OTT vs CTV: Which is Best for You?

Television has been around for decades,¹ but the way people watch their favorite shows has evolved in recent years. An increasing number of consumers have cut the cord on cable in favor of streaming video services.² 

In particular, consumers are centering their entertainment around Over-The-Top (OTT) and Connected TV (CTV). While these two terms are often used interchangeably, they’re not the same thing. 

Below, we’ll dive into the differences between these two services. We’ll also explain their powerful advertising opportunities.  

What’s The Difference Between OTT and CTV?

If you haven’t noticed already, the marketing world loves a three-letter-acronym. OTT and CTV are two newcomers on the block. 

Here’s a brief definition of each of them:

• What is OTT? – Over-The-Top (OTT) refers to video content that people streamed directly from the internet. In other words, it goes “over the top” of a cable, broadcast, or satellite television subscription. 

An OTT provider offers consumers unparalleled viewing flexibility. Rather than being tethered to a TV set, they can stream their favorite content from any device, as long as it has an internet connection and a screen. Some common OTT viewing devices include laptops, desktop computers, smartphones, tablets, gaming consoles, and smart TVs.

So, where do consumers find this OTT content? The most popular OTT service is Netflix, Hulu, Disney+, and Amazon Prime Video. However, there are countless OTT streaming services on the market, with more cropping up each day.

• What is CTV? – Connected TV (CTV) is a television set that connects to the internet, either through WiFi or an ethernet cable. CTV allows viewers to stream OTT content on a big screen, as they would with traditional TV.

You can think of CTV as a specific subset of OTT streaming devices. Some popular examples of CTVs include Smart TVs, Apple TVs, Rokus, Fire TVs, and gaming consoles with internet connectivity, like Xboxes and Playstations.

As you can see, OTT and CTV are not direct competitors. Instead, they often work in conjunction to facilitate an optimal online video streaming experience. 

The Growing Popularity of OTT and CTV

Have you ever heard of Netflix and Chill? Hulu and Hang? HBO Go and Merlot? If so, you’ve most likely used OTT and CTV services first-hand, like a growing majority of the population. 

Here are some statistics that showcase the rise of OTT and CTV:

• As of 2020, 80% of homes have a CTV that’s used to stream OTT content.³
• In 2020 alone, 52% of buyers shifted their money from a cable TV subscription to CTV.⁴ 
• More people now have an OTT subscription than a cable or satellite TV subscription.⁵
• The average OTT subscriber has four different streaming subscriptions.

As you can see, OTT and CTV have been exploding in popularity in recent years. So, what’s the driving force behind this shift? 

The Benefits of OTT and CTV

Many traditional TV viewers have been transitioning over to OTT and CTV due to the following benefits:

• On-demand convenience —  With cable and satellite TV, you either have to watch your favorite shows as they air or record them with DVR. Both of these options require you to plan ahead. 

In contrast, a OTT and CTV streaming device allows you to watch whatever you want on-demand. Whether you’re in the mood for The Office, Breaking Bad, or the latest dramatic season of the Bachelor, your wish is OTT and CTV’s command. 

In the age of same-day Amazon deliveries and addicting 60-second TikTok videos, this level of instant gratification is what modern consumers have come to expect.

• Reduced cost — Many consumers are tired of paying for costly cable TV subscriptions that give them access to tons of channels they rarely watch. Compared to traditional TV subscriptions, OTT subscriptions are generally less expensive. 

As you can see, OTT and CTV are transforming the home entertainment world by giving people more options and flexibility at a better price. Due to these benefits, they’re only projected to become even more popular as time goes on. 

So, what does this mean for TV advertising? 

Advertising Opportunities With OTT vs CTV

OTT and CTV are quickly eclipsing the market that was historically dominated by traditional cable, broadcast, and satellite TV. Thus, advertisers must keep pace with consumers and funnel more of their ad spend to these up-and-coming services. 

OTT and CTV ads are placed before, during, and after streamable video content. Since these two services are closely intertwined, they share many of the same advertising benefits:

• An expansive reach – As more consumers switch over to OTT and CTV, their audience base continues to grow, giving advertisers a greater reach.
• High completion rate – Typically, OTT and CTV ads cannot be skipped. If a viewer wants to watch their favorite on-demand content, they must sit through the entire advertisement. 

This differs from traditional TV, where viewers can record their favorite shows with DVR and fast-forward through the ads whenever they please. As a result, OTT and CTV ads have higher completion rates than other forms of advertising.

