Advertising on TV? Why It’s Time to Go ‘Over the Top’

This article has been republished from September 2019.

By Dan Goldstein On Feb 10, 2019

Television remains a major Advertising channel for businesses in many industries. Statista estimates that TV advertising will continue to generate more than $70 billion in revenue like it has for the past several years. However, cracks in the TV advertising space are becoming more and more apparent. A 30-second national TV spot costs $115,000, according to AdAge. For many small and medium-sized businesses, even regional or local TV ads are not a sustainable advertising option in competitive markets.

What’s more, many consumers now access news, entertainment, and sports through internet streaming services instead of traditional TV. According to a report by PwC Consumer Intelligence, 78% of households subscribe to at least one streaming platform, such as Amazon, Hulu, YouTube, and many more. These services are known as “over the top” (OTT) because they connect users to TV programming without a cable connection.

Many customers have become so turned off by the cost, selection, and customer service issues with cable that they make the decision to forgo traditional TV and exclusively watch shows, movies, and more via streaming. This is called “cutting the cord,” and it’s becoming more and more popular.

Consumers are “cutting the cord” at prodigious rates, but many businesses are not taking advantage of this growing Advertising channel. Streaming is not an ad-free space; indeed, OTT is emerging as a strong alternative to TV advertising, with a number of benefits cable can’t match.

Demographics of Streaming

According to Think with Google, time spent on OTT streaming has seen a 28% growth year over year. Although this development may seem confined to Millennials and Generation Z, these numbers encompass more than half of consumers aged 18-49.

So, ads on OTT platforms reach several age groups that are highly desirable to advertisers. One of the key advantages OTT advertising has over traditional TV commercials is the ability to deliver ads to a targeted audience according to a variety of different characteristics.

Several media companies have begun to offer robust ad targeting options for OTT streaming. Remember, users have to create accounts to enjoy most if not all of the programming on streaming services, so ads can be targeted according to characteristics the users themselves provide, such as income, gender, interests, intent (based on search history and online browsing habits), and zip code.

Hispanic viewers (comprising both Spanish speakers as well as those who are fluent in English and Spanish) also represent a major audience for OTT services. According to Hispanic Online Marketing, nearly 30% of Latinos are cord cutters.

OTT ads can even be targeted to appear at certain times of day. This dayparting feature improves the likelihood of ads reaching target audiences when they are most likely to be watching. Media companies only charge advertisers for impressions among the target audience, further ensuring that you get a return on your spend.

Device Options

Naturally, TV ads are confined to the television screen. Companies may buy advertising time to be on multiple channels across the nation, but the commercials ultimately appear on only one kind of technology. And, unless the company also uploads the ads to its YouTube channel or social media accounts, only the TV viewers watching on the right channel at the right time will see the ad – and they may not be the advertiser’s target audience.

Television is still a significant audience. Although CNBC reports it was the “lowest” viewership in over a decade, more than 98 million people watched this year’s Super Bowl on TV. However, reaching a broad audience on the grande dame of mass communications is costly. What’s more, the people who see it are confined to a single device.

The opposite is true with OTT. Ads on OTT services appear across different device types, from smartphones, tablets, and computers to the emerging market of Connected TV. Connected TV is a term for devices such as Apple TV, Amazon Firestick, Google Chromecast, Roku, and others that replicate the experience of watching TV by connecting to the internet.

As a result, OTT viewers may see your ads when they are at home, on the go, and elsewhere. Furthermore, the ads themselves differ from TV commercials in length: 90-second ad blocks, as opposed to up to 3 minutes on traditional TV. So, not only does the potential exist to reach audiences everywhere they “live” online, but OTT formats are designed to appeal to the reduced attention span of digital audiences.

Other OTT Advantages

On standard YouTube videos, users often have the option to skip ads after five seconds or so. OTT ads are different; they always run, and they don’t give viewers the option to skip. And, because users actively choose what they watch on OTT channels rather than just “watching what’s on,” they don’t feel inclined to change the channel to avoid commercials.

Media companies and Marketing agencies also offer businesses the ability to track leads generated through OTT ads on mobile devices and connected TV. You are only charged for ads that reach your target consumer audience. Both of these features ensure that you can easily track your ad ROI on OTT ads – something much harder to do with regular TV commercials.

With another hotly contested election season already ramping up, OTT advertising offers brands and businesses another major advantage over TV: a level playing field with political campaigns. FCC regulations require TV stations to offer equal time to opposing political parties. This means that if one candidate or campaign runs an ad, the opposing candidate or campaign has a right to run its own ad. Broadcasters are also required by the FCC to offer the lowest ad rate for the time slot to political advertisers.

In effect, FCC regulations create a climate where broadcasters are required to “bump” regular ads for political advertisers. However, these same guidelines do not apply to internet-based services like OTT ad network. With spending on political ads projected to reach almost $10 billion next year, according to the Wall Street Journal, an alternative ad space with significant reach and less competition is a major advantage for businesses that will almost certainly lose visibility on television amid election commercials.

Read More: The Future of the TV Analytics Market

Conclusion

Television still reaches millions of consumers. However, with the growing trend of “cord cutting,” high cost of advertisement, lack of targeting options, and significant disadvantages in the upcoming 2020 election cycle, TV advertisers will see more and more limitations on the effectiveness of their ad campaigns.

Many users have cut the cord and opted for digital streaming instead of a cable package. Your business can benefit from this same move.

Ads on over the top services are more affordable, highly targeted, and not subject to the constraints posed by the FCC on television broadcasters. Furthermore, the OTT ad space is significantly less competitive than the TV landscape – for now. In order to get the highest return on investment on advertising in this emerging market, it behooves businesses to start using OTT now before major competitors begin dominating the market like we see with TV.