Television used to be the be-all and end-all of marketing. Over the past 80 years, TV ads have shaped our culture, created household names, dictated norms, and set up new consumer trends that have dominated our lives.
However, we aren’t watching TV like we used to. Streaming and connected TV (CTV) has made getting a prime-time slot a thing of the past. But what is connected TV advertising then, and how can brands leverage it? We asked our expert advertisers to give you the right answers.
Table of Contents
What Is CTV Advertising?
By the end of 2024, an estimated 46.6 million people will abandon traditional TV in the US alone. With streaming services such as Netflix, Disney+, and Hulu, people can watch any show they want, whenever they want — often for less than a cable subscription.
The non-linear nature of connected TV means that traditional TV advertising tactics are also becoming a thing of the past.
But how does CTV advertising work? Connected TV ads are video ads that play intermittently via streaming platforms, while viewers are watching a show or a movie. In most cases, the ads are shown on TV, because CTV represents around 80% of all viewing. The remaining 20% takes place on other devices like tablets, smartphones, or laptops.
The Drawbacks of Linear TV
Traditional (or linear) television advertising allows marketers to reach millions simultaneously. However, that’s not necessarily a good thing, as the ads aren’t reaching a highly target audience. Instead, they’re seen by everyone who tuned in to watch a show, regardless of preferences and demographics. This means that even the best video commercials will have less-than-optimal campaign measurements.
On another note, digitization has also led to shifts in user behavior. More and more people are dropping their satellite and cable subscriptions. In 2015, 76% of adults in the US had a satellite or cable subscription, and by 2021, the number decreased to 56%.
This viewership drop naturally means that marketers are now moving to CTV too. According to an eMarketer report, linear TV ad spending topped $68.35 billion in 2022 and will go down to $64.94 billion by the end of 2026. On the other hand, CTV advertising will see a steady rise. In 2019, the total ad spend on these platforms amounted to $6.42 billion and is expected to reach $38.83 in 2026.
The Perks of CTV Advertising
The only benefit of connected TV advertising isn’t just riding the wave and following the flock. As marketers have shifted to CTV ads, they’ve realized a few significant benefits of programmatic advertising for TV.
- Improved targeting
- Hyper-localized ads
- Better video completion rates
- Enhanced performance measurement
- Flexible campaign optimization
1. Improved Targeting
Linear TV targeting is usually limited to finding shows that index positively against the broad gender and age metrics of Nielsen, targeting a non-particular audience, based mostly on gender and age (women 18-49, men 25-54).
CTV enables marketers to gather user information and demographics, such as those on Google and Facebook. This means that the audiences can be segmented more precisely, based on income level, education, personal preferences, consumer behavior, and similar combinations.
Brands also have the opportunity to add their first-party data to reach their existing customers or retarget qualified leads. This means that CTV targeting allows for:
- Retargeting
- Creating lookalike audiences
- Geological targeting
- Time-of-day targeting
- Contextual targeting
2. Hyper-Localized Ads
With CTV, marketers can take advantage of IP addresses, and precisely pinpoint the consumer’s location. Ads can be hyper-localized, with more customizable messaging, which can resonate better with viewers in that area.
Better localization can open more targeted advertising for small businesses that have been advertising with public access or local cable television. In addition to better targeting, more precise ad displays may help advertising become more cost-effective, yielding a better return on investment (ROI).
3. Better Video Completion Rates
Thanks to the video marketing trends that CTV helped set up, viewers are more likely to engage with ads and watch them until the end. Relevancy is a key factor here.
Marketers can also easily tell whether viewers have watched the ad to completion. With the help of ACR (automatic content recognition), CTV service providers can give marketers real-time data regarding completion rates, which can further aid marketers in tuning the effectiveness of their ad campaigns.
4. Enhanced Performance Measurement
Thanks to better segmentation and ACR features, advertisers can measure the effectiveness of their strategies more effectively through conversions.
Using attribution, marketers can see the digital footprints of users. They can see who visited the brand’s site and purchased something after viewing the ad on TV. With the help of footfall attribution, the same thing can be tracked in the case of physical store purchases.
5. Flexible Campaign Optimization
Ad campaigns in linear TV advertising tend to be rigid. The ads are usually sold, trafficked, and implemented into feeds long before the air, meaning that there isn’t much room for making tweaks during campaigns. CTV ads can be edited and inserted during campaigns, giving advertisers more flexibility to amend their campaigns to optimize ad performance and outcomes.
Here’s an example from one of Madhive’s clients. The modern TV advertising company teamed up with a luxury retail brand and ran several campaigns, constantly tweaking the ads. Taking advantage of in-flight optimization led to an 8% conversion rate increase and a 23.5X return on ad spend, leading to a $4 million revenue lift.
