Web ecosystem has been a perfect medium for delivering and consumption of myriads ad formats and now CTV advertising actively changes experience on TV. Unlike traditional TV, the Internet as a platform is universal in the ability to make content available from any spot in the world. As traditional linear TV for advertising loses its former relevance, connected to the Internet devices are massively paving the road for flexible and selective advertising. Time to find out how CTV ads are served in 2021.

What is connected TV advertising and how does it work?

Connected television can be supported by any device that is designed to support multimedia and connect streaming from the Internet (internet-capable TV set or video game consoles - Xbox, Amazon Fire, Roku, Sling TV, PlayStation, Blu-ray Disk Player, or Smart TV). Thus, connected TV is far broader than Smart television (connected to the Internet TV sets). Thus, it means CTV advertising can be supported on the same Internet-connected device.

connected tv devices

Without going deep into technical subtleties, it’s worth pointing out that connected TV (CTV) is the integration of the internet and web 2.0 features into new-generation TV sets.

To ease the understanding of connected TV definition, you might regard the CTV as a hybrid TV or a merging of computer technology and linear TV. The user interface resembles that on the smartphone. For this reason, connected TV is sometimes called smart.

Using smart devices (connected TV), the viewers can access video streaming services (Netflix, Hulu, YouTube, Pandora) and search for movies, photos, and other digital content on the web.

Compared to traditional TV, which is primarily focused on media broadcasting, these new-generation devices are all about online interactive media, Internet TV, over-the-top content, and on-demand streaming media. These can be accessed through software applications or web widgets.

Evolution of TV

This scheme depicts the evolution of television over time. Judging by the picture you can understand how TV advertising works now. When it comes to advertising, it can be delivered on every medium featured above, including linear/broadcast TV, the differences will be in technical nuances.

Since traditional TV doesn’t support the Internet connection, it can’t transmit digital advertisements like internet-capable Smart television. Let’s take a bit closer look at the channels for digital advertising distribution: OTT, CTV, and PTV.

The difference between OTT, CTV, and PTV

Connected TV CTV is purely a technology that supports addressable TV advertising capabilities. As was mentioned above, connected TV examples include streaming content via gaming consoles, from PlayStation to Xbox, online TV streaming services, and cable providers. This way, CTV represents the tech core for programmatic TV (PTV) support.

The TV connected with OTT (over-the-top) is the same internet-TV content consumption, but it doesn’t require an active subscription like cable or TV streaming services. However, users still need to have a broadband connection. It helps to reach the connected TV advertising market using top OTT (over-the-top) apps typically found in mobile stores. Since both addressable TV and CTV connect to the Internet source, they’re able to deliver the digital ads on television programmatically.

Programmatic TV buying, aka PTV, is a method used for broadcasting connected TV ads to the target audience using the advantages of algorithmic ad purchasing. Algorithmic purchasing is enabled by programmatic software. Such software is specially adapted for the brands and exists in the form of programmatic advertising platforms.

It can be either a connected TV ad network or a connected TV platform for advertisers (DSP). Advertisers organize ad placements on programmatic platforms tuning the dashboards according to their marketing objectives almost like they do for the web.

Programmatic TV is essential for advertising individualization. It helps to serve ads on virtually any device that has an internet connection. Using PTV, the brand can deliver a specific commercial to a particular household. Instead of running the same ad for all viewers of a TV show, the brands can show different ads to different people. While watching the same show, the users will be shown different ads that better correspond to their interests, age, level of income, etc.

difference between OTT, CTV, and PTV

What is connected TV advertising in terms of programmatic auctions?

If we speak about the mechanism of how programmatic connected TV ads are served, we need to remember the specifics of the environment. Programmatic functions according to second and first-price auctions. Apart from this, different programmatic deals have different terms and conditions regarding inventory access priority and necessary purchasing volumes.

Connected TV ads are getting purchased and sold in private marketplaces (PMP) which perches one level above the open marketplace. Private marketplaces are invitation-only, which means fewer participants and higher win rates. In such addressable TV programmatic auctions, advertisers can reach unique premium inventory that isn’t available in real-time bidding auctions (plus specific sections, sub-sections on narrow-niche websites).

(Smart TV) Connected TV performance measuring

The number of clicks is not very indicative when we talk about Connected TV ad campaign performance. Why? Because clicks will only measure interaction on mobile devices where the users can stream video content. That’s why cost-per-completed-view (CPCV), video completion rate (VCR), and CPM: Cost per mille (cost per 1000 views) performance metrics will be more descriptive. Cost-per-completed-view is a metric that's used most often for CTV campaign measurement. The lower is cost-per-completed-view the more money advertiser can save.

Best connected TV CPMs

Best internet-connected TV ad formats are usually full screens. They are far from the cheapest static ad formats in terms of CPM. They usually cost 3-5 times higher than average display ad formats including web video advertisements. Yet, while the CPM of average video ads in normal circumstances reaches $10-$15, the CPM of Connected TV ads pays off at $65. So, if CTV ads aren't the cheapest option, they can still serve as the most effective way to increase your video completion rate and decrease cost-per-completed-view.

How big is connected TV?

More than 164 million U.S. internet users access video content via connected TV devices, and this number is predicted to grow by up to 204.1 million viewers in 2022. The trend doesn’t only encompass North America. The penetration of connected TV in the United Kingdom, Japan, Germany, and France will significantly grow according to the Interactive Advertising Bureau.

How big is connected TV

Connected TV advertising and OTT market grows exponentially

IAB Video Ad Spend Study illustrates the worldwide OTT video advertising revenues are growing quite fast. In 2022 they’re expected to reach 80 billion dollars. By 2025 it is expected that local ad spending in over-the-top OTT segment will increase from $1.18 billion to $2.37 billion. When it comes to CTV, eMarketer forecasts that ad spending here will reach $25.5 billion by the end of 2024.

