Advertisers are betting big on connected TV advertising (CTV). According to Statista, CTV advertising will continue to grow year over year — from a value of 20.69 billion dollars in 2022 to a projected 40.9 billion in 2027.
At the same time, eMarketer’s forecast shows that CTV advertising will experience a 21.2% growth in the U.S. in 2023. All these figures should make you wonder one thing: how connected TV ads fit into your overall marketing plan.
After all, cord-cutting is no longer a trend. It’s the norm. According to Nielsen, streaming accounted for 37.5% of all TV viewership in September 2023, compared to just 29.8% for cable. Overall, CTV households are expected to more than double traditional pay TV households by 2024. So, there’s no denying the platform’s reach and popularity.
Let’s dive into all things CTV, from how it works to which platforms are most popular.
What Is Connected TV Advertising?
A connected TV is a device such as a smart TV that you use to watch video streaming services. It could include everything from PlayStation and Xbox to Roku, Amazon Fire Sticks and Apple TV. Connected TV advertising refers to the paid advertisements brands place on connected devices.
CTV reaches audiences that aren’t watching conventional television or even cable operations. Brands are seeing CTV as an opportunity to unify their content across streaming and linear (that is, traditional TV) platforms.
CTV Versus OTT Versus Linear TV
Connected TV and over-the-top (OTT) are often confused, but there are slight differences.
OTT media refers to any content streaming service that you can view through the internet. Examples of top OTT platforms include:
- Amazon Prime
- Netflix
- Hulu
- Disney+
- Max
- YouTube TV
OTT media refers to streaming services — the content you watch. In comparison, a connected TV is an internet-connected device that you use to watch TV, video and streaming services.
A streaming TV (STV), or OTT, is a digital video content distribution system that enables streaming video delivery through the internet. CTV and OTT differ in the respect that OTT is the actual delivery of content without cable providers or traditional satellites, while CTV is the device viewers use to access OTT services. CTV devices include smart TVs, streaming devices and gaming consoles. OTT also includes the other devices you may stream TV on, such as smartphones, tablets, laptops and desktops.
Both OTT and CTV differ significantly from linear TV or traditional television programming. This type of programming is referred to as “linear” because the viewer doesn’t have control over when programming is aired. The programming schedule is predetermined, as opposed to OTT, where viewers can choose to watch content on-demand.
Linear TV also differs from CTV due to its dependency on cable providers. Viewers must subscribe to cable packages to access linear TV channels, while CTV allows viewers to access content without a traditional cable subscription.
Connected TV Advertising Statistics
More and more consumers are moving away from conventional television watching. Viewers prefer their Amazon Fire Sticks, PlayStations and Apple TVs instead of letting traditional broadcast programmers choose what shows and movies they watch and when viewers now get to choose.
Streaming services are taking full advantage of CTV. YouTube, Roku and Hulu account for half of all connected TV ad revenues. However, the connected TV landscape is just shaping, and new leaders may emerge. There is a lot of opportunity for streaming services in connected TV advertising.
Statista data shows that CTV penetration was at an all-time high in 2023 when 88% of U.S. households had one CTV device at a minimum. It’s also interesting to note that baby boomers and Gen X are less familiar with CTV devices compared to millennials and Gen Z. There are nearly 56.8 million millennial CTV users, and they will increase to 62.6 million by 2025, according to estimates.
Here are two main players in the connected TV market.
Hulu
Hulu remains one of the biggest players in the CTV market. According to eMarketer, Hulu’s ad load grew 38% year-over-year to 7.3 minutes per hour — north of the average of 6.1 minutes per hour for the average ad-based video on-demand (AVOD) providers.
Due to this, Hulu’s ad revenue was estimated to be $3.4 billion in 2022, much higher than the $1.2 billion for Peacock and $1 billion for Pluto. Part of the reason advertising on Hulu is so successful is due to its ability to target specific demographics through its personalized ad experience.
Hulu also lets businesses automate certain advertising management processes through its self-serve ad platform. It allows businesses to create and track their ads without too much of a hassle.
Roku
Roku is another popular streaming platform that has been growing in recent years. In 2022, Roku’s advertising revenue was estimated to surpass $1.4 billion. The company currently has the highest user base in its history, standing at 73.5 million active users in the second quarter of 2023.
