The Value of OTT Advertising

There is no question that the way your target audience consumes their favorite TV shows, movies, or any video content has changed over the last five years. The day of rushing to the couch, firing up the television and tuning to NBC at 9 p.m. on Tuesday night to catch the newest episode of Chicago Fire is getting to be a thing of the past. While actually watching these programs has not changed, how consumers watch them has.

Today, viewers have many options for watching the shows they love. They have the ability to watch them on their phone during their morning train commute or they can watch an entire season over the weekend on their connected TV or streaming app on their mobile device. With technology ever enhancing, the way they consume content is constantly changing. And, this means big changes for advertising.

As a marketing agency, we are always looking for new, cost effective ways to find our clients’ target audience. Over the last few years, Over-the-Top television advertising, known as “OTT” has become an incessant buzzword. From intrigued clients wondering, “What is this OTT, and should we be doing it?” to media vendors asking to discuss their version of OTT, it is a platform we must be fully immersed in. Understanding your options for OTT will be very helpful in making the right choice for your advertising dollars.

So, what is OTT and how does it allow marketers to expand reach to viewers who have moved away from traditional television viewing?

OTT – The Most Talked About Form of Media

OTT stands for “Over-The-Top” and even if you have never heard of it, odds are your target audience have been participating in it. To break it down in its simplest form, OTT is how we consume TV and content via an internet connection rather than watching it live from a cable box or Dish. There are several categories of OTT, including:

Subscription video on demand (SVOD)
Virtual multichannel video programming distributor (vMVPD)
Free ad-supported streaming services (FASTS)
Free network apps (FNAS)
Transactional video on demand (TVOD)

Are all OTT options created equal? No, each type of OTT offers different opportunities to reach different audiences. For example, TVOD (the opposite of SVOD) allows users to buy content on a pay-per-view basis. TVOD services are normally free to sign up for the service and users pay an amount based on the specific content they watch. OTT ads are placed in programs just as they would be on traditional TV. The difference is, the ads are mostly non-skippable and, so far, the ad environment is much less cluttered than traditional TV. A local advertiser has the potential to stand out as the only local advertiser in an entire show. The OTT platform provides an opportunity to connect your brand with the most talked about, binge-watched content available on TV. And, because OTT is more “intentional viewing,” when a consumer commits to watching a program through a streaming device, they are much less likely to simply have the program playing as “background noise,” which is more commonplace with traditional television viewing. Also, with commercial breaks being shorter, and non-skippable, there is less time for bathroom breaks and other distractions, improving viewership of commercial content.

Who is Using OTT

Depending on the media vendor making the pitch, you will most likely be told that paid TV subscriptions are losing share and “cord cutting” is taking over. These are the hard to reach individuals who don’t watch traditional TV, only stream. There are several types of viewers and commonly used terms for each.

Cord Nevers: Consumers who have never had paid cable TV and have only ever viewed their programs through apps on smart TVs and/or streaming sticks (like the Firestick or Roku).
Cord Stackers: Consumers who have both cable television and also stream through video-on-demand platforms, smart tvs, sticks or mobile device apps with subscriptions to streaming programs like Hulu, Apple+, Sling, or YouTube.
Cord Cutters: Consumers who once had cable television or satellite TV, but have canceled it and access their content exclusively through platforms like YouTube, Hulu, or the like.

Below are the latest household statistics on cord cutters versus paid cable/satellite subscribers. While it does show a shift, it also indicates that today, two thirds of the viewing population are still watching TV through paid subscriptions.

In 2018, there were 90.3 million US households subscribed to PA (Cable/Satellite) TV, with that number dropping by almost 4 million this year to 86.5 million. This number is expected to drop even further in 2020 to 82.9 million households.

Homes that have cut the cord are likewise increasing at a similar rate. In 2018, the number of households without pay TV service was 36 million. That number has steadily increased to 40.2 million in 2019 and an estimated 44.3 million in 2020.

Source

We also know the following:

Netflix has the biggest share of video streaming on TV among the services Nielsen measures, representing 29% of all streaming minutes viewed for the week of March 16, 2020.That’s followed by YouTube at 20%, Hulu at 10% and Amazon Prime Video at 9%.
Source: Spots N Dots April 3, 2020

While platforms like Hulu and YouTube are supported by advertising, Netflix and Amazon Prime are not, meaning marketers cannot reach audiences utilizing these platforms. In addition, even those supported by advertising, some paid models (like YouTube) include the removal of ad content for paid subscribers. The remaining streaming minutes where impressions can be purchased through an OTT provider is approximately 30%. The important issues to consider here are how many unique people you are able to reach, and how often.

