Over-the-top (OTT) streaming has revolutionized how people consume home entertainment content. With OTT TV, content is delivered through the internet, thus bypassing the traditional means by which TV entered the home. Though only really a “thing” for about a decade (Netflix first started streaming in 2007), over two billion people watched OTT content in 2020.
In the past, market research predicted that global OTT revenue would grow from $120 billion in 2019 to over $1 trillion by 2027. However, even that growth now seems like an underestimation due partly to the pandemic-fueled demand for home entertainment content. In April 2020 alone, there was a near 200% growth in OTT subscribers year-over-year.
The huge shift to OTT delivery has also meant a significant change in advertising strategy for both content producers looking to monetize their assets and advertisers seeking to maximize results for their clients. So, let’s take a closer look at OTT ads and what it means for you.
OTT ads and revenue models
Though OTT may be a new delivery platform, advertising revenue is still core to its business model. Statistics show that even though OTT started out as a subscription video-on-demand service (SVOD), advertising is increasingly becoming the norm for OTT revenue. The majority of all OTT revenue now comes from advertising; for example, advertising video-on-demand services (AVOD) in the U.S. and Asia-Pacific now considerably surpass SVOD in income.
The “cord-cutting” phenomenon that has ripped up the traditional cable TV model also seems to have filtered through to the SVOD field, which has become overcrowded by new OTT services (Disney+; Paramount +) joining legacy players like Netflix and Amazon. More than half of U.S. consumers have said they would like to limit their spending on video services to $20/month, and advertising is the only feasible solution to fuel revenue growth when the pool of subscribers matures.
How OTT video advertising works
Streaming content differs from traditional broadcasts because the user is in total control and can pause, play, or fast forward through content. As a result, OTT ads need to adjust to this format and optimize for impressions and engagement. This can mean a mix of inputs for OTT ads such as pre-play or banner ads rather than more intrusive in-content OTT video advertising.
Fortunately, user recall and engagement with OTT ads is quite positive. Over 70% of viewers say they can recall an OTT ad, and two-fifths say they had stopped watching a program to check out a product or service they’d seen in OTT ads. Also, as alluded to earlier, users are open to paying for their subscriptions through advertising, even picking and choosing the level of OTT ads they’re comfortable with.
This knowledge allows OTT services to gear different offerings towards the price-point that suits their customers, whether that be full subscription and ad-free, fully ad-driven, or a hybrid or ad-lite version. In order to maximize the value gained from content assets, finding the right OTT video advertising model that also delivers quality and provable engagement for advertisers is essential.
The advantages of OTT video advertising
The growth of OTT ads brings many benefits for advertisers who previously spent a lot on traditional or cable TV; namely, it incorporates many of the features of web-based digital marketing into their processes.
Traditional broadcast and cable TV services are one-way systems. That is, they send out their content, and users view it. For internet-based OTT service, that information is two-way — the service provider also receives information on who the user is and what they are watching, which opens up great potential for improving advertising.
Here are just some of the advantages that OTT video advertising offers:
- Viewer tracking: One of the big advantages of online digital marketing is the potential it has for measuring exactly how many people saw an ad, who engaged with it, and how. Since OTT ads are run on essentially the same platform, OTT service providers can provide similar metrics to advertisers, allowing them to adjust their OTT ads and maximize the effectiveness of their spend.
- Individualized advertising: Another advantage OTT video advertising has over traditional services is that cable and broadcast TV must bind their advertising to a single show, even if a wide range of viewers are watching it. With OTT ads, advertisers can show each individual viewer ads tailored to their specific profile.
- Faster engagement: Internet-based viewing also gives OTT advertisers the opportunity to provide immediate links to the advertised product or service. With a quarter of OTT viewing time occurring on mobile devices, viewers can click-through to landing pages directly from the TV program.
- Multi-level retargeting: Retargeting has been one of the big successes of digital marketing, with cookies enabling advertisers to take a longer-term view of their conversion funnels. With the inclusion of OTT ads, marketers can track and target leads across all of their online interactions, offering an even wider scope for successful conversion.
OTT content delivery is already a major disruptor of the existing home entertainment consumption model, and OTT ads are heading in the same direction. While still new to many advertisers, it has the potential to be a game-changer in terms of ad optimization and returns on marketing spend.
Having an expert ad agency like Bloom Ads working with you can put you in the best position to maximize results from OTT video advertising. Contact us today to find out how we can help you engage with your targeted audience while they’re watching their favorite shows.