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OTT Advertising: How to Stop Worrying and Love Digital Streaming

Feb 08, 20248 min read
Stepan Krokhmal
Stepan Krokhmal, AdTech Writer
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What do Disney+, HBO Max, Hulu, and even YouTubeTV have in common? Well, except for the fact that you can’t watch the complete John Wick quadrilogy on any of them, it’s ads, namely how they are delivered.

Today, we’ll talk about OTT streaming – the omnipresent guest of every 2024 smart device. What does OTT stand for in marketing? How is OTT different from CTV/VOD? How much does OTT advertising cost, and how do you start with it?

Let’s not make this into any longer; we have an over-the-top (hehe) amount of information to cover.

What Is OTT Advertising?

By definition, over-the-top advertising, or OTT, is the content (ad placements, in our case) delivered through the Internet instead of cable, broadcast, and satellite television.

You see, in the past, the latter were the primary media distribution channels on TV. Now that two out of three families (80-90 mil.) in the US have a Smart TV at home, broadcasting video advertising via the Internet simply makes more sense. That’s where the term comes from – “over-the-top of traditional channels.”

What Are The Examples of OTT Advertising Platforms?

There’s a huge variety of streaming platforms that support OTT marketing. The first that come to mind are, of course, Netflix, Amazon Prime, Disney+, Hulu, and YouTube Premium. But unlike what you’d think, OTT is not limited to video content.

Yes, Spotify is considered an OTT advertising platform in the music realm, and even Telegram and WhatsApp are OTT apps (though this hardly relates to advertising as such).

So yeah, as you might’ve concluded from the examples, the OTT ad formats are also diverse. The platforms offer skippable/non-skippable ads, banners, in-stream/out-stream video ads, and more.

What Are the Benefits of OTT?

So, why do you invest in OTT? Before explaining the nuances behind this advertising channel, here’s a quick sum-up of its benefits:

  • Cross-platform support
  • Broad targeting options
  • Cost-efficiency

We’ll dive into them a bit deeper.

Benefit #1. Cross-Platform Support

Let’s assume you want to watch the first three John Wick movies on Netflix. You could enjoy the trilogy lying on the couch with your SmartTV, sitting at your laptop, or just being outside on your phone. Hell, you can even watch Netflix on your PS5 these days, and even there, over-the-top content will get to you.

Cross-platform support is what makes OTT streaming channels so desired by any advertiser. Have we already mentioned how big the OTT ad spend nowadays? The numbers well exceeded $250 million in 2023.

over-the-top advertising overview over-the-top streaming

Benefit #2. Broad Targeting Options

Among other benefits is the accuracy of targeting. The methods of OTT data scraping don’t differ much from any other media channel; you use data management software to segment audience data, optimize your ad campaigns to get the most performance, and compare the results with the competitors.

But the data you use in OTT advertising usually belongs to a first party. Think how much YouTube (the 2nd largest search engine next to Google itself) knows about the user’s stuff. Plus, despite its upcoming departure, you could partner up with a few major third-party vendors to get even more data.

We don’t need to explain the benefits of accurate and rich data for targeting/retargeting, do we?

Side note: The data you’ll get depends on the provider. Some of the “walled garden” data providers may be very restrictive.

Benefit #3. Cost-Efficiency

This one’s a bit broad but stay with us.

Firstly, with OTT, you won’t lose as much performance and costs to ad blockers. This is due to the fact that most OTT traffic comes from Smart TVs, and there’s no way to install an ad blocker there (well, there is, but only if you wish to experience true pain).

Secondly, this media channel is protected from the consequences of third-party cookie deprecation. Surely, marketers usually use OTT in combination with other channels, but if you rely heavily on OTT, fear not – there were no cookies to begin with. This means you don’t have to reinvent the wheel and spend money on changing your marketing strategy.

Thirdly, OTT is everywhere. The supply is more than enough to cover the demand; any Spotify Free Plan user would agree. Moreover, there are many ways to monetize this traffic.

Consequently, OTT is relatively cost-efficient. It’s even cheaper than CTV traffic. But wait, what is CTV, and what are these monetization models? Let’s find out.

