Introduction

Over-the-top (OTT) and connected TV (CTV) advertising are two of the fastest growing forms of digital video advertising. Both allow brands to reach cord-cutting audiences who are shifting their viewing from traditional TV to internet-connected devices.

OTT refers to the delivery of video content over the internet without requiring a traditional cable or satellite pay-TV subscription. This includes services like Netflix, Hulu, Amazon Prime Video, and others.

CTV advertising is a form of OTT advertising that specifically targets viewers through internet-connected TVs, whether smart TVs or devices like Roku, Apple TV, and Fire TV. While OTT advertising can also reach viewers on computers, tablets and smartphones, CTV advertising focuses just on the big screen TV environment.

The rise of OTT and CTV has opened up new opportunities for marketers to engage viewers who are moving away from broadcast and cable TV in favor of on-demand and streaming content. In this guide, we’ll break down the key differences between OTT and CTV advertising and what marketers need to know.

Defining OTT Advertising

OTT (over-the-top) advertising refers to video ads served directly to viewers through internet-connected devices. Rather than going through traditional TV platforms like cable, satellite, or broadcast networks, OTT ads are delivered on streaming services and apps accessed over the internet.

Some key things to know about OTT advertising:

• OTT platforms include popular services like Hulu, Netflix, Amazon Prime Video, YouTube, and more. These provide video content directly to viewers online.
• Viewers access OTT content through internet-connected devices like smart TVs, streaming sticks/boxes, game consoles, smartphones, tablets, and laptops.
• Ad inventory comes in the form of video ads inserted before, during, or after OTT video content. This includes 15-30 second pre-roll/mid-roll/post-roll spots.
• OTT provides more advanced ad targeting based on data like audience demographics, interests, viewing habits, location, and more.
• Marketers can access OTT ad inventory through programmatic buying platforms and direct deals with OTT providers.
• OTT ads enable marketers to reach cord-cutting audiences who no longer watch traditional TV.

In summary, OTT advertising centers on serving video ads to viewers streaming content through internet-connected devices and platforms. It provides a digital video ad solution beyond traditional television.

Defining CTV Advertising

CTV advertising refers to digital ads served through Connected TVs and streaming media players. These devices are connected to the internet and allow viewers to stream content through apps like Hulu, YouTube, Netflix, etc.

CTV ads are similar to traditional TV ads in that they often come in the form of 15 or 30 second video spots. However, CTV ads can be much more targeted based on user data and delivered programmatically through digital ad exchanges.

Some key things that define CTV advertising include:

• Ads served on internet-connected TVs and streaming devices like Roku, Apple TV, Fire TV, smart TVs, etc.
• Includes ad-supported content providers like Hulu, Pluto TV, Tubi as well as network streaming apps like NBC, Fox Now, etc.
• Ad formats like video, display banners, pre-roll, mid-roll, overlays.
• Uses digital ad targeting based on user data like demographics, interests, behaviors.
• Ad delivery is programmatic through ad exchanges and networks.
• Provides greater measurability vs traditional TV ads.

In summary, CTV advertising represents the convergence of digital advertising and television, offering the targeting capabilities of digital with the high-quality video ad experience of TV. It is changing the way marketers reach and influence modern streaming audiences.

Key Differences Between OTT and CTV Advertising

Over-the-top (OTT) and connected TV (CTV) advertising share some similarities, but also have some key differences that marketers should understand.

Audience Targeting

One major difference is in audience targeting capabilities. OTT advertising allows for more advanced audience targeting based on data like demographics, interests, and behavior. This is because OTT content is delivered via the internet, where users are logged in to accounts and more data is available.

In contrast, CTV advertising has more limited targeting based on factors like network, daypart, and program. However, targeting on CTV ads is improving as platforms develop capabilities to target ads using first- and third-party data.

Ad Frequency Capping

There are also differences in ad frequency capping, which is the limit on how many times a user sees an ad within a given time period. OTT platforms allow marketers to set more specific frequency caps to avoid over-exposing viewers.

CTV frequency capping tends to be more standardized, like allowing 2-3 exposures per hour or 4-6 exposures per day. Marketers have less control over customizing frequency caps.

Data and Measurement

The data and measurement capabilities differ as well. OTT provides more robust data on ad performance like impressions, clicks, conversions, as well as audience demographics and engagement analytics. This is because OTT is an IP-delivered digital ad experience.

With CTV, measurement is more limited currently and based on panel-centric, set-top box data. However, measurement is evolving with initiatives like Nielsen’s Digital Ad Ratings and other solutions to better track ad performance on CTV.

Ad Inventory

There are also differences in the ad inventory available. OTT platforms like Roku have a more limited supply of ad inventory that fills up fast and is subject to pricing fluctuations.

CTV ad inventory available on cable and satellite networks is generally more abundant and steady in terms of supply and pricing. However, premium CTV networks and live events have more constrained inventory.

Audience Targeting

OTT and CTV platforms offer different audience targeting capabilities for advertisers.

OTT platforms like Roku and Apple TV tend to have more limited targeting options compared to CTV. With OTT, advertisers can typically target by location, device type, content genre, and some basic demographic data. However, OTT platforms generally do not allow advertisers to integrate their own first-party data or partner data for more advanced audience segmentation and targeting.

In contrast, CTV platforms like Hulu and Sling TV offer more robust options for audience targeting thanks to their direct relationships with viewers. CTV providers have access to customer data like age, gender, interests, purchase history and more. This allows for targeting based on more specific audience segments. CTV platforms also enable advertisers to leverage their own customer data and CRM data for highly customized targeting campaigns.