Key insights from latest annual survey of CTV and OTT landscape 2021 (by Business Intelligence):

  • 49% of advertisers consider video to be the most important media type that helps them reach their advertising goals.

  • 41% of advertisers increased their OTT/Connected TV advertising ad spend compared to the previous year. 
  • Linear TV advertising ad spend decreased by 14% in comparison to the previous year. 
  • Most frequently ad buying for CTV was made on streaming services.

change in video ad spend

With this, questioned advertisers also indicated the most important factors that they take into account while choosing advertising connected TV vendor:

While choosing OTT/CTV vendor advertisers pay attention to factors:

  • 55% reported that audience reach matters to them most.
  • 43% of questioned named quality of programming and quality of advertising opportunities (38%) as the most important criteria.

Connected TV advertising is becoming a powerful open platform that caters directly to a variety of new applications and services to homes, mainly for the young, middle-aged, and older adult population. Such a robust, tech-savvy audience represents incredible marketing opportunities. The brands that are looking for ways to increase engagement and raise brand awareness can target their users multi-screen.

Benefits of connected TV advertising

When ratings of TV channels are dropping, and price for the linear broadcasting climbs high, connected television provides a new medium to growing your audiences that never watch live television. Consumer migration to internet-enabled TVs and over-the-top devices is a unique opportunity for advertisers to reach the target audience they aim for. Information about how customers behave on the Internet, what they bought earlier, their lifestyle preferences, etc., opens the gateway to endless advertising opportunities.

ctv benefits

  • Budget. Soon, there will be no smart television without ads since digital advertising has massively shifted on television. For advertisers, it’s a chance to save up on an impression cost (when it comes to TVs). So, how come those are less expensive? When users watch an ad on their personal Internet-connected device, only one person views the creative but on TV the ads can be seen by several people. According to stats, people watch smart television with family and friends (in the company of at least 2-3 viewers). Watching the ad on smart television means that the same ad will be seen by several people at once, which significantly reduces the cost per one impression for the advertiser. 

ctv cost per impression

  • Targeting: Targeting is one of the best connected TV benefits recognized by marketers in 2021 and 2022. In order to use smart television, users are required to log in via universal identifiers such as Facebook or Google accounts. The technology will use third-party data to complete users’ profiles based on geolocation, zip code, interests, online behavior, device, language, and others. Precise audience segmentation allows targeting brand-receptive audiences with relevant messages, bringing more value to the brand.

ctv targeting

  • Ad quality: Connected TV supports the transmission of targeted, highly personalized, HD-quality ads with stereo sound, delivered fullscreen. Better ad quality, as a result, promotes brand loyalty and boosts brand exposure.
  • Ad formats: Connected TV advertising is highly entertaining. It allows marketers to experiment with animated, static, call-to-action, and interactive video ads that drive consumer engagement and increase the performance of the video content.
  • Video completion rate: Connected TV advertising is a natural large screen experience that results in high ad viewability. It imitates the traditional TV cable experience. Consumers not only pay more attention to CTV ads but also tend to watch them for a more extended period.
  • Real-time metrics: With connected TV marketers can actually measure ad campaign effectiveness by tracking the cost-per-completed-view, video completion rate, clicks, conversions, and direct responses.
  • Responsive audiences: Connected users choose the content they want to watch and the way to consume it and interact with it. Such high levels of control trigger high levels of satisfaction among viewers, which leads to a better perception and positive attitudes towards ads.

Market potential for connected TV ads

  • Premium audiences: More than 20 percent of daily ad requests for CTVs are registered during primetime hours while premium content streaming. This time includes live concerts and important sporting events, which suggests unique target audiences and potentially impressive returns for advertisers.

connected TV practices

Best practices to follow with smart television ads

Best internet-connected TV advertising practices will be different from those applied on the web, mostly because the medium will require good quality creatives developed in high resolution. Brands often underestimate the impact of original and memorable creative, but that is an essential visual hook that is supposed to convert viewers on big screens.

The rest of the practices for advertising on connected TV remain to be the same. They’re equal to those typically applied for programmatic advertising.

An example. You sell the product for women aged 21 to 35, who have children and whose income is above average. Thus you need to set the target options accordingly in the dashboard of the CTV ad platform. After you launch a campaign, it analyzes the data received from household devices: two laptops, a tablet, and two smartphones, the system interprets that:

  1. Laptop No. 1 and smartphone No. 1 are mainly used by a man of a certain age and income level.
  2. Laptop No. 2 and smartphone No.2 is used by a woman aged 22-36 years.
  3. The tablet is mainly used by a child aged 1 to 8 years.

Thus, the algorithm understands that this household corresponds to the portrait of the perfect customer. After collecting information about the activity on individual devices, the algorithm determines that the primary content consumer in the family is a woman and delivers most of the smart television ads accordingly.

With SmartyAds advertisers receive access to premium OTT and CTV placements during primetime for various categories of content.

SmartyAds programmatic advertising platform supports all kinds of CTV ads on connected TV devices. The solution brings cord-cutting advertising experience to the viewers and outstanding opportunities to advertisers, who can tune it according to their own needs:

  • The media buyers and advertisers can now target their audiences in a highly responsive CTV environment delivering 15-second and 30-second full-screen video advertising on SmartyAds demand-side platform. CTV ads deliver a powerful and efficient way to reach potential consumers through cross-device targeting. Know where your target audiences are, and stay connected with them anytime!

Run efficient advertising connected TV campaigns on SmartyAds DSP

Written by
Irina Kovalenko, CMO of SmartyAds
February 2018