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According to a report published by the Winterberry Group, over-the-top (OTT) advertising streaming in the US is predicted to grow by 20% to reach a market of $2.6 billion in the year 2019, and forecasted by public S-1 filing of connected TV reaching $18.3 billion in 2024.
This clearly marks that the era of cable television and TV commercials is on a decline. Streaming media is what the viewers want. It is the new way of watching TV and video contents.
The overall convenience and reach of OTT advertising as compared to traditional TV ads is just hard to beat, and let’s not forget the on-demand contents with more exciting and dynamic contents.
So, What is OTT Advertising?
OTT is a common term used for gadgets and services that are used to stream videos, ads and other digital content to the television (or computer, smartphones, and tablets/ipads). These devices are known as OTT devices and are the medium through which the streaming process happens. These include:
- Game consoles
- Smart TC
- HDMI sticks (like Amazon Fire TV Stick. Roku, Chromecase)
- Streaming Boxes (like Apple TV, Amazon Fire TV, Samsung Allshare Cast)
- Internet-enabled Smart Blue-ray, etc.
With reports that predict the ad spend to increase multiple times in the next 10 years, advertisers are looking forward to getting good returns in the times to come. And it is through these OTT devices and OTT steaming contents that advertisers are betting on.
So what about ad streaming on Netflix?
Will Netflix be ad-free?
The answer is a YES, for now. Premium subscription services have continued to be ad-free though how long that may last, time will tell. OTT advertising will continue to use free to watch platforms like Crackle, Newsy, Roku and Tubi. Most of these platforms offer free Hollywood content which is ad-supported and they are growing by leaps and bounds.
Various niche companies compete for advertising space and the competition is only going to grow tight. Producers of OTT devices and platforms will, therefore, be able to cater to the non-paying audience. Leveraging the potential of OTT platforms allows them to reduce the service cost (including cost of devices) and serve free content to the audience.
Wait … Then What is CTV?
Connected TV or CTV in short, refers to televisions which are connected to the Internet either by wired ethernet cable or wirelessly. The two terms (OTT vs. CTV) often appear together like batman and robin as both are intricately linked to each other.
These days, OTT works through all sorts of devices and one of primary means is via a TV. Nowadays, TVs come ready with the capability to connect to the Internet thereby becoming OTT-ready intrinsically with what is known as Smart TVs. In this article, we shall continue to refer to OTT since OTT is more encompassing.
Let us take a quick look at the factors that make OTT a success.
As per recent speculation by eMarketer, the OTT monthly users by the year 2022 is predicted to reach 197.7 million.
The figures in 2018 stand at 170.1 million. The growth is hence predicted to be over 27 million users in 4 years!
2. Strong Targeting
Targeting is a big strength of OTT advertising. As opposed to traditional TV advertising, investors can now show their products in targeted geographic areas or to a targeted audience.
Being able to reach a focused group of audience saves resources and increases efficiency.
3. Data Analysis
Analytic strength is important to understand how your advertisements are performing. Almost all OTT platforms give data analysis services for their products. Information on types of data, impressions, and their analysis helps in the right targeting of the advertisements.
4. Cost efficiency
Since OTT advertisements are highly efficient in tracking the number of views, there is always flexibility in budgeting. You can not focus on bringing a fixed number of impressions to a select group of audience and at a given budget.
OTT platforms are all about high-quality videos. Most businesses leverage the fact by creating message-based videos and targeting them to a select group of audience.
The cable TV audience is typically classified as:
- Cord Shavers: A group that pays for their Television subscriptions but cut down some of their TV channels and decide to check streaming videos
- Cord Cutters: A group that is totally cut off from TV subscriptions and is totally on streaming services.
- Nevers: A group that hasn’t checked out streaming services or never paid for premium channels.
OTT advertising gives the possibility of reaching out to each of these groups. OTT is hence the only alternative at present for traditional TV advertisements.
OTT Ad Delivery
Following sequence of events is usually followed for the purpose of OTT ad delivery:
Create a target audience
To start with, subscription data of users along with other relevant information (like shows watched, preferred categories) is collected and analyzed. This forms the basis of selecting a target audience.
