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Connected TV is the Future of Video Advertising

A man works over a bank of servers.

What is Connected TV?

Connected TV is the latest video advertising buzzword floating around the industry. Yet many people still aren’t sure what it is or the power it has to transform video advertising. Connected TV (CTV) is simply a television that connects to the internet. Unlike traditional TV, CTV includes Smart TV’s, Apple TV’s, devices like Tivo and Roku, gaming consoles like X-Boxes and PlayStations. Already, you probably see a couple devices that you may own on this list. One of the reasons CTV is so appealing for advertisers is that it already have incredible market permeation. But let’s not get ahead of ourselves. There are a lot of reasons CTV is the future of video advertising.

 

How Does Video Advertising Work on CTV?

CTV is a conduit Over-the-Top (OTT) video content. OTT content is content that is delivered via the internet without multi-system operator (MSO) involvement. Much OTT content mimics the services of a traditional media service, but over the internet – and usually for free or much less expensive. For example: WhatsApp, the encrypted, free, and wildly-popular text-messaging app for smartphones that uses internet connection instead of a mobile texting plan. WhatsApp is a good example of and OTT messaging application. CTV like Netflix does the same to traditional television.

What does this have to do with video advertising? Well, users are watching a show that is on the internet rather than via a TV station, but apart from that difference, the experiences are extremely similar to their traditional television experience, and they are willing to accept advertising in order to continue to watch this content. Studies show that half of these users who view content on apps like Hulu are willing to sit through video advertising to continue to watch shows, a huge boost over traditional television viewers. CTV administers video advertising before and during content, called pre-roll and mid-roll advertising when users are most willing to experience an advertisement to be able to watch the content. In fact this mid-roll advertising is so popular it is also the most competitive of video advertising.

 

Why CTV is the Future of Video Advertising

#1: CTV is Everywhere
We said it before and we will say it again: CTV is everywhere. As internet giants like Netflix, Amazon, and Hulu produce their own highly-popular shows, more and more people have joined as the convenience and fear of missing out overcome any residual luddite tendencies. As of last year in the United States, 60% of households own a CTV. In the UK, which has just 6% more CTV use than the United States currently, 75% of households were expected to connect their TV’s to the internet by 2020. The time is ripe for a video advertising boom as households adopt CTV technology with records speeds.

#2: Millennials Love CTV
CTV is the future of video advertising because millennials love CTV. The coveted video advertising audience that is getting harder and harder to target are clustering in one place. Millennials love the content made available by Netflix, Amazon, and Hulu. Even Youtube allows the purchasing of episodes. The point is, most millennials just don’t feel like they need convention television packages. In fact, millennials are a full 67% more likely to be in a CTV-only house, and 25% report that they don’t have pay-TV. With the millennial audience so concentrated, savvy advertisers should focus their video advertising on CTV.

#3: People Don’t Mind CTV Ads
As we mentioned before, CTV is very close to the normal television viewing experience. However, there is a much higher ability to target the audiences you’re looking for based on the data these apps provide. This provides a much higher return on investment than traditional television advertising, which is more like the shotgun approach to advertising. This, coupled with the fact that most applications for viewing content through CTV are less expensive than traditional TV, contributes to the fact that users don’t mind experiencing video advertising on CTV. Devices like TiVo that waste millions of advertising dollars by allowing users to skip will not be a problem with CTV because viewers understand it is part of the cost of doing such cheap and convenient business. In a recent study, ‘half of the respondents said they felt that watching ads is a fair value exchange for low-cost content. Moreover, ads on connected TV were “less annoying” than those on linear TV, according to the respondents.’

#4: Enormous Video Advertising Opportunity with CTV
There is very little CTV inventory available now, and most of it is snapped up quickly, but advertisers shouldn’t be worried. The massive growth of CTV is creating an enormous opportunity for video advertising with CTV. 160 million Americans streamed using CTV every month, CTV use grew 300% but CTV only accounts for barely 1% of TV ad dollars. As technology improves and even more people adopt CTV into their homes and daily lives, more TV ad dollars will shift in the direction of CTV.

 

The Big Caveat:

The reason for the tremendous opportunity for video advertising with CTV is that there is one major drawback keeping people away. Currently, CTV has no universal “measurement currency,” which means that there is no really efficient way to measure audience size and makeup across multiple apps and devices, although these measurements do exist platform to platform based on viewing behavior. CTV doesn’t use cookies or device ID’s, and so billions of dollars have been held back from CTV advertising for fear that measurement will be too tricky to get right. Many advertisers have sought a more formalized attribution system before fully jumping on board. But don’t lose heart, the necessary changes to CTV are rapidly gaining momentum, and when the changes come to standardize measurements, we’ll be ready for them.