmatic and programmatic.

Types of Ad Deals

Source: https://www.iab.com/wp-content/uploads/2015/06/IAB_Digital_Simplified_Programmatic_Sept_2013.pdf

In non-programmatic advertising, negotiations take place directly with the publisher. This process is entirely manual. Think of phone calls, emails, and insertion orders. As we drill further down, we can see that two types of non-programmatic deals take place.

  • Sponsorships: A direct deal where publishers guarantee premium inventory to advertisers — specifically first or last break ad slots.
  • Direct insertion orders: An agreement between the advertiser and publisher to run a specific ad campaign on the publisher's inventory. Here, the buyer guarantees they will spend a particular amount on the publisher's inventory over a determined period and negotiated rate. The publisher, on the other hand, promises a certain number of impressions as part of the rate.

Programmatic advertising, on the other hand, involves ads typically purchased using automated buying techniques and software.

  • Programmatic guaranteed: A one-on-one deal combining the benefits of programmatic advertising with the assurance of guaranteed inventory. The publisher agrees to deliver a set number of impressions, while the advertiser agrees to pay a fixed price. The publisher then reserves inventory for the advertiser rather than sending it out to auction.
  • Private marketplace (PMP): Invitation-only marketplaces that allow advertisers to purchase ad inventory from a select group of publishers. In this case, inventory is only available to a select group of buyers. This guarantees the inventory will be available to purchase but does not guarantee it will be sold to a certain buyer. In fact, it is possible to have a private marketplace deal with a floor price that does not win very many auctions. Why? A private marketplace buyer will get a "floor price," or the lowest price they are allowed to offer for any ad. It's possible, though, a higher bidder may come in and win.
  • Preferred deal: Within the private marketplace, a publisher can give a buyer priority and exclusive access to certain inventory if they have agreed upon a preferred deal. This allows the buyer to check the inventory before they buy it. If not, it is then made available to everyone else in the private marketplace, and then open auction.
  • Open exchange and real-time bidding: This comes to mind for most when they think of programmatic advertising. At its core, it is an open marketplace where multiple advertisers can bid on the same inventory, and the highest bidder wins the impression. Buyers beware — purchases can be risky. Information about publishers here is often limited, increasing the risk of fraud.

Note: It's common for advertisers to confuse real-time bidding with all programmatic. Remember that purchasing can happen ahead of time, such as with programmatic guaranteed deals. In other words, not all programmatic deals involve real-time bidding.

What streaming services have ads?

The TV ecosystem has seen an explosion in ad-supported streaming apps in recent years: Disney+, Pluto TV, Hulu, Peacock, and Netflix are just some of many examples.

US OTT Video Viewership, by Platform, 2023

The cost of advertising on streaming services can vary widely depending on the platform and the specific advertising package purchased. For example, Hulu offers various ad formats, including standard video ads, interactive ads, and sponsored content, with prices ranging from a few cents per impression to several dollars per thousand impressions. Similarly, Peacock offers both traditional and native ads, with costs ranging from around $15 to $30 per thousand impressions.

What are the different ways to target on CTV advertising?

Finding where viewers watch video is easy with CTV advertising. But what about finding the right audience?

CTV's targeting abilities make it possible, even easy, to do so. The channel uses a mix of data to target audiences at a granular level. Here are a few targeting strategies that marketers use:

  • First-party data targeting: Data that is collected directly from customers or users of a product or service.
  • Third-party data targeting: Data about individuals and their behavior that is collected by a third party rather than by the company or organization that is doing the targeting.
  • Contextual targeting: Displaying ads to users based on the program, genre, and streaming app they are watching.
  • Geotargeting and geofencing: Targeting users with location-based data. The two terms are similar, but they differ in their scope.
    • Geotargeting users various data to reach users within a defined area regardless of their exact location.
    • Geofencing, on the other hand, is more precise. In this instance, the advertiser sets up a virtual boundary around a physical location. When a user physically enters the geofenced area, they are served targeted ads.
  • Retargeting: Serving ads to people who have previously interacted with a brand or website with the goal of bringing them back to complete a desired action.
  • Lookalike audience targeting: Identifying a group of individuals who share similar characteristics or behaviors to a company's existing customers and then target advertisements to this group.
  • Device/platform targeting: Limiting viewing methods to specific device types, such as connected TVs, streaming devices, mobile, browsers, gaming consoles, or device manufacturers, like LG, Vizio, and Samsung. This can look like serving ads on gaming consoles only or excluding ads from being shown on a Fire Stick.