The OTT Buy

OTT is digitally delivered and, therefore, it is available through several different media providers like your broadcast TV rep, able rep, or radio rep. When you engage the discussion, you are given pros and cons as to why their platform makes the most sense. As a marketing agency or in-house media buyer, it can be a challenge to choose the right OTT provider… one who will allow you to achieve your campaign goals and objectives. What is the difference in buying OTT direct or partnering with an agency? First, let’s talk about the differences between providers.

Cable companies are one of many providers in the OTT space. Broadcast TV media representatives also offer OTT, and some large media companies who have historically sold radio or print are also now selling OTT through direct publisher relationships and through open exchanges. Cable providers have carriage rights and licensing agreements with each of the networks available to the subscribers. Because they have all of these agreements, they have access to first party data and impression insertion through their Video On Demand (VOD) platforms. Also, per the Video Advertising Bureau Stats, 70% of OTT subscribers have a cable subscription. The cable subscriber has to authenticate (meaning sign-in) through their subscription. This gives the viewer access to networks through their VOD platform and, because of their paywall, other OTT providers have very limited access to these impressions. These alternate providers will tell you they can place ads behind paywalls, but that is only if they own the networks and in most cases the networks are very limited. OTT providers will also suggest that cable companies place the majority of their impressions within their subscriber base. This is a very common point made, and is frankly more of a myth. In addition, cable providers have agreements with ATT Uverse, Directv, and Dish Network.

The campaigns our agency has managed through a cable provider delivers approximately 30% of their total impressions into their subscriber base. The remaining 70% are placed in those households who are accessing streaming programming through an internet connection. Some cable providers are unable to geo-target by zip code, and this can be limiting.

As mentioned above, there are OTT providers who buy through publishers or what is called an “open exchange.” The open exchange is a bidding process that allows the buyer to purchase usually at a lower CPM and insert into similar content to other providers. Media reps may tell you they have the most access to the different exchanges, which sounds impressive. However, if they are buying on an open exchange, it means they are buying whatever inventory is leftover and usually it’s not premium content.

As a buyer, you also must be aware of fraudulent impression delivery. This can happen more frequently when buying through an open exchange so it is important to partner with a provider that utilizes anit-fraud software. There are three examples of fraud:

1) Misrepresentation: A fraudulent arbitrager may sell ads they claim are being shown to users in the US, but instead will show the ads overseas to take advantage of lower CPMs.

2) Device based fraud: A single connected device will show an implausibly high number of ads during a given time period, for example 50 ads in a single minute. (A human user could not possibly watch 50 different 30 second video ads in a minute.)

3) App-based fraud: This occurs when the same ad-supported OTT app shows an consistently high rate of activity around the clock.

Source

Another factor to consider when determining the right partner is ad delivery. What percent of impressions do you think are delivered between 12am and 5am? It all depends on your target audience, but some providers will not even place in that space. Some will deliver dynamic content. Automotive dealerships are usual targets for dynamic delivery because their inventory changes daily. Some providers can access CRM data and deliver updated vehicle ads every day. Where are the impressions actually being delivered? Reporting dashboards play a large role and indicate where your investment is being placed.

Finally, budget is always a factor. It is important to understand the number of impressions available, and what the cost per impression ultimately is. Totals can range from $20 to $50 cost per thousand impressions and are based on many of the points previously discussed. Providers may also require a minimum spend to buy with them.

Reporting is the key to executing a successful streaming ad campaign. Because OTT ads are delivered to verified cable TV/internet subscribers and unique internet IP addresses, there is greater potential to target geographically, demographically and by lifestyle. In order to measure the success of the campaign, the reporting should provide the number of impressions delivered to the target geography, each individual network/platform and the individual programs on those networks and platforms. The audience composition can vary greatly from network to network, program to program just like traditional TV audiences, so it is important to target down to the show level for the best targeting. The number of unique users delivered within the targeted geographies and frequency of messages delivered to these users is critical information when using OTT. Some providers offer a LIVE reporting dashboard that can be accessed at any time to review the campaign details. These reports are usually more detailed than printed reports and offer the flexibility to monitor the campaign at any time.

You also have choices on management. You can place OTT yourself, or you can hire an agency to work on your behalf. Click here to review the benefits of partnering with an agency versus buying and managing direct.

Like all digitally-delivered media and advertising, OTT is growing and changing every day. Its popularity is gaining ground with all age demographics. It’s very cost effective and can deliver valuable impressions to your target audience. And gives you the chance to reach some consumers who may be unreachable through other means. Yes, there are many things to consider when determining if OTT should be added to your marketing mix, but it is a platform filled with opportunities that should definitely be considered.