Since OTT/CTV viewers get to select their favorite content on-demand, they’re usually more inclined to sit through ads with a willing attitude. 

• Precise targeting – Compared to traditional advertising, OTT and CTV advertising allows for precise, data-driven targeting. Both of these services collect significantly more user data than a traditional TV set ever could. 

By using this data to optimize your ad strategy, you can target your ads to make the most of your advertising budget. 

• Cost — Due to their vast reach, high completion rate, and precise targeting capabilities, OTT and CTV ads often offer a better return on investment than traditional TV.

The Benefits and Limitations of OTT Advertising

While there’s a lot of overlap between OTT and CTV in terms of advertising benefits, they have some unique differences as well.

For example, OTT advertising is better when it comes to:

• Device flexibility – While OTT content is often streamed on a CTV device, it doesn’t have to be. There are many other ways to access OTT content. In turn, viewers don’t have to be confined to their family room couch to see your ad.
• Reach – Due to this device flexibility, OTT offers a larger potential reach than CTV. You can advertise to people who own a CTV, as well as those who don’t. 
• Interactivity – Since OTT ads are often shown on computers, tablets, and smartphones, they’re clickable. If your ad generates interest with a viewer, they can click on it right there and then to learn more. This level of interactivity doesn’t exist on a CTV device. 

Despite these advantages, OTT advertising has some downsides too. For example, OTT devices come in a wide range of screen sizes. While you may envision your ad being played on a high-resolution TV screen, it may also populate on tiny smartphone screens. This dramatic screen size differential can play a role in how your ad looks and ultimately influences your audience. 

Additionally, OTT includes a wide variety of streamable content. Some of this content is less reputable than what you’d find on CTV alone. This variance in content quality puts more pressure on your advertising team to determine which OTT services are worth your ad spend. 

After all, you don’t want to associate your brand with a subpar streaming service. 

The Benefits and Limitations of CTV Advertising

As with OTT advertising, CTV advertising has some distinct pros and cons. Compared to OTT, CTV advertising stands out for its:

• Enhanced audience engagement – While OTT ads may enjoy a greater reach, some of this reach is wasted on distracted audiences. For example, an OTT viewer may be commuting on the bus to work, only half paying attention to your ad amongst the surrounding hustle and bustle. 

In contrast, CTV viewers usually watch from their family room couch, highly engaged in the content they’re consuming. Thus, they’re more likely to pay attention to your ad and absorb your brand messaging. 

• Content quality – Since CTVs only offer access to a narrow slice of the available OTT streaming services, CTV content tends to be of superior quality. By focusing on CTV advertising, you can associate your brand with premium content with ease. 
• Ad quality – Lastly, CTV advertising ensures that your ad will be shown in its full glory on a large screen with stereo sound. Due to this enhanced playback quality, CTV may result in a more powerful and effective ad experience. 

Even with these benefits, CTV has its shortfalls too. Most notably, CTV ads are not clickable. In turn, you’ll need to employ other advertising techniques to attract website traffic and compel conversions.

OTT vs CTV: Which One Belongs in Your Advertising Strategy?

Both OTT and CTV have a lot to offer in terms of advertising. 

If reach and clickability are your main concerns, you may want to focus your efforts on OTT. If viewing quality and premium content matter most, CTV may be the better choice. However, the best advertising strategies often employ a combination of both. 

To learn about Power Digital’s advertising and digital marketing services, reach out to us today. 

Sources:

1. Britannica. Television. https://www.britannica.com/technology/television-technology
2. Business Wire. Streaming TV Viewers in the U.S. Could Surpass Traditional Pay TV Viewers in Five Years. https://www.businesswire.com/news/home/20190918005240/en/Streaming-TV-Viewers-U.S.-Surpass-Traditional-Pay
3. Leichtman Research Group. 80% of U.S. TV Households Have at Least one Connected TV Device. https://www.leichtmanresearch.com/80-of-u-s-tv-households-have-at-least-one-connected-tv-device/
4. IAB. IAB U.S. 2020 Digital Video Advertising Spend Report: Putting COVID in Context.  https://www.iab.com/insights/iab-us-2020-digital-video-advertising-spend-report/
5. Deloitte US. Deloitte: COVID-19 Accelerates Cycle of Paid Entertainment Subscriptions and Cancellations.  https://www2.deloitte.com/us/en/pages/about-deloitte/articles/press-releases/digital-media-trends.html