OTT vs. CTV vs. VOD: How Does OTT Advertising Work?

OTT, VOD, CTV – many advertisers use these terms interchangeably, but that’s almost like being a crypto expert and substituting Bitcoin with blockchain or Proof of Stake with Ethereum.

However, it’s not a mortal sin to get confused; the sphere has plenty of complex terminology, and most explanations on the web only make matters worse, so we’ll try to be as clear as we can.

Understanding the differences will not only make you a better person but will also enlighten you on how OTT advertising works at its core.

What Is the Difference Between OTT and CTV?

A connected TV (CTV) is a device embedded/connected to a TV to support video content streaming. For example, your PlayStation 5, Apple/Android TV, or LG Smart TV are CTV devices.

On the contrary, OTT is not the device itself but the service streaming content over the web. That’s why over-the-top media services are the usual platforms of content distribution, like Netflix, Spotify, or HBO Max.

CTV devices CAN play OTT content, but OTT is not limited to them. There are phones, laptops, PCs, etc., and they all play OTT content without a problem.

over-the-top vs ctv advertising

Now follow the hands. Despite sometimes being shown on the same device, OTT and CTV advertising are different for a variety of reasons. The check-list is the following:

Device vs. service

Yes, it’s the third time since we first mentioned it, but let’s cement this. OTT can be played on CTV devices, but it can also be played on non-CTV devices. That’s the main difference you have to remember during the exam.

Ad formatting

No matter if it’s a video, banner, or native, the ads that play on your smartphone and the ads that play on your Smart TV have different formatting. The strategies differ accordingly, meaning that with OTT marketing, you should create a dozen versions of the same ad before launching a campaign.

Looks and interaction

CTV ads aren’t clickable. The advertiser can embed a QR code to solve this problem partially, but that’s how it is. However, the ad lasts for 15-30 seconds, and you can’t skip it. For that reason, these digital ads are considered to be more premium, and they cost more than their OTT counterparts.

OTT ads are clickable and (more often than not) skippable. The latter depends on the over-the-top media service; some platforms, like YouTube, allow you to skip the ad after several seconds, while others, like Jio TV, don’t.

OTT vs. CTV: Which Is Better?

Which ads are better for your strategy? To be honest, there’s no clear answer.

Some say the difference for the user is practically insignificant; thus, with its cross-device coverage, it’s better to use OTT. Others argue that CTV is better for user engagement since the viewers usually see these ads in a more relaxed atmosphere, thus bringing more brand awareness.

Anyhow, no ad network or researcher has made a comprehensive study on CTV vs. OTT. So paradoxically, there’s usually no dilemma at all – just use both (especially when buying programmatically), and you’ll be good with your video marketing.

OTT vs. VOD. OTT Monetization Models

Video on Demand (VOD) is a media distribution system that allows users to choose and watch video content on demand.

“Wait a minute, it’s literally OTT; what’s the difference?” – quite a justifiable question from the voice in my head. Remember how we mentioned that OTT supports a variety of advertising formats? That’s it: VOD is the content delivered (video, duh), while OTT is a content delivery system.

The following block would be most useful for the publishers and ad networks: skip to part 3 if you’re overwhelmed already, or follow through with us to know a bit more.

You see, over-the-top media services also have different monetization models based on VOD. They are either payment-based or advertising-supported. The first doesn’t cross out the second, so you can essentially use both. Now, let’s look at them a little closer.

over-the-top monetization models

Payment-based monetization models

  • SVOD / Subscription video on demand

SVOD is the usual “subscription” model these days. Customers pay a monthly fee to access services.

Spotify, Disney+, Hulu, and many others broadcast programmatic ads with this one. SVOD proved to be super-effective over the years.

  • TVOD / Transactional video on demand

TVOD is a one-time fee to watch certain content. It benefits exclusive OTT streaming material well, and it’s a good fit for SVOD.

Advertising-based monetization models

Free ads supported by over-the-top media services are not rare either.

  • AVOD / Advertising-based video on demand

AVOD offers free-to-watch content in exchange for ads. This model is great for independent companies and content makers, which is proven to be true by 140 million AVOD viewers in the US alone.

