What is OTT?
As our friends from Naughty by Nature might put it, “You down with OTT?” Well most people are these days but with all the buzz about the emergence of OTT or “over the top” devices, many marketers still don’t fully understand it’s true definition. An OTT device, like a Roku or Chromecast, is all part of the “connected TV” space. Connected TV is simply a TV that is connected to the internet. This connection could be through the TV itself, a la SmartTV, or through an OTT device like Roku, Chromecast, and the various game consoles from Xbox, PlayStation, Nintendo etc. What’s NOT in the connected TV space is VOD or “video on demand.” VOD is not connected to the internet and is considered a different vehicle. As ad space on connected TV devices becomes more available to marketers it is increasingly important to understand what OTT and connect TV are and what makes each device unique.
The Rise of Connected TV
To state the obvious, the days of traditional TV viewing are gone. It started with DVR, then VOD, and now we are in the rise of connected TV and SVOD or “subscription VOD” (Netflix, Hulu, HBO Now). These devices are quickly commandeering the living room as the number of households with Connected TV devices grew to nearly a quarter of US households in 2012, and ownership is expected to double by 2017. This dramatic ascension is due to the advancement of SmartTVs and the vast adoption of OTT devices. Both of these are becoming increasingly more affordable and commonplace. Frankly, having a connected TV is on the cusp of becoming the norm, which excites many in the advertising and media world.
Many marketers see connected TV as a vehicle with the combined advantages of both TV and digital media. It has the benefits of traditional TV because it yields a captive audience, with the added benefit of having a choice in how and when they want to enjoy content. This makes them an even more engaged audience. The digital advantage connected TV is thought to bring, is its ability for precision ad-targeting and interactive capabilities. What is arguably the biggest advantage of connected TV is the tech-savvy diverse audience it reaches. Avoiding the ad-clutter, which can often plague the user experience via desktop, connected TV reaches the “ad intelligent” consumers who use smart TVs for their apps. At this point, connected TV advertising holds enormous targeting potential (that of desktop advertising) but has not quite yet fully realized it.
It is important to note that the rapid adoption of connected TV devices on the consumer side has yet to be met on the advertising side. This slow process has derived from two primary issues: a lack of industry standardization and limited content. With a plethora of devices starting to pop up these days, ad standards and specs are fragmented across all the various TVs, game consoles, blu-ray players, and set-top boxes. All of these have different ad units and standards, which make it time consuming and costly for marketers to navigate. The other major hindrance to advertising on connected TV is the lack of content available in order to drive widespread use of connected TVs. Currently, consumers use connected TVs for a limited number of activities such as watching movies, TV, or gaming. Also, many of these connected TV apps (Netflix, Hulu, etc) are subscription based and do not support advertising. As a result, CPMs can be quite high for advertising on many of these devices and as the scale is just not there yet. Finally, advertising on most of these devices is frankly still in its infancy and many of the targeting capabilities synonymous with digital advertising are not there yet with Connected TV.
Video Content Grows in Popularity
OTT is relatively new to the advertising playing field, but is definitely top of mind. We’ve had some recent success for our client AOL On with a tune-in campaign we executed to launch their first ever original, long-form, digital series, “Connected.” What’s considered a disadvantage by marketers with the lack of standardization in ad units for connected TVs, we were able to leverage for our client’s benefit by using an ad unit unique to only Xbox 360 devices. It performed very well for the campaign — more than 15 percent of views of the series’ first episode occurred on OTT devices. It’s all about fully understanding the arena you’re working in and making it work to your advantage. Having a media agency partner who understands what connected TV is and the changes it will soon bring is enormously important for the future of your video advertising solutions.