Ads sent to OTT platforms
Once the audience is selected and matched to TV subscriber lists on various OTT platforms, the ads are forwarded and downloaded by OTT agencies.
Display the ads
OTT gadgets are now linked with VAST or VPAID tags.
The results of ad viewing are then produced in reports and analyzed for the advertiser to go through. The data analysis forms the basis of improvement for the campaigns.
OTT delivery is largely dependent on the communication of the platform with the OTT device.
OTT Ad Insertion
Following are the key techniques used for insertion of OTT advertisements:
1. CSAI (Client-side ad insertion)
This method involves direct loading of the ads on the OTT box and then displaying them to the audience. While this technique has been used traditionally, there are clearly certain loopholes. Hacking issues are very common when using CSAI ad insertion techniques.
2. SSAI (Smooth Stream ad insertion)
This process involves mixing the ads and the core content which is then streamed to the audience’s gadget in a smooth stream, frame by frame. The technique is fairly effective when dealing with ad-blocking software since the blockers can not distinguish the frames as ads.
SSAI technique stitches the advertisements with the content which makes it free from the gaps that traditional CSAI ads had. There are hence no pauses between advertisements and videos.
Additional features like clickable ads can later be added on the client’s end using certain advanced developments.
Tags Used for Communicating With OTT Devices
OTT advertising makes use of tags to create communication channels with OTT devices like Smart TC, Game consoles, HDMI Sticks, Streaming boxes, etc.
Following are some common tags used:
VAST (Video Ad Serving Template) Tags
VAST is a specification that is developed by IAB for streaming video advertisements.
These are third-party ad tags that are generated by the server for video advertisements. The tags allow video players to connect with ad servers. This allows the advertisers to serve ads into various ad inventories in the vide ad players.
VPAID (Video Player Ad Interface Definition) Tags
These were developed by IAB for the purpose of interaction between ad units and video players. The purpose here is to enable rich interactive in-stream ad experience. VPAID is an upgrade from VAST.
VPAID tags enhance interactions and enable measurements of performance in terms of engaging the audience. Companies these days are preferring VPAID over VAST tagging techniques.
Key Challenges with OTT Advertising
While OTT is the preferred advertising technology in modern times and has multiple advantages over traditional methods, there are still some challenges that need to be fixed/worked on.
OTT advertising is at present very fragmented and needs guidelines and operational standards for smooth implementation. There are at present more than 200 providers and more platforms are scheduled to be released!
Additionally, OTT advertising lacks features like flash and cookie support. These create limitations when targeting viewers and attributing conversations.
Further, not all tags on all platforms find compatibility with OTT which creates discrepancies.
While OTT measurements have improved in the last year, there’s more that needs to be done. Most OTT platforms still fail to report the channel that an ad ran on. This drawback is one of the main reasons for key agencies to choose direct advertising over a programmatic approach.
There is also a serious lack of trust and confidence in the OTT advertising. This is because of continual fraud issues. A report states that over 20% of the OTT inventory has frauds. With so many. With more and more OTT services entering the market, tracking the frauds is a big challenge.
Leading organizations like Knorex in collaboration with Pixalate have come up with “fraud protection techniques that are dedicated to helping clients confidently capitalize on the OTT/CTV opportunity.”
That said, there’s still growing hope in the advertising world for OTT advertising. Advertisers understand the potential and the money that it is bringing. While the technology needs a good number of upgrades, the outlook is very positive. More so with the adoption of IAB standards and frameworks!
The Future of OTT Advertising
As mentioned above, OTT advertising has a lot of potentials, despite its current challenges. According to IAB, two iterations of OTT are envisioned.
The first one allows brands to purchase directly from OTT content providers. They will hence execute the campaign programmatically.
The second iteration brings forth ad targeting based on viewing information from OTT providers and matching the OTT devices with other devices in the house.
The idea is to optimize a brand’s ad campaign efficiency. Additionally, this will promote the intent-based targeting of ads.
As mentioned earlier in the article, OTT’s share in the advertising market is increasing and is bound to grow more in the years to come. It is still a long way from showing its full potential for the advertisers.
The advertising world is undergoing a major change. With advantages like powerful analytics, strong targeting, flexible budgeting, high-quality creatives, OTT is definitely the next big thing!