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The constant expansion of technology means a whole new world for savvy small business marketers. Connected TV (or CTV) and CTV advertising represent a whole new world for advertisers seeking to take advantage of more precise digital targeting and the expansive creative possibilities inherent in video advertising.

If you don’t know your Roku from your Fire Stick, or a GRP from a CPP, this beginner’s guide to CTV advertising should get you started on the right foot.

1. What Is Connected TV Advertising?

Generally speaking, CTV is television-type content that is streamed over the internet as opposed to a satellite cable network or device. As cable television subscriptions continue to decline, CTV is actually on the rise.

How popular is CTV? According to one recent eMarketer report, “Connected TV: Almost Ready for Primetime” CTV users in the United States comprise about 55% of the population or a little over 182 million users. In four years, that market share is expected to rise to over 200 million, or just over 60 percent of the population. In 2017, about eight percent of all US television viewing for adults aged 18 to 49 took place on CTV platforms and devices.

CTV advertising is basically the purchasing of television ads that display over these internet-powered streaming devices and apps. For advertisers, the best part about the rise in popularity of CTV is that it allows for the precise targeting we’re used to enjoying with digital ad networks along with the superior creative impact that traditional TV ads promise.

The terminology for CTV advertising can get a little confusing. For example, CTV might also be referred to as IPTV, due to the fact that the content is delivered through IP packets, or as OTT (“over-the-top”), because the content is delivered “over the top” of your cable connection using an internet connection.

All three terms-CTV, OTT, and IPTV-mean roughly the same thing, at least for our purposes. As we use the terms, they refer to the same general concept of broadcast quality video content that’s usually longer than most YouTube video and more like our general conception of traditional network television.

Devices that can handle CTV content and ads include everything from your laptop and cell phone to Smart TVs (that is, televisions with a built-in internet connection) and streaming devices such as Roku boxes and Amazon Fire Sticks. Even many of the more popular game consoles such as PlayStation and X-Box can serve up CTV content and advertising.

2. How Does Connected TV Advertising Work?

CTV ads are sold to advertisers through the use of automated software that maintains and tracks data while sending the ad out to viewers who are watching on-demand streaming content.

It’s a system that closely mirrors the one you’d find at work in a Facebook advertising campaign. You as the advertiser create a video ad that effectively markets your product or service, which grabs the viewer’s attention and engages the audience’s interest. After you determine the contours and features of your targeted audience, you purchase ad space (or the platform you select purchases it on your behalf, if you choose to work with an ad tech company) when viewers match that audience’s parameters. As the ad is viewed, the platform captures critical performance metrics for your review.

Those metrics can include a number of data points, some of which are familiar to digital advertisers and some of which may be entirely new.

  • Frequency: the average number of times your ad will be displayed to a user.
  • Reach: the percentage of the audience you want to reach that your ad is expected to be exposed to. For example, 62 percent of 24- to 32-year-old women.
  • GRP or Gross Rating Point: A metric that precedes the internet and reflects the number of people within the targeted audience who viewed the ad. As an example, let’s take the audience parameters above of 24 to 32-year-old women. If you know that 25% of the viewers matching this demographic will watch episodes of a certain scripted drama the day they’re released on a specific platform, and you’ve bought three spots to display during that show, then your GRP is 25 times 3, or 75.
  • CPP or Cost per Point: This metric shows you what your costs are using the GRP as a basis. After you’ve calculated your GRP, then your CPP is the total media cost of your ad buy divided by that GRP.

For the most part, the content a viewer consumes via CTV looks and “feels” much the same as any video content they might see over more traditional channels and platforms. The main technical difference is that the content is delivered over an internet connection, not a cable network.

The main difference for the viewer, however, is that the content is usually either free or much less expensive. Think about the cost of a single Netflix monthly subscription versus the cost of a monthly subscription to traditional cable services.

Besides the cost, the experience of CTV compared to traditional TV stations or cable networks is pretty similar for the end viewer. As a result, these viewers don’t really balk all that much at advertising over CTV, as long as the price remains low. Hence, to its subscribers, Hulu’s periodic ads for TV shows are an acceptable tradeoff for low-cost access.