This is especially important in today's economy. Advertisers and brands can make more impactful investments and continuously optimize their performance with greater transparency into their campaign's performance.

Tip: A common mistake advertisers make is over-targeting. Narrowing your audience segments to niche demographics often leads to missing out on relevant audiences that convert. Instead, go wider to find as many high-converting media fragments as possible.

What are the main CTV advertising formats?

Marketers can serve ads to users within the CTV space using standard video ads and several ad formats specific to CTV.

In-stream video ads

In-stream video ads are a type of digital advertising format displayed within video content that can be either skippable or non-skippable. Skippable in-stream video ads allow viewers to skip the ad after a few seconds, while non-skippable ads require viewers to watch the entire ad before continuing to the video content.

Pre-roll, mid-roll, and post-roll ads all fall under in-stream ads.

Just as the name suggests, these ads differ in when they're shown. Pre-roll ads play before the main video content. Mid-roll ads play in the middle of the video content, and post-roll ads play after the video content.

Interactive ads

Another benefit of connected TV advertising is the ability to use interactive formats, including interactive overlays and companion banners. Use this to your advantage — these ad formats allow viewers to engage with the ad in a way that feels more natural and less disruptive, increasing the chances that they'll convert.

Note that these are specific to publishers, meaning they can't be scaled across media buys.

Mastering CTV advertising: Guidelines to get started

Building a connected TV campaign can be a daunting task. To get started, consider the following.

Why? Identify your campaign goals

Defining clear goals and objectives can help you create a more effective and efficient campaign, maximizing your budget and ultimately driving better results. Try asking questions that determine why you want to be on connected TV and what success looks like to you:

  • Do I want to drive lower or upper-funnel actions?
  • Am I looking to increase brand awareness?
  • Do I want to generate leads?

Each goal requires a different approach, so it's crucial to identify what you want to achieve before launching your campaign. By taking the time to define your campaign goals, you can ensure that your CTV advertising strategy is tailored to your specific objectives, resulting in a more successful campaign.

Tip: It's common to measure TV campaigns using traditional reach metrics. But more and more marketers realize that justifying their TV spend means tying their campaigns to business outcomes and proving that TV can drive performance. Pay attention to lower-funnel metrics like form submissions and purchases when thinking about goals to better explain its performance later on.

Who? Understand your target audience

While CTV advertising may seem like a new and exciting frontier, many of the principles that make traditional advertising effective still apply. Start with the basics: Advertisers should focus on understanding who they're trying to reach before they go any further.

This includes audience characteristics such as:

  • Demographics (How old are they? Where are they located? What is their income?)
  • Psychographics (What are their interests, habits, and values?)
  • Purchase intent data (What are they likely to buy?)
  • Usage data (How did a customer use your site? Did they stay on one page longer than another?)
  • Behavioral data (How are they behaving? Do they order deliveries 5x a week?)
  • Ownership data (What do they own? A pet? A Lexus?)

This information will help you create ad campaigns that resonate with your target audience.

Where? Take a holistic approach

CTV should be on every advertiser's radar, but it doesn't have to be the only piece in your TV toolbox. While cord nevers are on the rise, most viewers are hybrid.

Using insights from our TV+ platform, we can see that just 13% of viewers exclusively watch ad-supported linear TV, while 33% only watch connected TV. On the other hand, a whopping 54% watch both.

Rather than pick between the two, think about how they can work together.

