Why Connected TV Advertising Is Going to Be the Next Big Thing

Eric Siu

The advertising arena is shifting once again, and connected TV (CTV) is spearheading the change. Gone are the days when TV advertising was limited to traditional, linear formats. Today, CTV offers a more dynamic, interactive and targeted approach to reaching audiences.

But is it worth the investment?

In this post, we’ll delve into the ins and outs of connected TV advertising and why it’s becoming the go-to channel for marketers.

Kim Cooper

Director of Marketing, Amazon Alexa

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What Is Connected TV Advertising?

Connected TV, commonly abbreviated as CTV, is a term that has been buzzing around the advertising industry for a while now. In its simplest form, CTV refers to any television that can be connected to the internet.

This includes smart TVs, gaming consoles like Xbox and PlayStation, and streaming devices such as Roku, Amazon Fire Stick, and Google Chromecast.

Here’s a more detailed breakdown:

Platform Integration: Connected TV advertising is displayed on smart TVs, gaming consoles or devices like Roku, Apple TV, and Amazon Fire Stick that enable internet connectivity on television sets. These platforms provide access to streaming services and applications where advertisers can display their ads.
Targeted Advertising: Unlike traditional TV advertising, CTV advertising allows for more precise targeting. Advertisers can use data to target ads based on various factors such as demographics, viewing behavior and geographic location. This level of targeting is similar to what’s available in online advertising, making CTV advertising more efficient and potentially more effective.
Programmatic Advertising: Much of CTV advertising is bought and sold programmatically, meaning it uses technology and data to automate ad buying, making the process more efficient and allowing for real-time auction ad buying. This also includes the use of Demand-Side Platforms (DSPs) and Supply-Side Platforms (SSPs) to manage and optimize ad campaigns.
Measurement and Analytics: CTV advertising provides advertisers with better measurement and analytics capabilities compared to traditional TV advertising. Advertisers can track the performance of their ads in real time and adjust their campaigns accordingly to maximize ROI.
Interactive and Engaging: CTV ads can be interactive, allowing viewers to engage with the content, which can lead to better user experiences and potentially higher engagement rates compared to traditional TV ads.
Cross-Device Campaigns: Advertisers can extend their campaigns across multiple devices, creating a seamless viewing experience for audiences whether they are watching on a TV, tablet or smartphone.

The Evolution from Linear TV to CTV

Traditional TV, often referred to as linear TV, operates on a schedule set by broadcasters. Viewers tune in at specific times to catch their favorite shows, and advertisers purchase slots during these times, hoping to capture the audience’s attention.

However, this model has limitations. For one, it’s difficult to target specific demographics, and secondly, measuring the effectiveness of these ads is not straightforward.

Connected TV, on the other hand, is different.

It’s internet-based, which means it allows for a more interactive and personalized viewing experience. This level of customization extends to advertisers as well. With CTV ads, marketers can target their audience based on traits like age, location and even viewing behavior.

This is a lot more controlled compared to the old method of TV advertising which largely consisted of “spraying and praying” in the dull hope that you were reaching the intended audience.

The Mechanics of CTV Advertising

So how does CTV advertising work?

Connected TV (CTV) advertising employs programmatic platforms similar to the real-time, data-driven models used in online advertising like Google Ads or Meta ads, automating the ad buying process and enabling real-time bidding on ad spaces. This facilitates enhanced targeting, allowing advertisers to pinpoint their audience based on various parameters, control budgets, and select specific shows or genres for ad placements.

They can also design cross-device campaigns for a cohesive advertising experience across different screens. The interactive and varied creative formats in CTV advertising foster engaging ad experiences, potentially leading to higher engagement rates.

Additionally, CTV advertising offers real-time performance analysis, empowering advertisers to measure campaign effectiveness through metrics like impressions and conversions. This blend of digital advertising’s immediacy and precision with traditional TV’s broad reach and viewing experience marks a significant evolution in TV advertising.

Virtual Product Integration

But wait, there’s more! CTV also offers additional avenues for brand exposure beyond traditional commercials.

Think of a popular TV series where the characters are using a specific brand of smartphone or drinking a particular type of coffee. This is paid product placement. Now we can take this further.

On platforms like Amazon Prime, for example, advertisers have the opportunity to integrate their products within the content, a feature known as Virtual Product Placement (VPP). This doesn’t necessarily have to be a well-known product; any brand that pays for this advertising opportunity can have their products featured in the platform’s movie or TV content.