During this quarter, viewers streamed 25.1 billion hours on the platform, showing a quadruple increase from 2018 to 2023. That’s a major indicator of just how popular Roku has become in the streaming world.
Advertising on Roku can be beneficial for businesses with a diverse target audience because Roku caters to both young adults and baby boomers. In fact, viewers over 50 constituted 40% of all streaming time on Roku in May 2022.
How Does Connected TV Advertising Work?
With traditional TV advertising, you place your ads — and determine ad costs — based on channels, air times or specific shows.
CTV ads get broadcast based on the viewer, so you have some more targeting and reporting options. Ads are based on a target audience’s demographic and behavior.
Placing a connected TV ad is similar to other ad formats, with slight differences for each platform. Once you have your creative, upload it to a connected TV ad platform, choose your audience targeting, and select your budget and launch dates.
To place connected TV ads, you have two primary options. First, you can go through a self-service ad platform like Hulu’s ad manager. Second, you can use a demand-side platform (DSP) like The Trade Desk to place connected TV ads on multiple services at once.
(Not using The Trade Desk, but interested in accessing the world’s leading independent, self-service media buying platform? Learn more about their partner program.)
The type of ads you show will depend on the platform and options available. For example, some platforms may offer interactive ad formats where viewers can engage with the ad by clicking or interacting with their remote control. Others may allow for targeted ads based on specific viewer demographics, such as age or location.
Online video (OLV) ads are also connected TV ads that are played during breaks in streaming content, similar to traditional TV commercials.
The main benefit of CTV advertising is that businesses can reach highly targeted audiences at a fraction of the cost of traditional TV advertising. Advertisers also get to broaden their reach by targeting multiple devices, as CTV ads can be viewed on smartphones and gaming consoles alongside televisions.
How Do You Measure CTV Advertising?
A CTV measurement strategy tracks and analyzes the outcomes of video content campaigns. For a campaign to be successful, it’s essential to know how many people saw the ad, how long they watched it and if the ad influenced them to take action.
Connected TV advertising uses a programmatic approach, meaning the same ads can be shown across multiple channels. However, some key metrics can help you set the bar for success:
- Ad impressions – the number of times your ad has been shown.
- Completion rate – the number of times that your ad has been watched to the end.
- View-through rate – the percentage of people that watched your ad entirely out of all viewers.
- Incremental reach – how effective a campaign is at reaching a target audience.
- Cost per unique reach – the cost to reach a single viewer or household.
- Cost per view (CPV) – the cost of ad per view.
- Cost per thousand impressions (CPM) – the cost of an ad per 1,000 impressions.
Another valued trait for measuring the effectiveness of a CTV ad is high completion rates. In simple words, this means determining the percentage of people who watched your ad completely out of all viewers.
Cross-Device Matching as a Measurement Solution
We’ve found that one of the best ways to measure connected TV advertising is cross-device matching. The strategy helps campaigns identify consumers across devices that connect. Cross-device matching tracks digital footprints across devices. Marketers can use their data to identify audience members and their viewing habits.
For instance, household A may have watched a cooking show on their smart TV. The next day, they visited the advertiser’s website on their phone to purchase a product. Cross-device matching can link these two actions and attribute them to the CTV ad campaign. It shows that the ad has influenced the viewer’s behavior, leading to a purchase.
Lean Into CTV Agency Expertise
Carefully managed campaign reporting is crucial to CTV advertising measurement. Marketers must track KPIs for every campaign.
Defining CTV advertising measurement will never make the process simple. When you have a multi-faceted campaign, it is vital to have a system in place to track and measure your ad performance on all channels. A marketing agency with experience in CTV advertising like Goodway Group will not only help you set up your campaigns, but also track their results.
CTV Is the Future of TV Advertising
Connected TV advertising has been the fastest-growing ad group of the last few years.
As more consumers cut the cord and switch to streaming, potential ad revenues are only expected to rise for the top players. CTV advertising will become an increasingly important growth channel for brands and marketers looking to reach large audiences.
Want to learn more about the potential of TV advertising?
- Learn all you need to know about convergent TV advertising.
- Take notes from our guide on CTV advertising for retailers and brands.
- Check out four tips to leverage CTV in your ad campaigns.
Rich Powell is the senior vice president – national multi-location sales at Goodway Group. He oversees the multi-location sector, where his responsibilities include the development and execution of a go-to-market strategy for revenue growth, sales development, marketing and profitability analysis.