What Is OTT Advertising and How to Get the Most of It

OTT advertising has spread to vast territories thanks to the growing adoption of streaming video services and devices. Statista projects a substantial influx of subscribers to the tune of $316.40 billion by 2026. As video content consumption increases year after year, it makes advertisers follow their target audiences. 

As a result, experts state that ad spending will also respond to favorable predictions about user adoption of OTT. That affects the BIA projections of $63 billion in OTT ad spending in 2024. As for revenue estimates, most advertising efforts will pay off in the USA. 

Meanwhile, the number of cord-cutters and cord-nevers has reached new highs. This creates excellent conditions for launching the next campaign using OTT ads. OTT ads have distinct features and peculiarities that distinguish them from traditional commercials and browser ads. 

So, if you want to know how to launch an effective OTT ad campaign and generate revenue from it, continue reading our article.

What Is OTT Advertising

What does OTT stand for in advertising?

What does it mean? As the above over-the-top advertising definition suggests, OTT ads are displayed on any device that streams video over the Internet:

• mobile devices and tablets;
• computers and laptops;
• smart TVs/connected TVs; 
• streaming devices;
• gaming consoles, etc.

OTT platforms allow brands to connect with more targeted audiences and bypass traditional TV providers like Dish or Comcast. They collect TV audience data at a granular level, including demographics, age, interests, behaviors, content preferences, and location details. By combining these insights with first—and third-party datasets, OTT platforms can create profiles of household members.

Advertisers use this method to form an audience for ad campaigns via OTT. They upload their creatives to the OTT platform, where its advanced algorithms and data integration tools ensure the ads reach the most relevant households. The campaign runs across various channels, delivering targeted and personalized ads to viewers. After the campaign ends, the OTT service provides detailed reports on exposure and performance results, including reach, engagement, and conversion metrics. We’ll explore more details further in the article.

What Are the Types of OTT Services?

OTT services offer various models for accessing content, with AVOD, SVOD, and TVOD being the primary types.

• Advertising Video on Demand (AVOD) lets users access a content directory of on-demand content and contains the following types of unskippable ads:

Roku Channel, Pluto TV, Peacock, Sling TV, and DirecTV Now fall into that category. The AVOD model is appealing to advertisers due to its ad-supported nature. These platforms reach a broad audience that prefers free content.

• Free Ad-Supported TV (FAST) channels enable users to stream live linear TV programs without an active subscription. Roku, Tubi, and PlutoTV provide out-of-the-box FAST apps that attract advertising dollars due to their extensive audience reach.
• Subscription Video on Demand (SVOD) is a subscriber-supported OTT platform that provides an ad-free viewing experience and, in many cases, access to premium and original content. Netflix, HBO, or Hulu are labeled SVOD since a monthly subscription helps access content without advertising.

However, top SVOD providers have also started experimenting with ad-supported subscription models. Tight competition for attention, low subscriber retention rates, and decreasing retention rates have made established names reassess their billing policies. Netflix, for example, has already attracted 40 million active monthly users thanks to introducing an ad-tier plan.

Unlike SVOD services, AVOD abounds in programs that let users tune into current events, either local or global. Besides, the price point is also a reason to abandon subscriptions and turn to free ad-supported platforms. That is why we can anticipate that AVOD's popularity will continue to soar in the coming years.

• Transactional Video on Demand (TVOD) platforms let users pay per view of premium video content, including exclusive releases or special episodes. Examples of TVOD services include iTunes, Google Play Movies, and Amazon's video rental or purchase options.

The TVOD model attracts engaged audiences ready to pay for high-quality viewing experiences. This spending readiness indicates a high level of interest, which can lead to improved ad engagement and efficiency.

What Do OTT Ads Look Like?

Unlike browser ads, over-the-top ads do not have control or “skip” buttons. As a result, users can’t switch to another tab or remove a piece of advertising from their screen. Such ads are also presented on a full screen, which resembles the ordinary streaming experience. 

The video ads you see on OTT spots can be shorter than traditional TV ad units. Moreover, as the OTT advertising definition suggests, they are personalized according to the preferences of each household, device, or geographic location.