Virtual Product Placement: Virtual Product Placement (VPP) from Amazon Ads permits advertisers to integrate their brand into existing popular shows or anticipated upcoming releases on Prime Video and Amazon Freevee. This feature allows for the seamless insertion of approved products into the content, even post-production:

Subtle Promotion: This form of advertising is designed to subtly promote products by integrating them naturally within the content, capturing target markets in a less intrusive way compared to traditional commercials.
Foreground or Background Placement: The products could appear in the foreground or background of the programming, providing a natural fit within the storyline or scene.

These types of ads allows for a wide range of products to be featured, not just well-known or established brands. It opens up advertising opportunities for various businesses, big or small, to promote their products within popular or relevant content on platforms like Amazon Prime.

The Platforms Leading the Charge

When it comes to CTV advertising, several platforms are at the forefront:

Hulu has been at the forefront of providing targeted advertising solutions in the CTV landscape, capitalizing on its extensive viewer data to offer advertisers precise targeting capabilities. By using viewer preferences and watching habits, Hulu can deliver more personalized ad experiences, which in turn could result in better engagement and ROI for advertisers.
Netflix, though traditionally an ad-free platform, is gradually exploring advertising avenues through brand partnerships and product placements. These subtle forms of advertising allow brands to organically integrate their products or messages within popular shows and movies, providing a non-intrusive advertising experience for viewers.
Amazon Prime, as we’ve seen above, offers unique product integration options such as Virtual Product Placement. With VPP, advertisers can seamlessly insert their products into existing or upcoming content on Prime Video, creating a more engaging and organic advertising experience.

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Why Marketers Are Flocking to CTV

According to MNTN, 65% of marketers plan to increase their spending on CTV advertising:

This is a big deal when compared to other channels like social media and paid search, where ad budgets are forecasted to decrease.

So, what’s driving this trend? For performance marketers, CTV offers better control and tracking capabilities. The rise of streaming services like Hulu, Roku, and YouTube TV has also contributed to CTV’s popularity.

One of the key drivers behind this trend is the appeal CTV holds for performance marketers. Unlike traditional TV advertising, which often feels like shooting in the dark, CTV offers a level of control and tracking that is music to a performance marketer’s ears.

With CTV ads, advertisers can target specific demographics, track user engagement, and even measure conversion rates. This granular level of detail is invaluable for optimizing campaigns and maximizing ROI.

Platforms like Hulu, Roku, and YouTube TV have changed not only the way we consume content but also how advertisers reach audiences. These platforms offer a dual advantage: a vast and engaged user base coupled with sophisticated advertising solutions.

The Shift Away from Social Media and Paid Search

While CTV is gaining traction, other advertising channels are experiencing a decline. One of the key reasons for this is the recent privacy changes, particularly on iOS devices:

These changes have made it more challenging for marketers to generate the same ROI from social media and paid search campaigns.

Moreover, Google is rolling out similar privacy features, making it even harder for advertisers to track user behavior. This has led to a decrease in social media ad spend, not because marketers are unwilling, but because they can’t achieve the same efficiency as before.

The privacy changes are not just affecting social media and paid search, they’re also impacting email marketing. Tracking clicks and opens has become more challenging, leading to artificial metrics that don’t accurately reflect campaign performance.

This has forced marketers to look for alternative channels, and CTV seems to be filling that gap quite effectively.

Duolingo’s Innovative Approach: Memes Over TV Ads

In a somewhat related development, Duolingo, the language-learning platform, has replaced its TV ads with memes. They’ve leveraged platforms like TikTok, Shorts, and Reels to drive virality through memes.

This strategy has been so successful that they’ve even established an internal “virality team” focused solely on creating viral content. While this may not directly relate to CTV, it does highlight the importance of adapting to new forms of media and audience engagement.

Last Thoughts on the Future of Connected TV Advertising

Connected TV advertising is not just a trend, it’s a significant shift in how advertisers reach and engage with their audiences. With its interactive capabilities, better tracking, and the potential for targeted advertising, CTV offers a promising future for marketers.

Key takeaways:

Connected TV is the way of the future: With better tracking, control, and a wide range of platforms, CTV is becoming the preferred choice for advertisers.
Privacy concerns are rocking the boat: The inability to track ROI effectively on social media and paid search is pushing marketers towards CTV.
Adapting to what’s trending is natural and prudent: Whether it’s embracing new channels like Threads or innovative strategies like Duolingo’s memes, the key is to adapt to the changing landscape.

As traditional channels become less effective due to privacy concerns, CTV stands out as a robust and efficient alternative. So, is connected TV advertising worth it? We think the answer is hell yeah.