What Is Connected TV? How CTV Advertising Works

Consumers are cutting the cable cord now more than ever and opting for popular Connected TV streaming services like Netflix, Amazon Prime, HBO Max, and Hulu. Connected TV (CTV) has redefined television, creating new opportunities for viewers and advertisers. But what exactly is Connected TV, and how does CTV advertising work? This article delves into the world of CTV, explaining its significance and how it’s transforming the advertising landscape in 2024.

Understanding Connected TV (CTV)

Connected TV refers to any television that connects to the internet to access streaming video content beyond what is available via traditional broadcast or cable TV. This could be a smart TV with built-in streaming apps, a gaming console, or an external device like Roku, Amazon Fire Stick, or Apple TV. Essentially, if you’re watching Netflix, Hulu, or any other streaming service on your TV, you’re using Connected TV.

CTV's ability to bring the vast world of online video content directly into the living room sets it apart. It’s not just about streaming the latest TV shows or movies; CTV allows users to interact with apps, play games, and even browse the web on their televisions. This integration of internet capabilities with traditional TV viewing makes Connected TV powerful and versatile.

The Mechanics of CTV Advertising

CTV advertising refers to delivering ads through internet-connected TVs where viewers stream digital content. Unlike traditional TV advertising, which casts a wide net hoping to capture the attention of a broad audience, CTV advertising is highly targeted. It leverages viewer data such as demographics, viewing habits, and interests to deliver personalized ad experiences.

This level of targeting is possible because CTV platforms can track and analyze a viewer’s behavior in real time. This data-driven approach allows advertisers to create campaigns that are more relevant to the viewer and more effective in achieving their marketing goals.

CTV vs. OTT Advertising

Over-the-top (OTT) video delivery involves the Internet, bypassing traditional cable or satellite TV. While CTV and OTT are often used interchangeably, there is a subtle difference. OTT refers to the content delivery method, while CTV refers to the device used to watch this content. For example, a person might watch an OTT service like Netflix on a smartphone, which wouldn’t be considered CTV. However, if they watch Netflix on a smart TV or through a Roku device, that’s CTV.

Understanding this distinction is crucial for advertisers because the type of device used can influence the context in which an ad is consumed, impacting the campaign's overall effectiveness.

CTV vs. Addressable TV Advertising

Addressable TV refers to the ability to show different ads to different households watching the same program on traditional linear TV. While this offers better targeting than traditional TV advertising, it doesn’t quite match the precision of CTV advertising, which is deeply integrated with digital data sources and can provide real-time feedback and adjustments.

CTV vs. Linear TV Advertising

Linear TV, or traditional broadcast and cable television, is the old-school way of watching TV, where the network determines the schedule. CTV advertising is distinct because it allows for on-demand content viewing, naturally leading to more engaged viewers. This engagement, combined with advanced targeting and measurement capabilities, makes CTV a more powerful tool for advertisers than traditional linear TV.

The Benefits of CTV Advertising



The advantages of CTV advertising are numerous, making it a compelling option for modern marketers. Here are the top five benefits of CTV advertising that you need to know:

1. Precision Audience-Based Targeting

CTV advertising allows marketers to reach specific demographics, interests, and behaviors, enhancing the ads' relevancy. Unlike traditional TV advertising, which targets broad demographics, CTV enables marketers to utilize first- and third-party data to target audiences across several parameters, such as age, gender, lifestyle, and purchase behavior. This precise targeting reduces ad wastage, increases engagement, and improves the campaign's overall effectiveness.

2. Hyper-Localized IP-Based Targeting

One significant advantage of CTV advertising is the ability to deliver personalized and relevant ads to specific geographical areas based on the IP address of the connected TV device. This type of targeting is particularly beneficial for local businesses or campaigns with a geographical focus, allowing them to reach their target audience more accurately.

3. High Video Completion Rates

CTV advertising typically sees high video completion rates because viewers are generally more engaged and less likely to skip or close ads when watching TV content than other digital platforms. This is particularly true for long-form content, which naturally encourages viewers to watch ads in their entirety. For advertisers, this ensures their entire message is seen and heard, leading to better brand recall and engagement.

