OTT Advertising: A Guide to Over the Top Ads

By IBM Watson Advertising

Over-the-top content is on the rise. More households are cutting cable and switching to TV streaming services every year, opening up an opportunity for advertisers to reach their audiences where they are, with highly targeted, user-friendly ads. 

This article will explore over-the-top (OTT) advertising and how it differs from similar technologies. Then, we’ll share the benefits of OTT ads, how they work, and how you can tap into the expanding market of OTT content. 

What is OTT advertising?

Over-the-top or OTT content refers to digital media which is streamed directly from services over the Internet. The phrase over-the-top comes from these services’ ability to bypass TV and cable providers via the Internet.

OTT services mainly include subscription-based streaming services. By leveraging these services, users are able to access content when they like through whatever devices are compatible, including their mobile phones and desktop PCs.

OTT advertisements are ads that are delivered via these streaming services. Such ads provide an opportunity for advertisers to reach large new audiences at scale.

What is the difference between OTT and Connected TV (CTV)?

OTT and CTV are both related to accessing content online. However, there are some key differences:

  • OTT is content that is streamed via the Internet. To access OTT content, users no longer need a cable or satellite provider. Instead, they subscribe to streaming services such as Netflix, Amazon Prime, or Hulu. In other words, OTT is the delivery mechanism for online content.
  • A CTV is a device that connects to or is part of a television. It enables the display of streamed video content. These devices include Smart TVs, gaming consoles, and streaming devices. So, while OTT is the delivery mechanism, a CTV is an Internet-connected device that can be used to access this content (and other online content).

What do OTT ads look like?

OTT ads are very similar to traditional TV advertisements. However, unlike traditional TV ads, advertisers can leverage dynamic creative to deliver highly personalized ads that reflect the viewers’ time, location, weather, contextual signals, and other household data. By partnering with the right advertising partner, companies can also leverage machine learning and predictive analytics to ensure they are targeting the right person at the right time.

However, there are several OTT distribution channels, and this is where it becomes more complicated. Here are some of the key channels:

  • Advertising-Based Video-On-Demand (AVOD). These are streaming services that off ad-supported video streams, such as Crackle and YouTube.
  • Subscription Video-On-Demand (SVOD). These are streaming services that you need a subscription to access, like Netflix.
  • Multichannel Video Programming Distributors (mVPDs). These are streaming services that offer paid-TV programming, like Sling and YouTubeTV.

Why is OTT popular now and what are its benefits?

Traditional TV usage is declining as OTT providers continue to take a larger slice of the market. For example, 78% (opens outside of ibm.com) of Americans now have a video subscription service and only 56% (opens outside of ibm.com) say that they are still watching TV via traditional means (including cable). 

OTT streaming services empower advertisers to:

Pay less to reach a larger audience.

OTT ads are often cheaper to run than traditional TV ads. And, it’s predicted that up to 1.88 billion (opens outside of ibm.com) people will use OTT this year, providing a perfect opportunity for advertisers to reach more viewers while paying less.

Meet your target audience where they are. 

Some platforms now have the ability to track mobile and Smart TV IDs so that ads can be delivered to key users regardless of the device they are using.

Hyper-target the right users. 

With AI and cognitive advertising tools, users can be targeted on cookieless data signals. Predictive analytics can determine which users are most likely to convert based on the large data set gathered.

Optimize campaigns in real-time. 

Advertisers can measure and optimize their campaigns based on several metrics, including video completion rate (VCR), app installs, and site actions.

Challenges of OTT Advertising

While OTT advertising is growing at a decent pace, there remain several technical challenges that need to be overcome, including:

Not all platforms provide ad options.

In fact, many OTT devices lack the capabilities of a web browser (like cookies and flash support) which reduces the ability to target audiences and monitor campaign success. Because of this, OTT currently only accounts for 13% (opens outside of ibm.com) of digital ad spend.

OTT advertising is complex.

With the market exceedingly fragmented and each provider using different delivery technologies and algorithms, deciding which to use can be confusing. Personalization efforts can also be difficult, since over 100 million people (opens outside of ibm.com) are sharing the passwords to their streaming services.

Bias is difficult to identify.

Advertising bias relies on assumptions to make decisions. Unconscious bias may be coded into the algorithms used, making the insights derived incomplete or incorrect. Leveraging the right AI advertising tools can mitigate these biases, but advertisers need to be aware of them to avoid them.

Creative can get worn out.

