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July 21, 2022

How CTV & OTT Advertising will Disrupt User Acquisition In The Next Decade

Is TV advertising costly and outdated? 

Well, yes and no. 

This may be true for traditional TV advertising, aka linear tv, where you show a commercial in between shows on cable television.

The thing is, people have different TV viewing habits now. They don’t have cable subscriptions anymore and now prefer to stream entertainment pieces on demand. This phenomenon is called cord-cutting, and it’s on the rise.

The number of homes without cable TV is rising every year, and by 2023, it is predicted to reach 44% (Adjust). 

With people’s habits changing, the best ways for marketers to reach them are changing too. For this reason, every marketer should familiarize themselves with two relatively new TV marketing types: OTT advertising and CTV advertising. 

But hat does all this have to do with user acquisition on mobile? 

Read on to find out.

What is OTT Advertising (Over-the-Top Advertising)?

OTT is an acronym that stands for “over-the-top”. It is used to describe the delivery of TV shows and TV-like content via the internet. This content is provided by different streaming services, which puts it “over the top” of other platforms. 

Viewers can access these services through different devices, such as laptops, connected TVs, phones, etc. 

The rise of OTT services have consequently led to the development of OTT advertising. To define it, OTT advertising delivers ads directly to viewers through OTT streaming services.

OTT Examples

When someone mentions OTT, a lot of people instantly think about Netflix. 

They are not wrong, but there is more to it.

Netflix is just one of many popular OTT services. Generally, Netflix, YouTube, Hulu, and Amazon Video are known as the “big four” among OTT Apps. Together, they make up 75% of total time spent on OTT streaming (comScore). 

Some other popular OTT services include Disney+, HBO, Apple TV, and Twitch.

OTT market growth

The OTT market has been growing for years. However, the pandemic helped speed things up even more. During the lockdown era, people were stuck at home hungry for entertainment. 

At that point, a lot of them became OTT viewers. 

According to Boston Consulting Group, the pandemic has boosted the growth of OTT subscriptions by 60%.

Even though lockdowns are now over, the OTT trend ishere to stay. According to IAS, 57% of digital marketers in the U.S. put OTT in 1st place on their list of top-priority advertising channels in 2021. 

Source: comScore Connected Home

What is Connected TV and what is CTV Advertising?

One of the other ways people can access OTT services is through Connected TVs (CTV). 

CTV is any TV set connected to the internet that supports video content streaming. This can refer to smart TVs, but can also refer to other devices that can connect to TV screens. As long as a device can be plugged into a TV screen and deliver OTT services, it’s considered a CTV device. 

CTV advertising allows marketers to reach households through their connected TVs.

Source: Statista

CTV Examples

CTV also includes gaming consoles like Xbox, Playstation, and Nintendo Switch. 

Another category of CTVs is internet-connected devices like Roku, Chromecast, Apple TV, and others. 

CTV Market growth

Today, most households own a TV device that is connected to the internet. According to Leichtman Research, in the U.S., this includes 82% of households

That’s a lot of people, right?

As a response to this, marketers are redirecting their ad budgets from traditional TV advertising to CTV and OTT. According to Adjust, as many as 60% of marketers have already followed this trend.

In 2020, CTV advertising spend was $9.03 billion. In a four-year timeframe, it is expected to more than double. According to Statista, CTV ad spend is projected to reach $19 billion by the end of 2024.

What are the differences between OTT advertising and CTV advertising?

Perhaps the best way to understand the difference between OTT and CTV advertising is by using examples.

Let’s say a viewer watches Game of Thrones on the HBO app on their phone. If they are doing that, they are streaming an OTT service and can be reached with OTT advertising only.

But what if they want to watch the same show on HBO through a Chromecast device connected to their TV?

In this scenario, they're using a connected TV to display OTT content. This means they can be reached both via CTV advertising and OTT advertising. 

Why do advertisers choose OTT and CTV advertising? 

OTT advertising is a good idea for advertisers who want to reach a wide audience to interact with their ads. The thing is, OTT ads are interactive. If users interact with them, this will lead them to a landing page. 

On the other hand, CTV ads usually don’t ask for viewers to interact. This makes it ideal for advertisers who want their audience to visit their brick and mortar stores, join a live event, or something similar. This type of advertising is considered premium to OTT, so it usually comes at a higher cost.

CTV and OTT Advertising for Mobile Apps

Mobile apps can be served through OTT and CTV advertising. 

How does this work?

Well, most ad campaigns that run on CTVs rely on in-stream advertising through apps on CTV or OTT devices. For instance, these ads can be displayed as banners before or during content streaming, or as full-screen, non-skippable commercial breaks. 

Since many users use phones for OTT streaming, this is quite an obvious choice for app marketers. If an app install comes from an OTT ad on mobile, it can be attributed just like any other mobile ad. 

