What Is Connected TV? How CTV Advertising Works (2024)

Connected TV (CTV) is swiftly redefining the advertising landscape, offering a bridge between traditional television and the digital world. As we venture into 2024, understanding CTV and its implications for digital marketing is crucial for advertisers aiming to capture audience attention where it increasingly resides.

This article covers what CTV is and how connected TV advertising works, highlighting its growing significance in a digital-first era.

What Is Connected TV?

Connected TV (CTV) refers to any television set that connects to the internet to stream digital content, transcending traditional broadcast channels.

It encompasses smart TVs with built-in internet capabilities and external devices that enable internet streaming on standard TVs. This innovation allows viewers to access a wide range of on-demand content, marking a significant shift in how audiences consume media.

What Is CTV Advertising?

CTV advertising refers to the placement of ads within content streamed through connected TVs, leveraging the internet’s precision targeting capabilities.

Unlike traditional TV advertising, CTV advertising allows marketers to reach specific demographics with tailored messages, enhancing the relevance and effectiveness of their campaigns. Streaming TV advertising on CTV devices combines the immersive experience of big-screen ads with the analytics and targeting strengths of digital marketing, offering a powerful tool for brands to engage their audience.

CTV Advertising vs. OTT Advertising

CTV advertising specifically targets advertisements to viewers on connected TV devices, focusing on content consumed through televisions connected to the internet.

In contrast, OTT (Over-The-Top) advertising encompasses a broader spectrum, delivering ads across various internet-connected devices, including smartphones, tablets, and laptops, regardless of the content’s viewing platform.

• Learn more about OTT vs. CTV.

CTV Advertising vs. Addressable TV Advertising

Again, CTV advertising leverages internet connectivity to serve targeted ads to viewers on smart TVs and devices.

Addressable TV advertising, on the other hand, focuses on delivering customized ads to different households watching the same program on traditional cable or satellite TV, using sophisticated segmentation and targeting directly through the TV service provider.

• Learn more about addressable TV vs connected TV.

CTV Advertising vs. Linear TV Advertising

Linear TV advertising refers to traditional commercial spots broadcast across network and cable channels, following a fixed schedule with a broad, non-specific audience reach.

CTV ads are much more targeted than linear and cable TV ads, allowing brands to display ads to specific audiences with dynamic, personalized content.

• Learn more about CTV vs. Linear TV.

Benefits of CTV Advertising

CTV advertising harnesses the precision of digital marketing strategies while leveraging the engaging power of television, offering numerous benefits to advertisers.

1. Precision Audience-Based Targeting

CTV advertising empowers marketers to target ads based on detailed viewer data, such as demographics, interests, and viewing habits, ensuring that messages reach the most relevant audience. This targeted approach significantly increases the likelihood of engaging potential customers and driving conversions.

2. Hyper Localized IP-Based Targeting

By utilizing IP addresses, CTV advertising enables hyper-localized targeting, allowing brands to tailor their messages to audiences in specific geographic locations. This local TV advertising capability is particularly beneficial for businesses seeking to increase their visibility and relevance within their community.

3. High Video Completion Rates

Ads delivered using CTV advertising platforms typically see high video completion rates, as viewers are more likely to watch through full-screen, non-skippable content on a smart TV. This ensures that the advertiser’s message is fully conveyed, enhancing brand recall and impact.

4. Accurate, Real-Time Measurement and Attribution

Connected TV offers advanced measurement and CTV attribution capabilities, providing advertisers with real-time insights into campaign performance. This allows for the accurate tracking of key metrics such as impressions, clicks, and conversions, enabling marketers to understand the direct impact of their ads.

5. Automated Campaign Optimization

The use of programmatic buying in CTV advertising allows for automated optimization of campaigns based on performance marketing data. This means that ads can be dynamically adjusted and optimized in real-time to ensure the best possible outcomes, maximizing ROI for advertisers.

How Does CTV Advertising Work?

CTV advertising isn’t as complicated as you might think. Here is a basic step-by-step process of how it works:

• Step 1 – Audience Selection: Advertisers define their target audience using detailed demographic, interest, and behavior data.
• Step 2 – Creative Development: Brands create compelling video ads tailored to their selected audience.
• Step 3 – Ad Placement: Through programmatic platforms, ads are placed within relevant CTV content that the target audience is likely to consume.
• Step 4 – Targeting and Delivery: Using algorithms, the ads are delivered to specific audiences based on the defined criteria, such as location, viewing behavior, and device type.
• Step 5 – Viewer Interaction: Viewers engage with the ads, which can include interactive elements leading to websites or product pages for further engagement.
• Step 6 – Measurement and Analysis: Ad performance is tracked in real-time, measuring engagement rates, completion rates, and other key metrics.
• Step 7 – Optimization: Insights gained from performance analytics are used to optimize ongoing and future campaigns, refining targeting strategies and creative elements for better results.

