Connected TV Advertising: How It Works

Two people watching a connected TV

Advertisers are betting big on connected TV advertising. According to eMarketer, the connected TV (CTV) advertising market will hit $17.4 billion in 2022 and $21.4 billion in 2023. You may be wondering how connected TV ads fit into your overall marketing plan. 

After all, cord-cutting is no longer a trend. It’s the norm. Based on The Trade Desk’s recent report, 80% of people in the US consider streaming their primary method of watching TV now.

We’re diving 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–usually a smart TV or over-the-top device–that you use to watch video streaming services. This could include everything from PlayStation and Xbox to Roku, Amazon Fire sticks, and Apple TV.

Connected TV advertising refers to the paid advertisements that 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 (traditional TV) platforms. 

CTV vs. OTT vs. Linear TV

Connected TV and over-the-top (OTT) are often confused, but there are slight differences. 

For instance, OTT (over-the-top) 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+
  • HBO Max
  • YouTube TV

OTT media refers to streaming services. Whereas a connected TV is an Internet-connected device that you use to watch TV, video, and streaming services. 

Now, there is also linear TV to consider. Linear TV ads are those placed on traditional television programming through cable networks. Unlike connected TV ads, linear TV relies on cable viewers to tune into a program at a certain time. And, as we know, tuning in to watch a scheduled program is a thing of the past. Connected TV advertising is the future of TV. 

Connected TV Advertising Statistics

More and more consumers are moving away from conventional television watching. Viewers prefer their Amazon Fire TV sticks, Playstations, and Apple TVs. As opposed to 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. 

Based on the eMarketer report, U.S. viewers will likely spend an average of 80 minutes a day with OTT video, an increase of 8.7% compared to the previous year. 

One of the smaller streaming services, Tubi, saw a massive 111.4% in ad revenue in 2021. As of the first quarter of 2022, Tubi reported over 51 million users with a total of 3.6 billion hours of video streamed in 2021. 

On the other hand, Hulu led the connected TV ad space in 2021. It reported $2.1 billion in yearly ad revenue in September 2021. ViacomCBS’ Paramount+ followed with $822 million in ad revenue for the same period. 

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. 

CTVs 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 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 platform like The Trade Desk, to place connected TV ads on multiple services at once. 

How Do You Measure CTV Advertising? 

According to research by Leichtman Research, over 80 percent of U.S. households in 2021 already have access to CTV. More importantly, brands know and have increasingly turned to it in recent years. CTV is becoming an integral part of omnichannel marketing. However, tracking your TV ad success accurately takes careful planning and expertise. 

CTV measurement tracks and analyzes outcomes of video content campaigns. Different metrics apply to evaluating success. Connected TV advertising uses a programmatic approach, meaning that the same ads can be shown across multiple channels. However, there are some key metrics that 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 percent of people that watched your ad completely out of all viewers
  • Cost per view or CPV – the cost of ad per view
  • Cost per thousand impressions or CPM – the cost of an ad per 1,000 impressions 

Another valued trait for measurement is high completion rates. Studies show it can reach 90 percent as ads can’t be fast-forwarded and the remaining 10 percent are cases where the viewer turned off the content during the ad.

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 use the data they gather to identify audience members and their viewing habits.

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 important to have a system in place to track and measure your ad performance on all channels. A marketing agency with experience in connected TV advertising will not only help you set up your campaigns but track their results. 

Connected TV advertising is the fastest-growing ad group of the last few years. If you aren’t running connected TV ads, or you are and want to improve your performance, feel free to reach out to the Goodway team to schedule a chat