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What Is OTT Advertising and Why It’s Growing so Rapidly

the ultimate guide to ott advertising

With the steep decline of traditional cable TV over the last few years, consumers have been turning toward streaming services as an alternative entertainment source. Three out of four American consumers have either replaced or expanded their media sources by subscribing to a streaming service. These have become so popular that you’d be hard-pressed to find anyone who wouldn’t recognize the names of some of the industry giants like Netflix or Hulu. That sudden rise in the popularity of OTT services is what grabbed the attention of many progressive advertisers.

Many were swift to realize that traditional TV commercials were dying out as an advertising medium and were quick to jump onto the OTT advertising bandwagon. Despite many OTT platforms being subscription-based, there is still a massive and highly lucrative advertising market in the OTT industry. Advertising still represents a significant source of the OTT market’s revenue (around 35%), and experts predict it to grow even more.

graph illustrating ott tv and video revenue by sources in millions

If you are an advertiser and are not leveraging the OTT market’s potential, you are leaving money on the table!

What Is OTT Advertising?

OTT (over-the-top) advertising is personalized ad delivery over the internet directly to viewers’ streaming video services or devices. There are many types of devices users can stream OTT content from. Here are just some of the most common ones:

  • Smart TVs / Connected TVs (via in-TV applications like HBO Go or Netflix)
  • Gaming Consoles (e.g., PS4, Xbox One)
  • Streaming Boxes (e.g., Apple TV, Android TV, Amazon Fire TV)
  • HDMI Sticks (e.g., Amazon Fire TV Stick, Roku, Chromecast)
  • DVR Set-Top Boxes

This advertising method allows publishers to overcome various problems that traditional advertising had, like pre-determined broadcasting schedules, lack of targeting and performance tracking, and much more.

Learn How to Set Up OTT on Gaming Consoles: Setting Up OTT Services on Your Gaming Consoles Made Easy

How Does OTT Advertising Work?

If you’re looking to learn how OTT ads work, there are two things to look at:

  • Ad Delivery
  • Ad Insertion

These two processes are vital in the OTT ad serving, so let’s look at them in more detail.

How Are OTT Ads Delivered?

When it comes to OTT ad delivery, it’s essential to consider how the OTT device and the streaming platform communicate. This communication is established via VAST or VPAID ad tags, who are mediators in the four-step ad delivery process:

  1. Audience Creation — The audience creation process takes place based on your chosen OTT platform’s subscription data. This data may include rich first-party and third-party information like users’ favorite shows or categories to allow for better targeting.
  2. Campaign Pushing — During this step, the OTT platform will match and distribute your ads to the appropriate audience.  
  3. Ad Displaying — This step entails the OTT platforms communicating using VPAID or VAST tags to display your ads.
  4. Reporting — The final step includes the OTT platform sending all relevant ad campaign data back to the advertiser. This data often consists of information like impressions, ad completion rates, and other first- and third-party data.

How Are OTT Ads Inserted?

The second crucial part of OTT advertising’s inner workings is how ads are inserted into the content. There are two primary ad insertion methods:

Client-Side Ad Insertion (CSAI)

an illustration of client-side ad insertion process

CSAI is an old-fashioned ad insertion method where the ad loading process occurs within the OTT box itself before getting delivered to the viewer. The reason this method is relatively ineffective is that it is susceptible to ad blockers. Since ads come from outside the content delivery stream with this method, ad blockers detect it and prevent it from playing.

Server-Side Ad Insertion (SSAI) or Ad Stitching

An illustration of server-side ad insertion process

With the SSAI method, ads are integrated into the content stream. That ‘camouflages’ the ads from ad blockers, making this serving method much more reliable for advertisers. 

SSAI works in such a way that the ad and the content travel toward the end device as parts of a single frame-by-frame stream. Since the current ad-blocking technology has no means of differentiating ads from content streams, it’s rendered ineffective. That is why this method is also known as ad stitching. Oh, and let’s not forget to mention that this ad insertion method also works on live broadcasts.

It should be evident by now that SSAI is a superior method to CSAI in many ways. Here’s a quick list of the most notable benefits SSAI has over CSAI:

  • Excellent Solution to Ad Blocking
  • Eliminates Latency and Buffering Issues
  • Offers Better User Experience
  • Easier Development and Implementation
  • Better Consistency, Reliability, and Engagement

With all of the above in mind, if you wish to get the best ROI out of your OTT advertising campaigns, it’s best to look for a platform that uses SSAI for ad insertion.

Why Invest in OTT Advertising?

Talking about ROI, you’ve probably been wondering whether OTT advertising is a sound investment. Well, we assure you that it is! Here are a few excellent reasons for that:

  • OTT Viewership Is Growing — While cord-cutting is becoming more prevalent, OTT is growing in popularity. That is particularly true with younger audiences, as 61% of U.S. consumers between 18 and 29 regularly watch TV through streaming services. This trend is sure to keep growing the more the traditional TV industry gets put on the back burner. 
  • New OTT Services Are Appearing Rapidly —  As of 2020, there are more than 300 OTT providers in the U.S. alone as everybody’s trying to compete for a piece of this lucrative market. That should be a good indicator of the OTT industry’s potential for growth. 
  • OTT Ad Investments Are on the Rise — With the rapid growth of the OTT market, more brands are investing in OTT advertising by the day. Experts predict that OTT ad spend will reach a whopping $9 billion by the end of 2020.
  • Ad Fraud Is Scarce in OTT Advertising — OTT platforms operate in a closed environment, meaning that the odds of falling victim to ad fraud are much lower than in online video advertising.