How Does CTV Advertising Work: Getting Started
CTV advertising works by displaying ads to viewers while they stream shows, movies, or other types of content on their TVs or other connected devices. In most cases, the ads are programs that are programmatically served through intricate auction systems.
But that’s only one segment of connected TV advertising. To set up a successful strategy, consider the following steps.
- Set goals
- Choose an advertising platform
- Pick an ad type and begin production
- Determine your target audience and start the campaign
- Track and optimize ad performance
Set Goals
Before spending money on ads, it’s imperative to set your goals straight for your CTV campaigns. Here are a few questions worth asking yourself before getting started:
- Who do you want to reach?
- What’s the action you want your audience to take?
- How does your CTV ad strategy pay into your other marketing campaigns?
- What are the tools you need to have to launch your campaigns?
Choose an Advertising Platform
You should know that CTV advertising offers several different platforms and methods of buying and selling ads. The most popular options are:
- Partnering up with Smart TV manufacturers (Samsung, VIZIO)
- Via Streaming sticks (Amazon Fire, Roku)
- Services like (Peacock, Hulu)
- Demand-side providers like (Nexxen, Madhive)
After choosing your platform, you will also need to decide how to buy ad slots, something that the top TV advertising companies can help you with. You can do it via:
Direct Sales
Direct sales refer to marketers or brands buying ad spots directly from streaming service providers, like Netflix or Hulu. The latter has a self-serve platform that enables brands to buy inventory through the platform. One benefit of direct sales is that brands know exactly which high-profile show their ads will be running against. On the downside, advertisers are brands that are mostly limited to the provider's original, e.g., owned content.
PMP (Private Marketplace)
This advertising environment represents an invite-based marketplace, where the inventory is closed for most advertisers, and only selected, reputable entities can gain access. Publishers can choose the buyers they would like to work with, handing out invitations to join. They also set prices for their inventory, while buyers enjoy transparency and first-party targeting information offered by the publisher.
Programmatic Guaranteed Advertising in CTV
Programmatic guaranteed deals consist of agreements between the buyer and the media owners for a particular number of ad impressions for a flat fee. This model provides media owners with a steady income and better budget planning, while buyers receive the ad space they’ve agreed upon with the need for auctions.
The PG model closely resembles traditional TV ad spot buying, where marketers or brands negotiate with the network and secure a budget for particular shows for a given period. In addition to upfront deals, the PG model enables buyers and media owners to set up campaigns anytime.
Pick an Ad Type and Begin Production
Usually, the most prominent video ad types are between 15 and 30 seconds, but you can also opt for six-second “quick-hitting," to-the-point ads. In addition to choosing between lengths, you can also consider adding direct-responses, or interactive tools that link the creative back to the user’s mobile phone, just like a QR code.
Determine Your Target Audience and Start the Campaign
With the help of advanced targets, brands and advertisers can reach highly qualified audiences using their first-party data, such as loyalty program members, if they share it with the publisher. They can also leverage third-party data from other providers and create different audience segments.
Once the audience has been determined and segmented, you can launch the ad on CTV.
Track and Optimize Ad Performance
Connected TV isn’t a top-of-funnel tool like linear TV, and it can help brands go beyond metrics such as perceptions, awareness, favorability, and purchase intent.
CTV advertisers can still get impressions for these awareness performance indicators, but they can also gain more insight into more precise, bottom-of-the-funnel metrics too. These include:
- Site attribution and conversion
- Foot traffic
- Location attribution
- Online and offline sales lifts
We’ve also talked about the opportunities for real-time optimization. You can reallocate your budget during the campaign to ensure that you get the most out of your budget performance-wise.
Connected TV Advertising: The Future of TV
More and more people are cutting ties with traditional TV and opting for streaming instead. And why shouldn’t they? It’s a win-win situation: viewers can browse the content they enjoy the most without the need for channel surfing, while brands and advertisers get a platform that allows for more granular and flexible advertising campaigns on TV.
Connected TV Advertising FAQs
Does CTV offer benefits for local brands?
Yes. Instead of opting for local cable or public access, local brands can also launch highly targeted ads for local audiences who are using streaming services. This allows them for more granular local targeting when compared to TV or radio. It can also tie in better with the brand's other local digital marketing efforts.
Is traditional TV dying?
Traditional TV viewership has been on a steady decline for some time now. While there are still millions watching linear programs, more and more people are embracing the convenience of streaming.
How does CTV compare to traditional advertising?
Typically, CTV advertising allows more precise targeting and audience segmentation. Also, it will ensure better conversion tracking. Traditional linear advertising tends to be rigid, while the digitized nature of CTV allows brands and advertisers to make larger and smaller tweaks in their campaigns to maximize performance.