"One of the trends we're starting to see is a continued growth of streaming and a decline of linear, but streaming isn't going to take over in the next 12 months — and linear is not going to go away in the next 5 years. It's natural for us to say out with the old and in with the new, but that's not the case here." - Dave Morgan, CEO of Simulmedia, 2023

How do you maximize reach across both linear and connected TV? First, you need to understand your audience's viewing habits across the entire TV landscape. How much time are they spending on linear TV versus ad-supported CTV? What programs, apps, and times are they watching each?

With the latest technology, you can pinpoint exactly how your target audience is distributed and behaving across linear and streaming TV, including demographics, the percentage of your audience watching linear versus CTV, the top linear networks and ad-supported streaming services your audience is on, and viewership concentration across time of day and day of the week.

What? Be smart when it comes to creative

What message are you looking to send? How do you say it in a memorable way? This is where your ad creative comes into play.

You can craft your creative from scratch, but you can also repurpose existing creative to save time and money. Think about what other creative exists in your repository. Do you have any social media video ads? What about a linear TV campaign?

Investing in design is important, but it's equally important to consider performance. Test your creative with multiple A/B versions to decipher what resonates with your audience, and use that performance data to inform future campaigns.

Another way to take your creative to the next level? Leveraged connected TV's advanced targeting capabilities. If you want to target several different audience segments, consider using different creative for each segment. If you own a travel booking site, for instance, use geotargeting to serve ads showcasing warmer destinations to those in colder areas.

When? Think about the timing

How long will your campaign run? Do you have a launch date in mind? The timing of your campaign will depend on a few factors, including budget, seasonal trends, and more.

For instance, holidays, elections, and other major events can influence how your audience and the market behave. With this in mind, stay up to date with supply and demand trends and how they may affect your industry.

Take note of how the ad market is performing, too. You can use this information to adjust your bidding strategy and ensure that you can compete effectively in the marketplace. Factors to consider include:

  • Clearing rates: By analyzing the current clearing rates, you can get a sense of the level of demand for ad space and adjust your bidding strategy as needed. If the clearing rate is high, it may be more difficult to win ad space, and you may need to adjust your bids or targeting to ensure that the right audience sees your ad.
  • High-demand inventory: This refers to the ad space that is in high demand by advertisers. Reviewing this inventory gives you a sense of what your competitors are bidding on and helps you decide if you should target different keywords or audiences to ensure you compete effectively.
  • Similar potential inventory: This refers to ad space with similar characteristics to the high-demand inventory but may be less competitive. By discovering similar potential inventory, you can expand your reach and find potential new opportunities to reach your target audience. You can also experiment with different bidding strategies to see what works best for this type of inventory.

How? Find the right tools

You now know how to build your campaign and draft your media plan, but a strategy is incomplete without the right tools.

How do you find the right provider? It's ultimately up to your brand, but here are some questions you can ask to get started:

  • Can I use my CRM data for targeting? Using first-party data can make reaching those similar to your best customers easier, but it requires you to match your data with a provider's viewing panel. Be sure to ask about your prospective provider's data-matching process. If their experience is limited, completing matches could become a huge roadblock.
  • How do you select inventory? Many TV providers claim to use granular audiences for planning. But when it comes to actual inventory selection, they often revert to the industry standard and rank spots based on how they index against standard age and gender demos. To truly take advantage of the efficiencies offered by advanced TV technology, look for vendors who can actually secure the recommended inventory.
  • What will you be able to tell me about my campaign's performance? When discussing your campaign with a provider, pay attention to whether they can tell you which days, times of day, and TV networks work best for your ad, as well as what lower-funnel metrics they can attribute to your campaign.

Connected TV Campaigns for Your Brand

As the popularity of connected TV continues to grow, understanding the CTV advertising ecosystem is becoming more critical than ever. Use this guide as a reference, stay informed on industry trends, and get ready to take your CTV advertising to the next level.

An efficient, connected TV campaign is incomplete without the right technology behind it. Powered by unique predictive technology, robust data science, automated processes, and experienced media veterans, Simulmedia's TV+® helps advertisers and marketers take the leap into CTV advertising.

Ready to get started? We'd love to talk.