It is worth mentioning that programmatic platforms support different formats of creatives and can spread their capabilities to OTT platforms as well. So, the different types of ad formats can be shown via OTT:

• video ads;
• banner ads;
• sponsored content to promote shows and movies.

Another classification of OTT ads includes pause and binge ads. As their names imply, pause ads are displayed when a viewer clicks a pause button, while binge ads appear during a viewer's binge-watching session. The meaning of OTT advertising is to create an uninterrupted viewing experience and decrease ad fatigue and annoyance.

While ads can’t be skipped or tapped on, OTT ads lack interactivity so far. This restriction makes the delivery of interactive ad units problematic. However, many anticipate such functionality to be present in OTT advertising to meet user expectations.

How Does OTT Advertising Work?

OTT ad delivery is possible when OTT devices and streaming platforms are compatible using standard communication protocols. In other words, the ad-serving process requires both ends (a video player and OTT platform) to speak the same language. 

For instance, this can be achieved using tags that facilitate communication with Game consoles, streaming devices, etc.

• VAST tags. VAST stands for Video Ad Serving Template. IAB (Interactive Advertising Bureau) defines VAST tags as XML-based scripts for structuring ad tags that transfer from ad servers to video players. With them, video players understand when to retrieve and render a creative and obtain tracking information and pricing.
• VPAID (Video Player Ad Interface Definition) tags provide a standard interface between video players and creatives, focusing on ad measurement and interactivity. Built on top of VAST tags' functionality, VPAID is seen as a piece of code that can serve executable ad units to viewers and record user interaction points. However, it is worth mentioning that the limitations of OTT devices make it impossible to implement interactive ad units.

Ad insertion can occur in one of the two ways:

• Via client-side (CSAI). One of the leading methods is to implement OTT video advertising when the advertiser delivers a certain ad unit into the platform separately from the rest of the video content. 
  In a CSAI flow, the video player puts the content on hold and makes an API call to the ad server when it sees an ad tag. Upon receiving information from the ad server, the OTT platform displays an ad to the user. After the ad playback, the video player switches to playing the core content. 
  This ad delivery method is prone to errors occurring on the client side and has no remedy against ad blockers. Nevertheless, most advertisers rely on CSAI ad insertion to implement their campaigns.
• Via server-side (SSAI, or stitching). This type of ad delivery deals with a real-time transition between the core content and creatives, similar to what we can observe with traditional TV advertising. However the main difference is that SSAI allows separate ad units to be targeted towards individual viewers.
  In other words, the video player ‘stitches’ the actual video and ads and continues playing the content without any interruptions. As a result, it is difficult for ad blockers to spot a piece of advertising as it goes live together with the core content.

Which Metrics Can Advertisers Measure in OTT Campaigns?

OTT platforms collect and analyze a wealth of data, providing better insights into their audiences. Unlike linear TV ads, OTT digital advertising helps collect background information, track actions, monitor interactions, and assess the impact of each piece of advertising.

Here are the most popular metrics and KPIs advertisers can track in their OTT ad campaigns:

• Reach. Advertisers can monitor impressions to determine their ad's visibility and track the unique viewers who have watched it.
• Click-through rates (CTRs) help track how often viewers click on an ad after watching it. This metric enables advertisers to understand the ad's potential to drive explicit reactions from viewers.
• View-through rates (VTRs). Low view duration suggests the ad's content doesn't resonate with users. Advertisers can use these insights to adjust the creative process to better respond to the needs of their target audiences. 
• Cost Per Acquisition (CPA) measures the expenditures linked to acquiring a customer through an ad campaign. Advertisers aim to lower their CPA while maintaining the quality of acquisitions.
• Engagement rate. This metric helps track user interactions with video content, including comments, likes, and shares. Advertisers can detect patterns in user behavior and identify types of content that increase users' interest. 
• Frequency. Advertisers can balance the number of times a user sees an ad to prevent ad fatigue and adjust frequency capping in campaign settings to maintain ad efficiency. 
• Return on advertising spend (ROAS). Advertisers can accurately calculate the revenue generated when running OTT campaigns and get detailed reports showing the ratio of profits earned to total ad spend.