  • FAST / Free ad-supported TV

Another complex thing ahead: FAST is a service offering free-to-watch content in exchange for ads. The differences are blurry, but they exist. FAST is always free of charge; with AVOD, it depends on the OTT streaming service provider. Plus, FAST supports platforms with linear broadcasting.

  • HVOD / Hybrid Video on Demand

HVOD is a hybrid (who’d thought) of every model above that offers different subscription models, the price of which depends on the amount of ads. The more the viewer is ready to pay – the fewer ads they get.

How to Serve OTT Ads?

This one’s more on the tech side, but we have to cover it since it would be useful for everyone in this marketing sector. There are two ways to deliver OTT streaming ads: CSAI and SSAI.

CSAI / Client-side insertion

CSAI (also sometimes referred to as Dynamic Ad Insertion) is a client-side technology that delivers ads in real time. It serves advertising based on user data, allowing deep personalization and quite precise targeting.

SSAI / Server-side insertion

On the contrary, SSAI is a server-side technology. The ads are preloaded, and the server identifies the best point in the OTT streaming flow to insert the ad with metadata. Since it’s a server-side technology, it bypasses most user’s ad blockers, thus generating more revenue.

Both of them rely on video ad serving tags. These tags define the parameters of the ads, whether they should be skipped or not, etc.

Which one to use for OTT advertising? Depends on your priorities and tech infrastructure. SSAI is best for a seamless experience and winning the ad blockers, while CSAI is a champion of a personalized approach.

Wheh, that was a lot of information. Now, let’s return back to our beloved advertisers and finally end this.

How Do You Start with OTT Advertising?

Like with most ad placements, you can buy OTT ads both programmatically with a white-label DSP or directly from streaming providers with an ad server. We’ve already covered the process for both, so there’s no need to repeat ourselves for the hundredth time.

Here’s a quick scheme of the programmatic ad buying process, just to remind you:

over-the-top placements

More curious, though, is the question, “How much does OTT advertising cost?”. Once again, it depends; with CPM, you may expect the cost from $25 to $40 per 1000 impressions. If you’re already calculating the ad spend of your strategy, we’d recommend a budget of at least $2000 per month. That will give you a great start.

By the way, the sphere of OTT advertising is not limited to one pricing model. We already see CPV (cost-per-view) and CPCV (cost-per-completed-view) entering the game.

As for the general advice, OTT is not that different from other digital buying channels. Keep your ads short, relevant, and personalized, and don’t forget to format them for multiple devices.

Aaaaand one more thing.

What Are the Disadvantages of OTT Advertising?

Most of the text above is a manifestation of OTT benefits in any strategy. It’s cheap, versatile, and covers many audiences.

Unfortunately, the world never graces us with perfection (except for this blog ofc), so before you rush investing in OTT marketing, we have to warn you about some likely drawbacks/nuances.

Media planning complications

First and foremost, OTT requires a compelling marketing strategy. We don’t recommend relying exclusively on OTT advertising; this traffic is better used in combination with other media buying channels.

Measurement issues

Measuring performance and tracking users' attribution is more complicated with OTT streaming than with ordinary desktop banners. It’s just more difficult to get the data from a Smart TV user if the provider doesn’t give it to you directly.

Too much formatting

As we’ve already mentioned (twice?), with OTT marketing, you have to create many variations of the same (video/banner/native) ad for different devices. This is pricey and consumes a lot of time.

How Does OTT Affect Advertising?

OTT marketing is awesome, and its impact on the ad world is hard to measure (a cliche but true).

It’s as simple as a rock in its concept, but it has a lot of depth and variation when you try to work with it, both as a publisher and an advertiser. We reeeeeally tried to cover everything possible about this colossus of digital ad buying, so let’s hope that this article will answer most of your questions!

By the way, you won’t believe it, but you can buy OTT traffic with our DSP as well. Moreover, it’s a white-label platform, so this media channel will be even more cost-effective than it currently is.

Serve over-the-top ads favorably with Epom White-Label DSP

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