Prior to the last two decades, the state of media advertising in America was relatively straightforward. Buy what you can afford in local media, be it newspapers or local TV stations. As you grow, focus on preparing to launch a national TV ad campaign. Find out which niche demographics appeal more to your target market, and sponsor ads on those specific cable channels. And maybe take a look at that newfangled Internet thing every once and again.
Then came the 2000s, and with it, the rise of online content and social media. As advertisers began to branch out to reach a more segmented audience through their favorite media sites and social networks, advertising became more segmented as well. TV is now a far cry from the gold standard for advertisers it once was, and is on the decline thanks in part to the streaming platforms that took center stage this past decade—what we refer to officially as OTT media.
Cut to where we are now in 2020, wondering about how the state of Peak TV and the “Streaming Wars” will affect TV advertising going forward into this year and beyond.
Of particular interest: where should you, the brand wanting to do the advertising, be spending your ad dollars in 2020?
We have the answers—at least as it pertains to all the OTT media platforms that are currently available and launching later this year. Let’s dive in!
State of OTT Media Advertising in 2020
As you may very well already know, 2020 is shaping up to be a huge year for over-the-top, or OTT, media streaming services. With recent high profile launches of Disney+ and AppleTV+ now in the mix, and new rollouts of HBO MAX and NBC Peacock coming later this year, there’s never been more competition in the OTT media landscape.
Similar to the winning formula of a popular TV series about disparate kingdoms fighting each other over a single seat of power, with so much competition in the OTT marketplace, there are bound to be some losers. The reigning champions, Netflix, Hulu, and Amazon, are going to have to work harder than ever to stay competitive—and that could mean developing new streams of revenue.
This means that as these services roll-out and compete for more eyeballs and market share, they are going to need to be spending a lot. And to finance that spending, they’ll need to either double-down on their current growth strategies or roll out new advertising initiatives to monetize their current audiences. And because they are all digital platforms, they have greater access to in-depth data and a greater understanding of their audience demographics than the old-school TV Nielson models.
While all of this could shape up into a whole lot of bad news for the industry, this is all actually good news for you, the advertiser.
Even the platforms that are not ad-supported as they stand right now could open themselves up to a more ad-funded model, or hybrid model like Hulu, in the future. Not only is an ad- or hybrid-funded model better for the platforms to diversify their sources of income, it’s also better for the customers, as they will have more options and price-tiers with which to choose from.
What’s more, with all the major networks now launching their own OTT media services, the entire industry is shifting away from a ratings-based system to an impressions-based system. This means that as an advertiser, you will have access to user-information across multiple devices—meaning you will be able to better tailor your ad-spend strategies to reach audiences where they really are, and on multiple fronts.
Nielsen Ratings vs. Cost Per Impressions
Since the 1950s, the big networks have used the Nielsen Ratings system as the industry standard for measuring and selling ads on TV. There are a few main reasons the industry is turning away from this standard—for starters, the Nielsen Rating system has never been all that accurate. It works by calculating a percentage of viewership based on a small number of actual viewers who had Nielsen boxes in their home to track their viewing habits.
These percentages were then tallied up into broad audience demographics, which huge swaths of population lumped up into much too big clumps. For example, the most sought-after demo, adults 18-49, represents such a wide range of the American public that it’s hard to assume really anything that would apply to all of them. Plus, what we know now with the rise of social media advertising is that hyper-targeted ads work significantly better overall.
Being outdated in targeting accuracy and losing market share to dwindling audiences as they cut the cable cord to watch TV on the internet has led to a perfect storm—and the right time to get into advertising on OTT media services like Hulu or upcoming ad-supported Peacock.
This is why, in 2020 and beyond, streaming services and network media sellers will be switching to a CPM (or cost per 1K impressions) model similar to the type of social media ad pricing on Facebook or Youtube. This impression-based model is not only more accurate that Nielsen impressions, but it can be calculated across every platform that viewers can access a service.
For example, if your ad shows up when viewers are watching a show on their phones, TVs, and computers, the streaming service can now calculate the total number of impressions across each device for a more highly-tailored and complete picture of who that ad actually reached.
What Types of Advertising Options Exist for Accessing Current OTT Platforms?
The main type of advertising seen in the current OTT media landscape is the ad-supported video on demand model, known also as AVOD. AVOD platforms are free for users to use without a subscription service, but require the viewers to watch ads between, or sometimes in the middle of, their video content.
The largest AVOD platform out there is YouTube, and if you’ve been advertising at all over the last decade, you’ve probably already dabbled in buying video ads on YouTube. With over 1 billion monthly visitors, YouTube is not only the largest video on demand network, but is the world’s second-largest search engine—meaning users who go to YouTube often go there to learn information, which could include looking for information on new products through “best of” reviews or tutorial video content. Plus, YouTube is owned by Google, the single largest digital ad seller in the world.
The other largest share of ad-supported OTT media services is the hybrid-supported model. Streaming services who use a hybrid model provide both an ad-supported version of their service, where users can access the service for free or at a lower cost to watch content with ads, or pay a higher monthly cost to subscribe to the service without ads.
Hulu, owned now 100% by Disney, is probably the largest hybrid-supported model with its multiple price tiers. Viewers can pay a lower cost to get Hulu with ads, or pay a higher monthly fee for an ad-free version. On top of that, Hulu also now provides live TV at a higher price tier, making it a truly unique hybrid.