How Publishers Monetize the OTT Inventory: Proven Approaches

1. Set key metrics. By understanding the most critical metrics, video publishers can estimate ad inventory performance and identify opportunities for increased revenue:
   • Revenue per second (RPS). Video publishers opting for ad-supported business models consider ad pod length as the point of sale of their inventory. They sell ad slots for each commercial break ranging from 15- to 60-second-long creatives. Next, they calculate ad content's revenue per second to determine the most profitable ad lengths.
   • ARPU (Average Revenue per User). Video publishers can also track the average profits yielded from each user over a specific period, factoring in customer acquisition costs (CAC), churn rates, and lifetime value (LTV).
2. Develop sales strategies. Video publishers can leverage different ways to sell their inventory. The most common approaches include:
   • Real-Time Bidding (RTB) auctions: Publishers sell their ad slots through open-market programmatic auctions, where advertisers bid in real time. 
   • Programmatic direct deals: publishers establish direct relationships with advertisers to secure guaranteed and non-guaranteed deals.
   • Invite-only marketplaces: publishers select an exclusive pool of advertisers and expose their inventory for auction-type transactions.
   • Direct deals: publishers establish direct relationships with top advertisers and transact without intermediaries.
   • Demand facilitation partners: publishers partner with third-party demand integrators and allocate inventory across different campaigns.
   • CPA buyers: publishers redirect unsold impressions to partners that pay per ad conversion instead of display.
   • Audience extension (AudEx): publishers can enhance their OTT advertising strategy by acquiring supplementary inventory from third parties.
3. Manage yield and adjust the monetization strategy. Publishers continue to work after building a network of partners and integrating various sales approaches into their AdTech stack. They constantly monitor metrics to weed out bids with low RPS and ARPU from the RTB flow. On the business development side, they aim to build new partnerships and secure direct deals with high-profile brands.

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How Advertisers Launch OTT Campaigns: Best Practices

1. Build an audience. Advertisers can access viewing information and derive insights from it. Here’s what they can assess:
   
   • interests and behaviors,
   • demographics,
   • location,
   • custom audiences (based on your first and third-party data sources).
2. Buy ad spaces. For that, it is necessary to figure out how to buy OTT advertising and navigate a couple of options:
   • Buy from open ecosystems, which give access to multiple devices and channels;
   • Buy from closed ecosystems like Google or Amazon.
     For instance, advertisers can dig into preferred content categories or the data about events, shows, and movies watched on the OTT platform.
3. Get the campaign started. The OTT platform is ready to match the particular audience to relevant TV subscribers’ lists.
4. Display OTT ads. At this stage, the abovementioned VAST or VPAID tags come into play to fill the communication gap between the video player and ad server. The ad can be served programmatically or via Guaranteed Insertion Orders (IO). 
   
   • OTT programmatic advertising is an automated process of purchasing and selling ad inventory across OTT platforms and services. This type of ad serving relies on Real-time bidding technology but does not provide guaranteed impressions for advertisers.
   • Guaranteed IO lets brands and advertisers have guaranteed access to desired inventory based on pre-negotiated custom parameters. Thus, ad buyers can specify audience type, frequency-capping, and other metrics and access specific list at fixed CMPs (cost per mille).
5. Assess the campaign. What is the over-the-top advertising success rate? To find out, advertisers can expect the OTT advertising platform to report the campaign results. They typically contain all kinds of metrics, including video completion rates and attribution KPIs.

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The ad delivery process via OTT is geared towards building efficient campaigns since it provides vast opportunities for targeting and measurement. However, there are other, less obvious benefits of OTT advertising that we want to share with you as well.

Which Trends Shape the Future of OTT Advertising?

• Ad-supported streaming is set to proliferate.

According to Statista, over half of digital consumers are frustrated by the subscriptions required to access their favorite content. This frustration has led to sign-outs, stagnating growth, and higher churn rates among OTT service providers.

