10.07.19

What is OTT and its Implications on the Advertising World?

Over-the-top (OTT) technology is flourishing, and with a growing number of cord-cutters pushing it mainstream, the technology (and its corresponding advertising offerings) are showing no signs of retreating from the frontlines. To put this into perspective, over 60% of internet users or more than 200 million people in the US are OTT users—many of whom are OTT-only households—a number that’s tripled over the past few years. Unsurprisingly, advertisers are intrigued, with expected spend in the US to top $5 billion by 2020. Promise and popularity aside, even the savviest and forward-thinking advertisers remain stuck in a cloud of uncertainty, which, in many cases, is a hindering factor. So, let’s clear the air. Here’s what OTT and OTT advertising really means.

What is OTT?

Defined by eMarketer, OTT is any app or website that provides streaming video content over the internet—think Hulu and Netflix. In the simplest of terms, OTT technology gives people the ability to watch video content without traditional means like cable. 

For clarity, connected TV (CTV) is technically not the same thing, although the terms are often used interchangeably. From a high level, CTV is a subset of OTT defined as a TV connected to the internet through built-in internet capability or through another device such as a game console or set-top box (e.g., Apple TV, Google Chromecast, Roku). For users, it’s ok if the distinction gets blurred. For advertisers, it’s not. Sure, the target audience is relatively the same, but the approach and inventory differ.

What is OTT Advertising?

Like anything in the advertising world with widespread appeal, advertisers are moving all-in. So, where are all of these dollars going? The clear frontrunners right now are Amazon Fire TV (and IMDb TV), Hulu, and Roku, with the trio operating at break-neck speed to emerge ahead of the pack. Hulu, for example, continues to push the envelope with innovative ad formats—think Pause ads—albeit with a relatively light ad load. Meanwhile, Amazon introduced IMDb TV, an ad-supported way for people to stream free TV shows and movies. While a quick rebrand from IMDb Freedive could have scared advertisers away, there’s no doubt that this, along with Amazon Prime will continue to be central to the online giant’s OTT strategy.

However, yet-to-launch platforms are making noise, too. AT&T, Disney, Apple, Viacom, and Discovery all plan to take on the perennial favorites if they aren’t already. For instance, AT&T announced that it plans to launch a direct-to-consumer offering by the end of 2019. Likewise, much-anticipated arrivals from Disney (which now owns Hulu) and Apple are slowly rolling out and attracting serious attention, largely due to their content repositories.

While time will tell if these newcomers can win market share, their clout alone gives them plenty of initial swaying power, and advertisers paying attention, even if there doesn’t seem to be an immediate intention for ads. In the meantime, others like IMDb TV, Pluto TV, Sony Crackle, and Sling TV are already offering appealing (and often more affordable), OTT advertising options. And no, Netflix is showing no signs of introducing an ad-supported model (though some are holding out hope for ads). 

So, what does this mean from an advertising perspective? It means a chance to reach a high-value subset of the population, especially millennials. As more inventory becomes available and targeting and measurement capabilities catch up, OTT advertising will remain an investment worth making.

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