2017 saw the rapid growth of over-the-top (OTT) global video ad spending, a trend that shows no sign of slowing. SpotX, a video ad serving platform that works with over 65 DSPs, released figures that show the share of ad spend on this format hit 26% in October 2017, a considerable gain from the prior year’s 8%. This upward climb is set to continue and reach nearly 30% by the end of 2017. Here are three reasons why:
Shifting consumer behavior
Changing consumer habits are certainly playing a role in the growth of ad spend on OTT. With the increasing adoption of streaming TV, cord cutting is a significant trend that encompasses many viewers who are both young and affluent – a combination that has great appeal to advertisers. A survey conducted in November 2017 by financial services firm Raymond James reveals just how popular streaming TV has become. While cable is still the primary way US internet users consume video, it doesn’t actually lead by much. Time Warner, Comcast and others were cited at 35% share of viewers while streaming services like Hulu and Netflix were not far behind at 31% — a whopping 29% jump year-over-year.
Greater audience reach
OTT isn’t limited to a single device. When advertisers buy OTT they can potentially reach viewers who watch on mobile, connected TVs, laptops and more. According to a June 2017 Nielsen survey, a majority of US TV households (58.7%) own a digital streaming device (smart TV, game console or multimedia device) while 5.5% own all three. The proportion owning all three may seem low, but that’s still 6.5 million viewers.
Finer targeting capabilities
Television ads still have more reach, but OTT ad spending is also on the rise because of its ability to target fine-tuned audiences. Instead of buying against specific shows or dayparts, OTT ads can be purchased to match demographic or lifestyle traits. Data can be collected about which shows viewers watch, when they watch them and the amount of time spent with them. Plus, there is the added benefit of advertisers potentially being able to link an OTT device to other devices being used in a household, allowing marketers to gain further insights into behavior through third-party data.
Yes, OTT TV users, especially VOD (video on demand) viewers, tend to be more engaged since they are actively seeking programming rather than passively flipping channels. But cable or OTT isn’t an either or proposition. Not all viewers are quitting traditional viewing methods cold turkey. A consumer who relies on a Roku for much of their content needs may still pay for a stripped down, lower cost cable package in order to access popular offerings like sports channels.
Television and OTT ad spending will peacefully coexist for the time being. And it’s likely that advertisers currently banking on the importance of OTT inventory will have an advantage in reaching these in-flux audiences as TV and video continue to converge.