As you can see, the OTT market’s potential is massive, and it’s only going to keep growing. That is why getting a foothold in the market early on can prove imperative to your success. Doing so will give you the edge over your competitors who might have not yet realized the benefits of OTT advertising.

Speaking of benefits, we’d be remiss not to cover the advantages of OTT advertising in detail.

Benefits of OTT Advertising

There are many reasons online and TV advertisers should consider getting a piece of the OTT advertising cake. We don’t expect you to take our word for it, see it for yourself! Here are some of the most notable benefits OTT advertising brings to the table:

  • High Reach — As of 2020, there are over 188 million OTT users in the U.S. alone. All of these people are potential customers! If you don’t use this vast reach potential to get your brand in front of these people, your competitors will.
  • Precise Targeting — Unlike with traditional TV commercials, you can serve your OTT video ads selectively. That is right — the latest developments in ad serving technology allow you to zero in on your potential customers. Whether you want to serve your ads to consumers from a particular geographical region or reach people with specific interests, ad targeting will boost your conversion rates and improve your viewers’ user experience.
  • Reliable Performance MeasurabilityTracking the success of your video ads is essential to making educated decisions and optimizing your advertising campaign. One of the primary advantages of OTT advertising over traditional commercials lies in the availability of performance tracking tools. Choosing to promote your business in the OTT market will give you more information on your campaign’s performance, resulting in more optimal budgeting and higher success rates.
  • High Ad Completion Rates — Unlike regular online advertising, promoting your brand on OTT streaming media platforms will offer stellar ad completion rates. Users cannot choose to skip OTT ads, while that is not the case when advertising on an online video platform.

Regardless of how many benefits OTT advertising has, nothing in this world is perfect. We’d be remiss not to mention some of the challenges you will face along the way if you decide to give OTT advertising a shot.

Challenges of OTT Advertising

As many benefits as OTT advertising has, there are a few downsides to it. Taking a look at both sides of the coin is crucial when deciding on something as big as entering a new advertising market. So let’s look at the potential challenges you might face if you opt to give OTT advertising a shot:

  • No Support for Third-Party Ad Serving and Measurement — Because the OTT market is still young, there is still no adequate third-party support for advertisers. However, that is likely to change in the future.
  • There Are No Industry-Wide Standards and Guidelines — Since both advertisers and publishers are new to this rapidly growing market, there are still no set-in-stone industry standards and guidelines. That makes the market quite unpredictable, which might be a deal-breaker for some.
  • Lack of Some of the Functionalities Web Browers Have — This point primarily relates to OTT platforms’ limitations with particular types of digital video ads. Aside from lacking the ability to collect data from cookies and having potential targeting issues, OTT platforms limit the functionalities of VPAID ad tags. VPAID ads offer various advertising opportunities with their interactive and media-rich ads, which OTT platforms currently don’t support. Some advertisers might find that downside as a huge missed opportunity.

All of the above issues are present mostly because the OTT advertising market is still in its infancy. But that is also where most of its potential lies! So if you don’t mind facing the above challenges, we believe this opportunity to expand your advertising horizons would be well worth the risk.

How to Buy OTT Ads

If all of the above made you consider trying your hand at OTT advertising, the last thing you’ll need to know is how to purchase OTT ad space. There are two widespread ways of doing that:

  • Guaranteed Insertion Order — This method entails making a direct deal between an advertiser and a publisher by sharing the complete details of the ad placement. These deals usually mean that advertisers will be purchasing ad inventory for a fixed number of impressions and a preset price. The most significant downside of this method is that it has to be done manually, which can be quite time-consuming.
  • Data-Driven Programmatic Buying — This method is the better choice for both advertisers and publishers since it is based on a real-time bidding system. That means that publishers will put their available ad inventory on an auction, and the advertisers then bid for it, and the highest bidder wins. The most notable advantage of programmatic video advertising is that it is fully automated. So even though advertisers have no guaranteed impression frequency, it pays off long-term due to lower time investment.

After you decide how you’re going to buy OTT ads, you’ll also have to find an OTT platform to advertise on.

Best OTT Advertising Platforms

Not all OTT platforms support the AVOD monetization model, as most are subscription-based. That is why we’ve shortlisted some of the most notable ones that do. Here are the three best OTT advertising platform you should consider promoting your business on:

Roku

roku logo

Roku is one of the pioneering platforms in the OTT industry and currently has over 37 million users. With such a huge audience, this platform should be at the top of your list! 

Roku’s native ad platform allows advertisers to play 15–30 second long ads, interactive videos, form sponsorships, and advertise on overlays. This variety of advertising solutions is what makes Roku perfect for all types of advertisers.

Hulu

hulu logo

Hulu currently sports the second-largest subscriber base of all OTT advertising platforms with its 29 million monthly subscribers. Like Roku, this platform also offers various advertising options, including features like header bidding, geo-targeting, advanced performance tracking, and several ad types.

Tubi

tubi logo

Tubi is another excellent contender for an OTT advertising platform with 25 million subscribers and more than 250 partners. This platform guarantees a brand-safe advertising environment, incredible reach, and state-of-the-art ad targeting and measurement tools. If you are looking to cast a wide web with your advertising campaign, including Tubi is a must!

Are You Ready to Start With OTT Advertising?

The OTT advertising market is vast and full of opportunities, and it is here to stay. With the decline in the global TV viewership, more and more brands will be turning toward the OTT market, as many predict it will be the future of media streaming. We don’t know about you, but we believe that it’s better to get on board with new trends sooner than later. Getting an early foothold in a market can help you get ahead of the competition when they join you. So why not give OTT advertising a shot? We’re sure you won’t regret it!

Best of luck to you!

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