Many streaming platforms, including Netflix, Disney Plus, and Max, have introduced ad-supported tiers to address this issue. Amazon Prime, for instance, has made its ad tier the default option. This shift offers a more cost-effective option for viewers and signals potential growth for OTT streaming advertising.

• Advances in interactive advertising.

Shoppable ad units represent a major leap forward in OTT advertising trends. Imagine watching a cooking show on Netflix and spotting a must-have kitchen gadget in an ad. With a simple click on a remote, you can access a checkout page without leaving the app. Major platforms like Amazon and Disney invest in this technology, using their OTT advertising and eCommerce expertise.

• Improved personalization.

Digital consumers expect tailored experiences that consider individual preferences and viewing habits. For instance, Netflix's recommendation engine suggests content based on your viewing history, while Hulu customizes ad breaks to align with user interests.

Advancements in AI and ML are driving even more sophisticated personalization strategies. Advertisers can target users precisely, using data from viewing patterns, search history, previous purchases, and social media activity. This degree of personalization increases ad relevance, boosts viewer engagement, and improves conversion rates. As technology matures, OTT platforms are set to offer even more refined targeting capabilities, benefiting viewers and advertisers.

• Widespread adoption of AI in the video ecosystem.

AI adoption is expected to grow across all industries and generate up to $826 billion by 2030. Artificial intelligence transforms the OTT advertising industry by automating repetitive tasks, improving data analysis, and predicting future trends. AI-powered tools already help advertisers and content distributors improve operations in the following ways:

• automate media buying and selling;
• improve campaign performance;
• scale tailored advertising campaigns;
• streamline the production and testing of ad creatives;
• analyze past campaigns and leverage data-driven insights to create new ones;
• improve targeting and relevance of advertising campaigns, etc.

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Benefits of OTT advertising

• Reach wide audiences. Once again, as audiences have shifted from cable TV to OTT, they are likely going to stay here for a long time. And with some viewer segments, streaming content via Internet-connected devices is the only option since they have never watched cable TV at all.
• Reach targeted audiences. Inaccurate assumptions about a general viewer base are now a thing of the past. With OTT advertising, one doesn’t have to guess audience preferences and interests. Instead, advertisers can display commercials to exact customer segments and individual households based on:
  • gender;
  • age;
  • income level;
  • geolocation;
  • device type;
  • time of viewing;
  • ethnicity, etc.
• Boost engagement. When we look at OTT advertising examples, it is easy to observe that they stay more relevant than their traditional TV counterparts. This is because OTT viewers see shorter but more relevant ads, which correspond to their interests. Moreover, marketers can target their audiences on other channels, including social media, audio commercials on Spotify, or browser ads.
• Assess ad efficiency. Thanks to over-the-top OTT advertising, advertisers can gather various metrics and gain helpful feedback to improve their campaigns. Based on this data, it is possible to understand which ads work best for the brand and which ones need improvement.

Reap Even More Benefits with a Trusted Partner by Your Side

As advertisers shift to where their target audiences watch the content, OTT advertising is accelerating—and it’s not likely to stop anytime soon. As a result, more and more brands are looking to reap the benefits of engaging ads that hit right on target. 

However, it is easy for a newcomer to navigate the complexity of the OTT advertising market. For that reason, we believe that our extensive experience with advertising technology can help you set the right trajectory for the next OTT ad campaign. 

Geomotiv can become an ideal candidate for creating, developing, and supporting ad campaigns on OTT and Linear TV. With us, you will be able to grow your business, add new functionality to existing services, and improve the efficiency of advertising efforts. 

Still unsure if Geomotiv can address your complex technology-intensive tasks? Come meet Adoppler! Our product subsidiary signals our solid in-house AdTech expertise and readiness to perform similar functions of your company. 

Adoppler is a programmatic AdTech platform that facilitates the media buying and selling process for streaming media services, vMVPDs, media agencies, OTT vendors, and tech startups. It provides a full-stack video monetization solution that enables users to transact directly, programmatically, or via third-party systems.

If you’re curious to learn more about OTT advertising, get in touch with one of Geomotiv’s experts here.