CTV Advertising: What is it and How Does it Work?

What is CTV Advertising?

Connected TV advertising refers to advertising shown on any internet-connected TV (also known as a Connected TV or CTV). A CTV allows viewers to watch content on streaming platforms like Netflix, Amazon Prime, and Hulu.  

Businesses are starting to use CTV advertising more and more to promote their brands. According to eMarketer, CTV ad spend reached $24 billion in 2023 and is predicted to exceed $40 billion by 2027. Many marketers are exploring connected TV advertising thanks to its promises to combine TV’s visibility and storytelling capabilities with digital’s advanced targeting.

Benefits of CTV Advertising 

As CTV gains popularity in the industry, businesses are starting to leverage new tools and platforms to reach their target audience, drive sales, and meet yearly revenue expectations. Advertisers are shifting their budgets and preparing to transition media spending into CTV for a few reasons:

1. CTV’s targeting capabilities allow advertisers to deliver content to viewers in a new way. More consumers are turning to streaming platforms for video viewing, and advertisers need to keep up with the changing trends.
   
   
2. CTV enables advertisers to share personalized content by connecting with audiences based on demographics, interests, behavioral data, and locations. 
   
   
3. CTV advertising can also help brands struggling to reach niche audiences. 
   
   

Connected TV advertising is useful for many businesses, but it needs to be used thoughtfully, with an understanding of the channel’s limitations and challenges, while it continues to improve.

Challenges of CTV Advertising  

Despite its popularity, CTV advertising is still an emerging marketplace and advertisers continue to face some challenges:

1. A leading concern for advertisers is ad fraud. According eMarketer and DoubleVerify, CTV ad fraud actually outpaced viewership growth in 2022.
   
   
2. Measurement and reach are also challenges for advertisers, especially with the rise in bots and scams taking over viewership numbers. TVREV reported that 43% of industry leaders are concerned with the ability to measure a CTV advertising campaign’s effectiveness.   
   
   
3. Connected TV advertisers may narrow their audience too much, limiting a campaign’s impact. Because each layer of third-party targeting increases pricing, tight targeting means advertisers must be extremely confident they’re reaching the right people in order for the return to be worthwhile.

How Does CTV Advertising Differ from Other Types of TV Advertising?

Anyone researching CTV advertising may encounter search results about other popular methods of TV advertising. Although there is some overlap, many ways to advertise on TV have slight variations.

CTV vs. OTT Advertising  

The biggest difference between CTV and OTT ("over the top”) advertising is the device. OTT ads are featured on streaming platforms on any device, including smartphones, laptops and smart TVs. CTV advertising is displayed on streaming platforms through smart TVs only.  

However, both CTV and OTT advertising provide precise targeting based on consumer behavior and campaign measurement in real-time.  

CTV vs. Linear TV Advertising  

Linear TV advertising refers to advertising you might see as traditional broadcast or cable. While Linear TV has the power to reach mass audiences and tell a compelling brand story, CTV has advanced targeting and measurement capabilities. These differences mean brands can gain incremental reach through CTV and access very large populations through Linear TV.

Viewers can now consume content wherever and whenever they want, so using both Linear TV and CTV advertising serves as a winning strategy for many advertisers. 

CTV vs. Addressable TV Advertising  

Addressable TV advertising is the use of data to target households through cable providers. While addressable TV advertising offers more narrow targeting than traditional linear TV, the targeting capabilities CTV advertising provides are even more advanced.

Who Watches CTV?

The rise in multiple-screen technology has changed how people consume TV and video. Today, 4 in 5 U.S. households have a video subscription service. Over half have a connected TV they use regularly. And 39% of total viewing time takes place on streaming TV.   

However, younger audiences are more likely to watch CTV than older audiences. 45% of CTV viewers in 2023 were younger than 35, while only 12% of CTV viewers are over 65 years old. 

Older audiences still favor linear TV, with 84% of viewers over 55 watching broadcast or cable TV. Connected TV’s growth is a focus for advertisers, but Linear TV still offers tremendous value, depending on the audience a brand wants to reach.   

Who Should Advertise on CTV?

Advertisers understand that TV remains one of the most powerful channels to deliver brand messaging. But the evolution of technology pushes businesses to move digitally to connect with their audiences. With elements of both TV and digital, CTV can seem like an ideal solution. 

Although CTV has proven to be valuable in some cases, it remains an emerging marketplace that can be confusing to maneuver. Regardless, brands are taking advantage of the overall benefits and opportunities it offers.  

What type of brands find the most value in CTV advertising?  

1. Brands that have younger audiences since they watch CTV the most.  
   
   
2. Brands with niche audiences will also find CTV beneficial because they can make use of its targeting capabilities.  
   
   
3. Brands that want to experiment on the channel so they can learn what works as CTV continues to evolve and more consumers shift their TV viewing time to the channel.

How to Advertise on CTV  

The opportunity is undeniable. Connected TV advertising is definitely a new and exciting channel for brands. Still, there are gaps that exist. The largest TV audiences still use Linear TV.  Connected TV’s advanced targeting capabilities come with high costs. And the newness of the channel means there’s not yet a universal currency for CTV measurement.

Here are some tips for advertising on CTV:

1. Don’t focus solely on CTV. Advertisers make the mistake of focusing only on CTV, but then miss out on the larger audiences in their target market that could be reached with linear.
   
   
2. Prioritize reach over frequency. High ad frequencies not only negatively affect a viewer's experience, but also waste ad budgets. To prevent this, use frequency caps to prioritize reach over hitting the same customers repeatedly.
   
   
3. Work with a Demand Side Platform. CTV ad inventory often has premium pricing. Advertisers can save by working with a DSP (Demand Side Platform) to find high-quality CTV inventory at lower prices.  
   
   
4. Find a TV partner that supports your goals. The best partner will support your goals, listen to your concerns and most importantly, help you grow. 

How Annika Streaming solves CTV challenges

At Marketing Architects, we believed there had to be a way to reduce CTV’s biggest challenges while benefiting from the channel’s unique opportunities. We created Annika Streaming to enhance CTV effectiveness for TV advertisers through the following features: 

1. Reduced costs. One of the primary advantages of Annika Streaming is its ability to remove middlemen and extra fees, resulting in more efficient pricing for advertisers. This approach contrasts with traditional streaming methods where unnecessary features often lead to higher prices. 
   
   
2. Specialized targeting technology. Annika Streaming utilizes specialized technology to identify valuable audiences, helping advertisers maximize the impact of their campaigns​​. It also leverages methods like contextual and device targeting to reach specific audiences without third-party targeting fees. 
   
   
3. Multiple measurement models. CTV campaign measurement with Annika Streaming includes tracking responses from impression to conversion and confirming results through multiple measurement models. This multifaceted attribution approach is crucial for verifying results as it provides a comprehensive view of a campaign’s impact​​​​. 
   

Interested in learning more? 

Click to read our Streaming TV whitepaper to learn how advertisers are developing cost-effective CTV strategies to drive business results. Or connect with our team to discuss how Annika Streaming could improve your CTV campaigns.