Advertisers are going big on Connected TV this year, dedicating 45% of their TV ad budgets to the channel. But for an investment that big, brands need to know their audience is watching CTV in the first place—and the most cost-efficient ways to reach them. Because advertising on streaming platforms isn’t just about getting your ad in front of viewers, it’s about getting it in front of the right viewers through effective connected TV targeting.
Who watches Connected TV?
The good news is pretty much everyone’s watching CTV these days. Streaming programming has made up over a third of all TV viewing since early 2023, and in 2024, more than 68% of the US population will be CTV users according to eMarketer. As a result, CTV audiences cover a wide range of demographics, and most brands will be able to reach their ideal customers through the channel, particularly by utilizing CTV targeting.
However, there are some viewership trends related to age worth noting.
- Younger audiences spend more time with CTV than older viewers, who often watch more linear TV.
- 61% of CTV viewers are under the age of 45, and just 12% of CTV viewers are at least 65.
- Millennials are the most likely generation to watch CTV, with Gen Z following close behind. Baby Boomers are less likely to be viewers, with just 32 million viewers compared to Millennials’ 62 million.
Even so, streaming adoption among older viewers is growing. And according to the IAB, older CTV viewers tend to be more likely to subscribe to ad-supported streaming options like FASTs than younger viewers.
Targeting methods for CTV advertising
Most audiences can be reached on connected TV with the right CTV targeting strategy. The challenge is uncovering exactly when and what they’re watching. Fortunately, there are many targeting options for Connected TV. Each method offers unique advantages and can be used in different combinations for a custom CTV targeting strategy that matches a brand’s needs.
Demographic Targeting
This classic targeting method is common in linear TV and filters out consumers unlikely to be interested in your offering based on factors like age, gender, income and education. This is typically a great low-cost place to start narrowing your audience.
Geotargeting
Geotargeting allows advertisers to deliver content to viewers based on their zip code. This method is most effective for businesses with physical retail locations, ensuring they reach people within traveling distance of a store and can prioritize driving foot traffic.
Contextual Targeting
Contextual targeting places ads in content related to the product or service being advertised. For example, a sports drink ad may be shown during a football game. Or a home goods store with a new line of kitchenware might advertise during a popular cooking show. This way, ads are viewed in a relevant setting, increasing viewer engagement.
First-Party Targeting and Look-Alike Audiences
First-party targeting utilizes data collected directly from a brand’s customers. This data can also be used to build look-alike audiences, or groups that resemble a brand's existing customers. By analyzing the characteristics of current buyers, advertisers can target similar profiles of CTV viewers, expanding their reach to new audiences likely to be interested in their offering.
Algorithms
AI and machine learning can be used to identify algorithm-based media selections. This lets advertisers capitalize on the best opportunities to get in front of their audiences at the lowest prices.
Retargeting
Retargeting engages viewers who previously interacted with a brand but didn’t necessarily make a purchase. By targeting these viewers on CTV, advertisers can remind them of their interest and nudge them towards a conversion. Retargeting campaigns tend to be among the highest performing CTV campaigns in terms of response, but only reach a very small subset of viewers.
Third-Party Targeting
Third-party targeting uses data collected by external organizations to target viewers based on interests, behaviors, and purchase history. While this method offers a way to reach niche groups, campaigns using this approach can suffer from high costs and data inaccuracies.
Problems in CTV targeting
While targeting is an extremely powerful tool (and essential for success on CTV), over-reliance on narrow targeting parameters can backfire. Here’s how:
Risk of Inaccurate Data
CTV targeting is only as good as the data it’s based on. The more you rely on third-party data to target individuals, the more likely errors are.
As of last year, only 23% of global marketers say they have the quality data needed to maximize their ad investments. And a recent study performed by HP found their highly targeted digital campaigns intended to reach IT professionals at enterprise companies was actually targeting mostly outside that field.
With streaming, shared accounts and a lack of standardization around the identity graphs used to track IP addresses create further challenges in ensuring data accuracy.
High Costs and High Frequency
As advertising criteria becomes hyper-targeted, the size of the target audience decreases. This can lead to higher costs per acquisition as the campaign struggles to reach enough people to achieve its goals efficiently.
Every layer of targeting equals more fees. The more specific and narrow your target, the more you pay to reach them—especially if you’re targeting specific individuals. This means you need to see an even higher return on your campaign to make the extra fees worthwhile.
Plus, campaigns with very limited reach are more likely to run into frequency issues. Being shown the same ad too often is the number one problem reported by streaming viewers. Unfortunately for advertisers, overexposure can deter the very consumers you’re trying to attract. Based on a study by IPG and Nexxen, intent-to-purchase dropped 16% among viewers who saw the same ad six times
Limited Audience Reach
How confident are you that your audience target is correct? Or that there aren’t other valuable pockets of consumers who don’t fit your current ICP?
Overly tight targeting can exclude potential customers who fall outside the narrowly defined criteria but may still be interested in your product or service. This also hampers a campaign's ability to build broader brand awareness among consumers who aren’t in-market for your offering now, but who will be in the future.
The case for prioritizing reach in CTV campaigns
Targeting everyone isn’t the solution to CTV’s targeting woes. But reaching a wider group that includes some positive media spill can be beneficial. TV’s impact has always been due to its mass reach and high visibility. Leaning into that can drive more effective campaigns in the long term.
So yes, there are good reasons for advertisers to focus on reach over tight targeting in their CTV campaigns. Approaches like demographic or contextual targeting can help advertisers reach their ideal audiences while avoiding the fees associated with more granular methods. Fewer audience restrictions also reduce dependence on third-party data, leading to lower costs and higher confidence you’re reaching those who matter most.
Reach your CTV audience with Annika.
Learn more about how Annika optimizes for reach while engaging your core customers or connect with us to discuss how CTV could drive results for your business.