Amazon would also qualify as a hybrid-supported model, but is even more unique in that users can either pay to rent or buy a video or series directly from the company, or pay a monthly fee to watch select shows and movies for free via Amazon Prime. Amazon also offers larger brands a service called Amazon Prime Video Direct, where brands can upload their own content to Amazon Prime Video, and then get paid royalties based on how many users view their content.
Amazon is also interesting in that you can add other streaming services, like HBO or Showtime, to your monthly subscription to get access to their unique content directly from your Amazon Prime Video account. This is also the play for Apple TV+, and could become a viable option for Hulu in the future as well.
What Types of Ads Can You Buy on OTT Media Services?
According to new research from the CMO team at Adobe, about 75% of TV audiences use a second screen when watching TV. That makes sense, right? How many times have you Googled something or responded to texts while watching, or even stopped a show mid-stream to tweet something?
That’s why, by taking advantage of OTT media advertising in 2020, you can reach more audiences by coordinating your ad spends across multiple devices.
That said, there are a few main ad formats that most OTT media services provide, and a few that will become bigger deals in 2020. Here they are:
Addressable TV Ads. Addressable TV advertising refers to ads that are shown to different households while they are watching the same program. Using addressable advertising, you can target specific demographics with different ads on a home-by-home basis. For example, buying ads for a car commercial targeting households in a specific area or region where that car company might be trying to reach.
Addressable ads make it easier to hone in on specific audiences than the traditional model of TV ad buying, but lack the automation and precision of programmatic ad buys. That’s because addressable ads are still bought and serviced manually for most services who don’t have the back-end support that a platform like YouTube has from years of collecting and harvesting data.
Automatic Content Recognition Ads. Automatic content recognition TV ads are used to identify content that is being watched on a device so that more information can be provided to viewers without them ever having to look up any additional searches themselves.
This type of ad helps advertisers to tailor their messaging to a specific content type so that it will appeal more specifically to the audience that is being served the ad. For example, you as the advertiser can create multiple video ad variations that have messages that appeal more to users who watch crime dramas and then a separate message for users who watch cooking shows.
Connected TV Ads. Connected TV ads refer to ads that are served through OTT devices that are connected to the Internet, and as such, can be connected to customer behavior data from other devices on that network connection, like purchasing and lifestyle choices.
Definitely a new frontier with unique challenges inherent to it, connected tv ads are on the rise, and present a unique way for advertisers to reach internet users interested in what they have to offer through new touchpoints, like on their OTT devices and streaming services. Or another example, if a Playstation 4 with streaming capabilities and a smartphone are on the same network, you as the advertiser can serve your video ads to both devices at the same time.
Programmatic Ads. Programmatic ads are what you typically think of when you picture ads on YouTube. It’s an automated, data-driven system for buying ads that are highly targeted based on user-information through an automated process.
If you’ve been advertising in this space already, it’s highly likely you already have a programmatic ad-buy strategy on YouTube. As of right now, YouTube is the only major VOD service that has the hyper-specific targeting and reach measuring tools to rival Google or Facebook ads, and therefore has a leg-up on the competition from a programmatic ad-buy perspective.
So, Which Should You Choose?
In order to decide what types of ads you should buy, you should first come up with a marketing strategy to determine what goal you are trying to achieve. Buying video ads can be quite a waste of time and money if you don’t have a highly-specified plan for what objective you want to accomplish.
For example, are you trying to attract new audiences? Then you’ll want to buy addressable tv ads on a platform like Hulu to reach a larger audience based on specific demographics you’ve identified in your target customer profiles.
Are you trying to engage with customers who are familiar with your products? Then a programmatic ad buy strategy on a platform like YouTube seems more in line with reaching those audiences who are familiar with your brand already and simply need more exposure through more touchpoints.
What about if you are trying to nurture leads? Serving audiences who have visited your website and signed up your newsletter with connected tv ads could be a good way to reach them again through multiple devices, so while this is a relatively new frontier, it could be a good area to explore in this coming decade as you build out the rest of your lead-nurturing strategy.
Keep in mind: as we move forward into 2020 and more users sign-up for these various services, the way that these platforms are able to track and target audiences across their various device screens will become more sophisticated—but also more complex. There will be a period of further segmentation as these new platforms grow and change, and their audience demographics will also grow and change along with them.
That’s why it’s important not to put all your video eggs in one platform basket—instead, having a broad yet strategic approach to testing your video ads across each ad-type and platform will be key to surviving and growing your own businesses’ reach during this next decade of media upheaval. If you don’t already have an in-house media buyer, partnering with an agency to help you navigate these rocky waters is a very good idea.
How to Get Your Own Video Ads on An OTT Media Service
The first step is to create and invest in high quality, affordable video content! If you haven’t done any video advertising before, the time to start is now. If you have, but don’t have an in-house team, working with a video agency (like us!) is a great way to create consistent content, especially by purchasing video packages that provide content that can work across multiple devices and access channels.
It isn’t enough to create a single video for a national TV spot and expect it to reach all audiences. With an industry more segmented than ever before, you need multiple video ads to reach audiences wherever they are—and the best way to do that is with a consistent and reliable team of video experts to help you create consistent, high quality, and affordable video content for your brand on a regular basis.
If you’re looking to learn more, reach out—we’d love to meet you and learn if we’re a fit!