Where Are Connected TV Ads Shown?

Connected TV ads are shown across a diverse range of platforms and apps, tapping into various viewer interests and habits to maximize reach and engagement. Some of these platforms with available CTV inventory include:

• Streaming Services: Platforms like Netflix, Hulu, and Amazon Prime Video serve ads either before content plays or during natural breaks in programming.
• On-Demand Video Apps: Apps that offer video-on-demand content, including those from traditional broadcasters transitioning to digital, often feature CTV ads.
• Connected Device Interfaces: Ads may appear on the home screens or within the interfaces of connected devices such as Roku, Apple TV, and Amazon Fire Stick.
• Live Streaming Platforms: Services that offer live TV streaming, such as YouTube TV and Sling TV, incorporate ads much like traditional live TV but with enhanced targeting capabilities.
• Ad-Supported Content Channels: Free ad-supported streaming channels and platforms specifically designed for CTV environments display ads to viewers without a subscription fee.

Types of Connected TV Ads

There are all sorts of unique and engaging ways advertisers can show their message to viewers. The primary types of CTV ads include:

• Pre-Roll Ads: Short video ads that play before the start of a video stream.
• Mid-Roll Ads: Ads that appear during breaks in the streaming content, similar to traditional TV commercials.
• Post-Roll Ads: Video ads that are shown after a video has finished playing.
• Interactive Ads: Engaging ads that viewers can interact with, often leading to additional content or a webpage.
• Overlay Ads: Semi-transparent ads that overlay on the bottom of the video content without interrupting the viewing experience.
• Sponsored Content: Content that is sponsored by a brand, which can include entire shows or segments designed to entertain while subtly promoting products or services.
• Display Ads: Non-video ads, such as banners or side panels, that appear on the menu or navigation screens of a CTV application.

How Are Connected TV Audiences Targeted?

We’ve touched on this briefly before, but let’s cover it in more detail. CTV targeting leverages sophisticated digital tools and data, ensuring that ads reach the most relevant viewers.

• Demographic Data: Advertisers can target audiences based on age, gender, and income level to ensure the ad resonates with the viewer’s background.
• Interest and Behavior: By analyzing viewers’ past viewing habits and interests, ads can be matched with content that aligns with their preferences, increasing engagement.
• Geographic Location: Geographic targeting allows ads to be delivered to viewers in specific locations, from broad regions to precise local areas, making them relevant to the viewer’s environment.
• Device Type: Targeting can also be based on the device used, whether it’s a smart TV, streaming stick, or game console, to cater to the viewer’s technology preferences.
• Time of Day: Ads can be scheduled to appear at specific times, targeting viewers when they are most likely to be watching, such as prime time or late-night slots.
• Viewing Patterns: Analyzing viewing patterns enables advertisers to target users who frequently watch certain types of content, such as sports enthusiasts or reality TV fans, for more personalized advertising.

CTV Metrics and Measurement

Proper CTV measurement requires a variety of marketing metrics and KPIs to assess campaign performance and optimize return on investment.

• Impressions: The total number of times an ad was displayed to viewers, indicating the breadth of exposure.
• Return on Ad Spend (ROAS): Measures the revenue generated for every dollar spent on advertising, assessing the efficiency and profitability of the campaign.
• Cost per Completed View: The average cost for each ad viewed to completion, highlighting the efficiency of engagement.
• Cost per Acquisition (CPA): The average cost to acquire a customer or lead, providing insight into the effectiveness of the campaign in driving conversions.
• Reach: The number of unique viewers exposed to an ad, demonstrating the spread of the campaign across the target audience.
• Frequency: The average number of times an ad is shown to each viewer, important for understanding saturation and repetition.
• GRP (Gross Rating Point): A measure of the size of an advertising campaign by estimating how many in the target audience it reached and the frequency of exposure.
• CPP (Cost Per Point): The cost to reach one percent of the targeted audience, helping advertisers understand the efficiency of ad spend relative to reach.
• Cross-Screen Measurement: Tracks ad performance and viewer engagement across different devices, ensuring a comprehensive view of the campaign’s impact.
• Target Rating Point: Similar to GRP but focused specifically on the target audience, measuring the percentage of the targeted demographic reached by the campaign.