So while OTT provides basic targeting, CTV opens up greater possibilities for advertisers to identify and engage their best customer audiences across different demographics, behaviors, and interests. The richer audience insights and segmentation capabilities give CTV an advantage over OTT when it comes to precision targeting.

Ad Frequency Capping

With traditional TV advertising, marketers have limited ability to control the frequency of how often a household sees an ad within a given time period. There are options to reduce ad fatigue through tactics like spreading out airings throughout the daypart mix, but in general, it’s accepted that TV viewers will see an ad multiple times.

In contrast, OTT and CTV allow for more nuanced frequency capping so brands can regulate the number of impressions served to a particular user or device ID within a defined timeframe. For example, you may want to show an ad to the same user just 2-3 times per day or 10 times per week. This helps prevent ad fatigue and optimizes frequency to impact conversion.

The ability to customize frequency capping by user, device, or household is a key advantage of OTT/CTV advertising over traditional linear TV. Data and software make it possible to govern the exposure rate and avoid wasting budget on superfluous impressions beyond a point of diminishing returns. While still an inexact science limited by available data, this level of control opens up more effective ad strategies.

Data and Measurement

CTV and OTT both offer robust data and measurement capabilities to advertisers, but there are some key differences in what each platform can provide.

OTT platforms like Roku and Amazon Fire TV have very detailed viewership data and can provide impression-level reporting on things like:

• Household-level ad exposure
• Frequency capping
• Viewability
• Completion rates
• Device data

This allows advertisers to optimize campaigns and target audiences across different apps and streaming content. OTT platforms also enable advertisers to integrate their own first-party data for advanced audience segmentation.

CTV platforms operated by cable and satellite providers have more limited data capabilities. They typically only provide aggregated reporting on:

• Impressions
• Reach
• Frequency

While they may be able to do some basic audience segmentation based on cable subscribers’ demographic data, it is not as granular as OTT data.

In general, OTT platforms provide much more transparency and precision when it comes to campaign data and measurement. This allows for superior optimization and targeting capabilities for advertisers. However, CTV platforms are working to enhance their data offerings to compete with OTT.

Ad Inventory

Due to the different technical infrastructure behind OTT and CTV, there are key differences in available ad inventory between the two.

OTT platforms like Roku have a more limited ad inventory compared to traditional TV or CTV. There are a finite number of ad slots available within the OTT content. This scarcity allows OTT platforms to charge higher CPMs.

In contrast, CTV provides a much broader and flexible ad inventory, similar to traditional TV. CTV apps have access to a full slate of TV commercial ad inventory, so they can fill many more impressions. There is also the ability to dynamically insert ads in a targeted manner.

The ad inventory for CTV depends on the specific network or publisher. Larger media companies with lots of premium CTV apps will be able to provide greater scale and impressions. But smaller CTV-only publishers may offer more limited inventory.

Overall, CTV provides marketers with a larger potential ad inventory and greater flexibility compared to OTT platforms. But when executing a targeted OTT campaign, the limited ad slots can be an advantage in saturating viewers within specific content.

Costs

OTT and CTV advertising have different cost structures.

OTT advertising costs are usually based on impressions. Advertisers purchase a certain number of impressions on OTT platforms for a negotiated CPM (cost per thousand impressions). The actual CPMs can vary significantly based on factors like targeting, ad format, platform, and overall demand. Broad targeting tends to have lower CPMs while narrower targeted audiences have higher CPMs.

CTV advertising pricing is similar to traditional TV advertising and is based on the programming the ad runs in as well as audience demographics. Popular shows and primetime spots generally have higher ad rates. There are options like programmatic TV buying that can make CTV advertising more targeted and flexible, but it still tends to be priced higher than OTT on a CPM basis.

Overall, OTT advertising has a lower cost barrier to entry with CPMs starting as low as $10. CTV provides mass reach but the minimum spends required are much higher, often $25,000 or more per campaign. The pricing models align with the strengths of each channel – OTT provides targeted scale while CTV offers broad reach at a higher fixed cost.

Conclusion

When deciding whether to use OTT or CTV advertising, marketers should consider the key differences between the platforms.

OTT advertising enables more precise audience targeting and frequency capping, since it relies on digital ad tech. However, it has limited measurement capabilities on big screen devices. OTT also suffers from data limitations, fragmented inventory, and relatively high costs.

In contrast, CTV provides access to big screen inventory within a better viewer context. It offers opportunities to reach cord cutters and cord nevers. Data and measurement are improving as well. However, CTV lacks the advanced targeting of OTT and has frequency capping limitations.

Ultimately, OTT and CTV can complement one another as part of an omni-channel advertising strategy. Here are some final recommendations:

• Use OTT advertising to reach younger demographics with customized creative and a higher frequency cap. Rely on CTV for older viewers and broader reach.
• Take advantage of OTT’s digital targeting but test CTV as well to determine optimal balance and efficiency.
• Leverage CTV for brand awareness and upper-funnel goals, while utilizing OTT’s capabilities for performance marketing.
• As CTV ad options grow, explore shifting budget from OTT to CTV for extended reach. But maintain OTT for precision targeting where needed.
• Blend data-driven insights from OTT with CTV’s scale to optimize cross-channel ad campaigns over time.

By combining the unique advantages of both OTT and CTV advertising, marketers can develop integrated ad strategies that maximize reach, targeting, and marketing ROI.