These ads can be pre-roll—shown before the main content begins to stream—or mid-roll—show in the middle of the show. Mid-roll is generally perceived to be the most popular and effective type of advertising, and thus it can be the most expensive and competitive.

3. The Benefits of CTV Advertising

There’s been a highly visible explosion in the use of and availability of CTV in recent years. It’s ubiquitous. From the huge, well-known players such as Netflix, Amazon and Hulu now producing their own scripted shows, and winning awards for them in many cases, to smaller, more niche-fare producers, we’ve definitely past the point where CTV is a novelty.

CTV is increasingly popular with millennials, with 67 percent of them living in a house that relies solely on CTV for television entertainment. If you’re targeting millennials to purchase your products or services, this statistic should register strongly with you.

For all the complaints we humans love to lodge against advertisements, the truth is that they just don’t keep us from consuming video content on CTV. It may well be the lower cost (compared to conventional TV service) that keeps us hanging around. Viewers seem to grasp and accept the fact that the ads are simply the price of doing business, which may make them more receptive to an ad’s message.

Both ad quality and creative formatting offer advantages to CTV advertisers. Viewers of CTV content enjoy better quality video, which enhances brand awareness and goodwill in the viewers. Advertisers can also experiment more creatively with styles and production formats, such as animated and interactive ads. Perhaps in part because of these advantages, there’s a high completion rate for CTV ads.

Advertisers can also access concrete metrics that help measure a campaign’s effectiveness, based on views, clicks, and conversions. Moreover, when the CTV provider requires login for viewers through Google or Facebook accounts, advertisers can target their ads more precisely based on demographics, location, interests, online behavior and more. By narrowly defining the target audience, advertisers can deliver more relevant brand messaging to the audience.

There are many misconceptions about connected TV and its potential for advertisers. For example, many see TV ads as an entirely different paradigm than digital ads. With CTV, that’s no longer true. You can enjoy the more precise targeting options along with the wide audience appeal of traditional TV advertising.

This targeting can be accomplished at a more reasonable cost than is often the case with traditional TV ad campaigns. This is because CTV’s parameters allow you to more precisely target your ads to those who are most likely to find them useful and entertaining. Traditional TV advertising simply can’t compete on this point, meaning you require many more views to get the same impact per viewer/prospect.

And because CTV ads aren’t skippable (viewers must watch them through to completion), the viewers are exposed to the full message you’re trying to send, not a sliver of it that may not be as persuasive as the whole. Yet even so, according to the Interactive Advertising Bureau (IAB), 40 percent of US adults say that CTV ads are less intrusive than traditional TV ads. So your message gets sent to the right people at the right time, they see it in its entirety, and they view it more favorably than they do regular TV commercials.

There’s a lot of opportunity and potential in CTV advertising, given the growing popularity of the platform.

That’s not to say there are no drawbacks or points of concern at all. Some of those areas include the newness of the format, measuring how and where an ad was viewed (since most services allow their users to consume content on a variety of platforms), and the limitation of targeting to the household level on Smart TVs and streaming devices connected to regular sets.

Moreover, just because ads aren’t skippable, that doesn’t mean your viewers can’t just get up and walk into the kitchen for a glass of water, the same way they can for any commercial. However, by and large, CTV presents a viable opportunity for video-based advertising that’s definitely worth considering.

How Ad Tech Companies Fit In

Keep in mind that CTV ads can be used for campaigns designed to increase brand awareness, as well as for retargeting those closer to the point of sale who have made contact with your brand through other channels.

Because CTV represents a large swathe of the internet ecosystem, you’ll want to work with multichannel partners who can help you get seen across a large variety of devices.

For these reasons, it’s probably a good idea to do some research and locate an ad tech company willing to partner with you and walk you through the possibilities and choices. An ad tech company with experience in CTV ads can also help you stay on budget and stretch your creative vision as well.

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