On the other hand, CTV ads obviously don’t have a direct link to mobile. 

It is less likely users will see an ad for an app on their CTV and then take action on their phone. App marketers can encourage users to install an app by, for example, embedding QR codes into their CTV ads. 

Generally, CTV is not created to be a last-click channel. It is more useful for building brand awareness and expanding the user journey. 

What are the benefits of OTT and CTV Marketing?

Even though OTT and CTV advertising are not the same thing, they share some mutual benefits.

Here’s how mobile advertisers can benefit from both of them.

Supporting programmatic advertising

A couple of years ago, a lot of OTT and CTV apps didn’t support programmatic advertising. Buying OTT and CTV ads was possible only through direct buying. 

Now, the majority of them support programmatic. 

Here’s how this benefits mobile marketers. 

OTT and CTV advertising now offer similar campaign setup and targeting options like any other type of programmatic advertising. It’s similar to how marketers  would advertise their apps on Google or Facebook. 

Among other things, this means marketers can analyze and optimize their OTT and CTV campaigns while they are running. 

Overcoming privacy limitations

Apple’s privacy changes have made OTT and CTV advertising even more appealing for app marketers. The thing is – TV screens never had IDFA or cookies. Hence, these privacy changes don’t really affect them. 

In the CTV and OTT space, marketers still have granular targeting options. For example, they allow advertisers to target users at an individual or household level. This kind of targeting is possible thanks to two major data sources:

  • data from registered users (first-party data)
  • IP addresses

Thanks to user-registration data, CTV and OTT advertisers can utilize cross-device targeting. In other words, they can reach them on all the devices they use to stream OTT content. On the other hand, knowing the users’ IP addresses allows them to match users by different criteria. 

Engaged audiences

OTT viewers choose what and when they will watch, unlike on traditional, linear TV. For this reason, they are known to be highly engaged audiences. Since they are so engaged with the content they are watching, they are more likely to pay attention to the ads they see.

How does this benefit apply to CTV? 

It’s quite simple.  According to the Video Advertising Bureau, for 75% of OTT users, TV is the screen they prefer. 

Here’s another statistic that backs up the claim about engaged CTV viewers. According to AppsFlyer, CTV viewers have twice a longer ad engagement time than desktop and mobile users. Not only that, but they also tend to have 25% higher ad completion rates. 

Wide reach 

Reach is one of the biggest issues of classic, linear TV. Since there is a lot of competition, the advertisers’ reach is quite fragmented. On top of that, the reach is generally dropping due to the cord-cutting trend.

At the same time, the number of monthly OTT users is constantly rising. According to Statista, In 2021, approximately 3.08 billion people used OTT services worldwide. By 2026, this number is predicted to grow to 3.93 billion.

Quite an impressive reach. 

Since CTVs are users’ favorite OTT devices, this means that the CTV reach is almost equally high. 

OTT and CTV advertising are especially good choices for marketers who want to reach young audiences. Millennials and Gen Z are the biggest cord-cutting generations. According to Mountain, 86% of users from these two generations watch connected TV.

They help with brand awareness

Let’s close this extensive list of benefits with one that falls into the “here’s a fun fact” category. 

According to a survey by Statista, 71% of respondents stated they were more likely to tell someone about a brand after seeing it in a CTV ad than after seeing it in a traditional TV commercial.  

Challenges of CTV and OTT Marketing

There is no such thing as perfect. 

Just like it’s important to know the benefits, it is also important to be aware of the challenges of CTV and OTT advertising. 

Here are some of the biggest ones:

  • ad fraud (just like in other types of programmatic advertising)
  • determining CTV impact 
  • ad format limitations (e.g. non-clickable CTV ads)
  • a lack of universally used CTV and OTT ad platforms
  • long learning curve until finding the right strategy
  • OTT account sharing (Don’t we all do this?)

Are connected TVs and OTT Marketing the future of Advertising?

Just like the users’ habits change, so does the ad landscape. A few years ago, leveraging OTT and CTV marketing was not nearly as important as it is today. They didn’t have the reach they have today and weren’t as sophisticated as they are now. 

Plus, all the statistics on OTT and CTV advertising show no signs of slowing down. 

Therefore, to answer the question from the title, it seems like CTV and OTT advertising really are an interesting branch of the future of advertising. 

But are they the future of user acquisition?

With rising CPIs across ad networks and privacy changes disrupting UA, alternatives are certainly welcome. From the looks of it, OTT and CTV advertising can help mobile marketers overcome both of these challenges. 

For this reason, we can expect many app marketers will start adding these ad networks to their media mix in the next couple of years. 

Stay up to date with latest UA trends & updates

Hopefully, this article has helped you understand what CTT and OTT advertising is all about.

Want to read more about the trends in the world of mobile marketing? Sign up for our newsletter here.

Daria Jemli
Senior Marketing Manager at Tempr.

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