Connected TV Devices & Platforms

Connected TV platforms and devices span a wide range of technology, from traditional computing devices to specialized streaming hardware, enabling viewers to access digital content in various ways.

Tablets, Phones, Desktops

These devices allow users to stream CTV content through apps and websites, offering flexibility to watch anywhere with an internet connection. They cater to a mobile-first audience, integrating CTV content into daily life beyond the living room.

OTT/CTV Devices

Devices like Roku, Amazon Fire Stick, gaming consoles, and Apple TV are specifically designed to stream digital content to televisions, turning any TV into a smart, internet-connected device. They centralize access to various streaming services, offering a user-friendly interface for navigating CTV content.

Smart TVs

Equipped with built-in internet capabilities, smart TVs directly access CTV content without the need for external devices. They represent the convergence of traditional television and digital streaming, providing a seamless experience for accessing a wide range of digital content.

CTV Marketing Best Practices

To maximize the effectiveness of CTV advertising, marketers should follow a set of best practices and strategies tailored to the unique capabilities and audience behaviors of connected TV.

• Leverage Targeted Advertising: Utilize the precise targeting capabilities of CTV to deliver your message to the right audience based on demographics, interests, and viewing habits.
• Focus on High-Quality Creative: Since CTV ads often cannot be skipped and are viewed on larger screens, ensure your ad creative is engaging and high in production value to capture and retain viewer attention.
• Use Cross-Screen Strategies: Integrate your CTV campaigns with other digital advertising efforts to create a cohesive omnichannel marketing strategy that reaches viewers across all their devices.
• Optimize for Different Platforms: Tailor your ads for the specific CTV platforms and services where they will run, taking into account differences in format, audience, and CTV ad specs.
• Measure and Adjust in Real-Time: Take advantage of CTV’s advanced analytics and measurement tools to track your campaign’s performance and make real-time adjustments to optimize reach and impact.
• Consider Frequency and Timing: Manage the frequency of your ads to avoid overexposure and schedule your campaigns to align with peak viewing times for your target audience.
• Prioritize Viewer Experience: Balance advertising goals with viewer experience by creating non-intrusive and relevant ads that add value to the viewer’s content consumption experience.
• Test and Learn: Continuously test different aspects of your CTV campaigns, including creative formats, messaging, and targeting criteria, to learn what works best and refine future strategies.
• Stay Updated on Industry Trends: Keep abreast of the latest connected TV trends and technological advancements to adapt your strategies accordingly and leverage new opportunities for engaging your audience.

CTV Advertising Examples

Some of the largest brands in the world use CTV ads to engage with their customers. Here are just a few notable CTV examples that you might remember:

• Nike: Launched a CTV campaign featuring inspirational sports stories, using pre-roll ads before sports content and interactive ads encouraging viewers to explore new product lines.
• Coca-Cola: Utilized mid-roll ads during family and holiday-themed movies on streaming platforms to promote their seasonal “Share a Coke” campaign, enhancing viewer engagement during breaks.
• Amazon: Deployed overlay ads on streaming services’ home screens to highlight Prime Day deals, allowing users to navigate directly to their shopping platform.
• BMW: Created a sponsored content series showcasing the innovation behind their electric vehicles, available exclusively on a popular streaming service, blending entertainment with product promotion.
• Netflix: Used post-roll ads to tease upcoming seasons of their original series, capitalizing on the audience’s interest immediately after they finish watching related content.
• Samsung: Implemented interactive ads within tech and lifestyle content streams, showcasing the features of the latest Galaxy smartphones with the option for viewers to click through for more information.
• McDonald’s: Launched mid-roll ads in children and family-oriented content, promoting their Happy Meal toys with tie-ins to current movie releases, engaging both kids and parents.

Learn more about CTV advertising costs.

Connected TV Advertising: Final Thoughts

Connected TV represents a significant shift in the advertising landscape, merging the broad appeal of traditional television with the precision and flexibility of digital marketing. As we move further into 2024, the ability to understand and effectively utilize CTV advertising will become increasingly critical for marketers looking to connect with audiences in more personalized and impactful ways.

Embracing the best practices, metrics, and targeting capabilities discussed will equip advertisers to fully leverage the potential of CTV ads, ensuring their messages resonate deeply within this evolving digital medium.