How OTT Advertising Works and How to Use It Effectively (2024)

When you watch a video-on-demand service like YouTube or Apple TV+, you may notice video ads that seem specifically tailored to your tastes. They may even be the same brands you see in online banner ads. This is called over-the-top advertising (OTT advertising), which can be better tailored to a target audience than traditional TV advertising.

As a business, you can use OTT media to your advantage. OTT advertising campaigns offer precise targeting unmatched by other video ad formats, inspiring many companies to allocate marketing budgets to OTT campaigns.

What is OTT advertising?

Over-the-top (OTT) advertising is a type of streaming video advertising that is displayed directly to viewers, bypassing third-party intermediaries such as television networks. Unlike advertising on cable or satellite television, OTT advertisements are distributed over the Internet.

OTT ads reach audiences via streaming devices such as smart TVs, streaming sticks, web browsers, gaming consoles and mobile apps. They are managed by OTT advertising platforms that specialize in precise video ad distribution and targeting.

Unlike traditional television advertising, OTT advertising allows you to personalize advertising to a specific audience. When you watch a traditional television network like CBS or NBC, broadcast over the air or cable, you see the same commercials as everyone else in your market. When you watch streaming services like Pluto TV or Amazon Prime Video — through a device like an Amazon Fire TV stick or a Roku-powered smart TV — you see exaggerated advertising that can be tailored specifically to you.

While you and your neighbor might be watching the same streamed show, they might be seeing an ad for oven-baked pizza while you’re being shown the designer handbags you’ve been searching for online.

OTT vs. CTV vs. VOD

As you explore OTT advertising campaigns, you may come across terms like CTV and VOD. These concepts are an essential part of making OTT advertising work. This is what they mean:

Over the Top (OTT)

OTT is the delivery of video content and advertising directly over the Internet, bypassing traditional cable or satellite providers. Examples of OTT services include streaming platforms such as Netflix, Hulu and YouTube TV, where viewers access streaming content via internet-enabled smartphones, tablets, laptops and smart TVs.

Connected Television (CTV)

Connected TV (CTV) refers to the device used to watch content – ​​particularly Internet-connected televisions used to stream digital content. This includes smart TVs and external devices such as Roku, Amazon Fire Stick and Apple TV. These devices act as OTT platforms by streaming internet-based video content to the television screen.

When you stream Hulu on a smart TV, you’re watching OTT content on a CTV. If you stream Hulu on a laptop, it’s still OTT content, but not through a CTV.

Video on Demand (VOD)

VOD allows users to select and watch video content at any time and without a fixed broadcast schedule. VOD can be accessed via an OTT platform such as YouTube or Max, or via a cable on-demand service (which means no internet connection is required). VOD content includes films, TV episodes and sports highlights available on demand.

Types of OTT Ads

When you purchase OTT ads through an OTT advertising platform, you have multiple options for distributing your content to viewers. Here are popular streaming formats and how they integrate OTT advertising:

• Subscription video on demand (SVOD). SVOD ads appear on premium video platforms where users pay a subscription – for example, Netflix, Disney+ or Max. These subscription video platforms often run few or no ads, usually focused on pre-roll ads before a broadcast or restrict post-roll ads afterward.

• Advertising-based video on demand (AVOD). AVOD platforms are ad-supported, similar to traditional television. OTT video ads are similar to standard TV commercials, called mid-roll ads, and play periodically throughout the program. Video streaming platforms that use the AVOD model include YouTube, the ESPN website, and streamer subsidiary services such as Hulu and Peacock.

• Transactional Video on Demand (TVOD). With TVOD, users pay a one-time fee to rent or purchase content and are much less likely to contain excessive advertising than AVOD video streaming content.

OTT advertising best practices

To reap the full benefits of OTT advertising, you should approach your OTT campaign strategically. Here are four digital advertising tips for companies exploring the world of OTT marketing:

Take advantage of OTT targeting features

CTV advertising operates on a fundamentally different model than traditional TV advertising. As an Internet advertiser, you have more precise targeting capabilities on OTT devices than traditional TV advertisers on broadcast, cable and satellite television. This level of precision extends across all device types. You can deliver precisely targeted ads whether your viewers are watching through a mobile app or streaming to their TV screen.

With this in mind, use the data and analytics of an OTT service to find out where your audience consumes and interacts with content. Then allocate your budget accordingly to achieve maximum impact.

Where possible, focus your OTT ad spend on premium channels

When it comes to CTV OTT advertising, it may be worth spending extra on high-quality ad impressions. Ensuring ad placement on premium OTT channels (e.g. ad-supported Hulu) instead of lower-tier OTT inventory (e.g. an agency placing your ad in random web videos) ensures your ads appear in in a brand-safe environment.

Invest in interactive ads

Diversify your OTT campaign with a mix of ad formats, such as overlay ads on streaming TV content, pre- and mid-roll ads, and interactive YouTube ads. Providing a diverse ad inventory and using different formats can make your advertising more effective.

Be on the lookout for OTT ad scams

Unfortunately, fraud is a problem in the OTT advertising industry. Scammers stream videos on unattended, internet-connected devices. To protect your investment, partner with reputable OTT inventory providers who offer verification tools to ensure your ads reach real viewers and deliver authentic, high-quality impressions.

An example of effective OTT advertising

As brands increasingly shift to digital marketing, there are many examples of OTT advertising where brands are reaching new audiences with targeted video ads. For example, Allbirds, a sustainable footwear brand, has run short, visually engaging ads on streaming platforms to showcase its eco-friendly products and unique brand story.

When designing its OTT campaign, Allbirds carefully selected streaming platforms and advertising placements to target an audience interested in living a sustainable lifestyle. The videos feature people enjoying urban outdoor activities (in Allbirds shoes, of course), helping the brand resonate with those looking for comfortable, sustainable footwear for city life. These ads encourage viewers to visit Allbirds’ website, which increases traffic and sales.