Consumers may be subjected to the same creative over and over again. Without a solution that can adjust creative dynamically, advertisers may hurt their relationships with viewers. However, with budget constraints, advertisers may be forced to use their TV assets for each delivery mode.

Reporting is challenging.

With the average consumer using 3+ devices (opens outside of ibm.com), it’s difficult to develop accurate reporting on cross-channel usage. To add to the complexity, a device such as a Smart TV may have multiple household members using it.  Additionally, each publisher has its own identity system, making it difficult to measure success across platforms. 

How are OTT ads delivered?

How OTT ads are delivered depends on the platform and the user’s device. Like most advertising platforms, the general method is as followed: 

1. Your audience is segmented. 

The first step is to create your audiences based on subscriber data. For instance, you may have first- and third-party information about your user’s favorite types of shows, their demographics, and their shopping data. 

2. The ads are rolled out.

Next, the advertising platform matches subscribers to different audiences.

3. Ads are displayed.

The ads are then inserted and displayed on user devices. This step is dependent on the OTT platform and what kind of ad-insertion method it uses.

4. Machine learning algorithms optimize the campaigns

Advertisements are continuously optimized with an AI-powered advertising  product like IBM Watson Advertising Accelerator. Complex data sets are taken in by the algorithm to determine which audiences are most likely to convert and when.

5. Review analytics and reporting

After the campaign, the OTT platform reports on ad exposure and key metrics. This information can be used to enrich the next campaigns.

OTT ad-insertion methods

There are two primary methods of ad insertion used today:

Client-side Ad Insertion (CSAI) 

Using CSAI, ads are loaded in the OTT box prior to being displayed. Most ad technologies are built around CSAI technology. However, this method is susceptible to ad blockers.

Server-side Ad Insertion (SSAI) and Stitching

SSAI involves inserting ads as a stream in real-time. Using SSAI, ad content is streamed to the OTT device alongside the core content to make it harder for ad blockers to recognize. This also eliminates the pause between the streamed content and the ad, making ads more viewable. 

Industries that Can Benefit from OTT Advertising

Three key industries are yet to tap into the true potential of OTT advertising. These are:

Automotive Advertising

With AI-powered analytics and predictive targeting, the automotive industry now has the capability to deliver dynamic creative at the household level while optimizing its campaigns in real-time. With challenges caused by supply chain issues and inflation, every dollar counts for automotive advertisers. By leveraging machine learning to deliver the right creative to the right audience, advertisers can ensure they are maximizing their budgets.

Retail Advertising

The retail industry is one of the top spenders in OTT advertising. They represent 16% (opens outside of ibm.com) of the entire market in Q4 2021 (growing 57% over the course of one quarter). However, there is room to grow. The retail and eCommerce industries can benefit from OTT with amplified reach and targeted capabilities. 

Healthcare Advertising

Not surprisingly, 27.2% (opens outside of ibm.com) of the digital health and wellness ad budget was allocated toward OTT. With a larger audience, better targeting, and insightful reporting, healthcare marketers can reach prospective patient populations where they are.

The Future of OTT Advertising

Currently, OTT content is often limited by the lack of support for tracking and analytics. However, brands like IBM Watson are leading the way by developing an AI-powered system that can target at the household and user-specific levels without the use of cookies. 

This award-winning technology has driven an average 127% performance lift in display campaigns and has helped OTT properties exceed video completion rate (VCR) benchmarks by almost 20%.

By analyzing near real-time consumer engagements and signals, personalized creatives can be delivered to users. Insights can then be derived based on audience engagement to improve performance over time. 

Watson Advertising can take your OTT advertisements to the next level through the following steps:

AI-powered data analysis and testing

With no pre-set rules in place, Accelerator rapidly assesses and tests which campaign strategies are most effective in helping your company achieve its goals. It then compiles the hundreds of data signals such as device, location, weather, and contextual signals to determine what leads to a successful conversion.

Data-rich insights

Once the data has been analyzed, Watson will reveal which creative elements resonated with your audience. These insights help your team make better campaign decisions in the future.

Predictive analytics

Through sophisticated algorithms and advanced machine learning models, Watson Advertising is able to make predictions about which creative will convert audiences in near-real time.

Final Thoughts

As always, advertising technology is rapidly advancing, opening up new opportunities for advertisers. While there are still some obstacles to overcome, OTT advertising offers marketers the ability to deliver more effective, highly personalized material to larger audiences. 

The IBM Watson Advertising Accelerator for OTT has been purpose-built to improve OTT campaigns with AI-driven creative optimization. Use cookieless data signals to predict the best performing creative and deliver personalized experiences at the household level.