4. Accurate, Real-Time Measurement and Attribution

With CTV, marketers can track a wide range of metrics, including return on ad spend (ROAS), website visits, and more. These metrics are available in near real-time, providing up-to-date accounts of campaign performance. With advanced CTV attribution methods, advertisers can even track who converted on their website after viewing a CTV ad, making it a powerful tool for performance marketing.

5. Automated Campaign Optimization

Some CTV platforms offer automated optimization features that adjust bids and ad placements in real time to ensure the best performance. This automation helps balance ad spending and goals, optimizing campaigns for better results. Unlike traditional TV advertising, which is set in stone once a campaign is launched, CTV allows for dynamic adjustments, ensuring campaigns operate at peak efficiency.

How Does CTV Advertising Work?

Launching a CTV advertising campaign can be straightforward, particularly with platforms that offer intuitive interfaces and robust targeting options. Here’s a simplified process of how CTV advertising works:

Step 1: Upload Your Creative

Marketers can upload their video ads to the CTV platform. These ads can be existing video assets, which makes the process simple and cost-effective.

Step 2: Select Your Audience

Marketers can use data-driven insights to select their target audience based on demographics, interests, and behaviors. This step is crucial for ensuring that the ad reaches the right people.

Step 3: Extend Your Campaign

To maximize reach, it’s essential to consider an omnichannel approach. CTV platforms often allow for the creation of companion ads that can be displayed across various devices, ensuring the audience encounters the brand message wherever they are.

Step 4: Set Your Budget & Launch

Marketers can set their budget and launch the campaign after defining the audience and setting up the creative. Many platforms handle bid management automatically, ensuring optimal ad placement without requiring constant manual adjustments.

Where Are CTV Ads Shown?

CTV ads are shown on paid and free ad-supported streaming networks and apps, accessed through smart TVs and other connected devices. These networks include popular channels like ESPN, MTV, ABC, and CBS. With the growing popularity of streaming services like Netflix, Hulu, and Peacock, which offer ad-supported tiers, advertisers have a broad range of options to place their ads in front of engaged viewers.

How Are CTV Audiences Targeted?

CTV offers advanced targeting capabilities, making it a powerful tool for reaching specific audience segments. Here’s how CTV audiences are typically targeted:

First-Party Data

Marketers can use their data to retarget website visitors or existing customers with CTV ads. This method ensures that ads are relevant and likely to resonate with the viewer.

Third-Party Data

CTV platforms also offer the ability to tap into third-party data sources, allowing marketers to reach new audiences based on attributes like personas, interests, demographics, age, gender, income, and intent information.

IP Targeting

IP targeting allows advertisers to reach specific households and the connected devices within them, offering a more personalized ad experience.

CTV Metrics and Measurement

Since CTV is a digital channel, it uses many of the same metrics as other digital marketing efforts. Some key metrics include:

Impressions

The number of times an ad is served to viewers.

Return on Ad Spend (ROAS)

This metric shows how much revenue a campaign has generated compared to the ad spend.

Cost per Completed View

Tracks the cost of each completed view, typically when an ad is watched from start to finish.

Cost per Acquisition (CPA)

Measures how much the campaign spent to achieve a specific action, like a sale or signup.

CTV Marketing Best Practices

To make the most of CTV advertising, marketers should follow these best practices:

Understand Your Audience

Know your target audience and what they care about to create relevant and impactful ads.

Use High-Quality, Engaging Creatives

CTV ads are often viewed on large screens, so ensure your creative is high quality and engaging to keep viewers interested.

Leverage Advanced Targeting

Take advantage of the advanced targeting options available with CTV to reach the right audience with the right message.



Make It Interactive

CTV allows for interactive ads, which can increase engagement by allowing viewers to interact with the ad content.

Frequency Capping

Avoid ad fatigue by limiting how often a particular viewer sees your ad.

Measure & Optimize

Use real-time reporting and analytics to monitor your campaign’s performance and make necessary adjustments for optimal results.

Final Thoughts

Connected TV is more than just a way to watch TV; it's a potent tool for advertisers seeking to reach highly targeted, engaged, and measurable audiences. As CTV continues to grow in popularity, understanding how to leverage its capabilities will be crucial for marketers looking to stay ahead in the digital advertising landscape of 2024 and beyond. By following best practices and staying informed about the latest trends, brands can effectively harness the power of CTV to drive better results and achieve their marketing goals.