What Is Connected TV Advertising and How It Works

With the rise of streaming services and internet-enabled devices, viewers are increasingly ditching traditional linear TV and watching their favourite shows, movies, and sporting events on connected TV (CTV).

According to eMarketer, people are spending more time watching CTV than ever before, with the average US adult expected to watch 123.4 minutes of CTV per day in 2024. 

As a result, CTV has become the fastest-growing major ad channel in the US, with the format accounting for 1 in 10 US digital ad spend dollars. It’s projected to grow 22% to reach over $30 billion USD in 2024 and see double-digit ad spending growth in the US through the end of 2027.

With consumers cutting ties with cable and flocking to streaming in droves, CTV has emerged as an ideal channel for advertisers to reach a more engaged target audience.

Whether you’re new to CTV advertising or looking for a refresher, here’s everything you need to know about CTV and how to incorporate it into your media mix.

What is Connected TV?

CTV refers to an internet-enabled device built into or connected to a television. It allows viewers to stream live or on-demand video content. Examples of CTV include Smart TVs like Amazon Fire or external devices and gaming consoles, such as Apple TV, Roku, Chromecast, Xbox, and PlayStation.

Unlike traditional linear TV, CTV allows viewers to access a wide range of video content through subscription and ad-supported streaming TV services like Netflix, Disney+, Max, Paramount+, Peacock, and Pluto TV.

What is Connected TV Advertising?

CTV advertising is a type of digital advertising in which ad space is sold within or alongside streaming content. This includes linear video ads displayed before, during, or after a TV show, movie, or scheduled programming and non-linear video ads overlayed on top of content streamed through a CTV device.

Despite the rise of subscription-based streaming services, free ad-supported television (FAST) continues to grow in popularity. In the past year, 55% of viewers used FAST platforms like Amazon’s Freevee, the Roku Channel, and Tubi to stream television. Top streamers like Netflix, Paramount+, and Disney+ are also experimenting with ad-supported video-on-demand (AVOD) tiers that are cheaper than traditional subscription-based services. 

These approaches are helping to democratize television advertising, allowing even small businesses (SMBs) to target audiences through premium channels at a lower cost (and with lower minimum ad spends) compared to traditional linear TV advertising. 

What’s the Difference Between CTV and Other TV Advertising Channels?

Understanding the differences between linear TV advertising and other streaming-based advertising options is essential to crafting the right CTV advertising strategy. Here’s what you need to know. 

OTT vs. CTV Advertising

Over-the-top (OTT) is video content streamed on any device like a desktop computer, smartphone, or Smart TV that’s connected to the internet. OTT gets its name because it bypasses traditional linear cable TV by streaming content online.

CTV is a subset of OTT. For example, if viewers watch Netflix on their mobile device, they’re streaming OTT content. But, if they watch Netflix through an external device like a Google Chromecast or Amazon Fire TV Stick plugged into their TV, that would be considered CTV.

OTT advertising refers to any ad delivered directly to viewers over an internet-enabled device (like a computer or tablet), whereas CTV advertising refers to ads specifically targeted to viewers using a CTV device.

Because CTV content is often viewed on larger screens in a more relaxed environment, CTV ads are typically known for having higher ad recall and tolerance than OTT advertising, which can be displayed on smaller mobile and desktop screens.

Traditional Linear TV vs. CTV Advertising

Linear TV refers to when a viewer watches TV programming as it airs live in real time through an antenna or a cable or satellite subscription.

The main difference between CTV advertising and traditional linear TV advertising is that CTV ads can be played before, during, or after the streaming of on-demand content. In contrast, linear TV ads are delivered live during the commercial breaks of traditional TV programming. 

CTV advertising also allows for precise, niche targeting and is more affordable than linear TV campaigns. Traditional linear TV’s strength is that it delivers ads to a broad audience, but is more expensive overall.

Addressable TV vs. CTV Advertising

CTV refers to the devices used to stream content over the internet. Addressable TV, on the other hand, is a method of delivering targeted, personalized ads to specific households or audience segments, even if they’re watching the same TV show.

CTV advertising can leverage the targeting capabilities of addressable TV, but addressable TV isn’t limited to just CTV devices. Advertisers can also serve ads through cable, satellite, and Internet Protocol television (IPTV) delivery systems and set-top boxes (STBs).

Benefits of Connected TV Advertising

CTV advertising combines the precision of digital advertising with the high-res, high-impact power of traditional linear TV advertising. It allows advertisers to target the right audience at the right time and moment, captivating customers when they’re the most receptive: watching TV in the comfort of their homes.

Here are five of the main benefits of CTV advertising.

1. CTV Offers Enhanced Targeting Capabilities

CTV ads are sold as impressions, similar to regular video or display ads sold through a demand-side platform. This means you can apply similar strategies using 1st-party data, 3rd-party segments, and lookalike audiences to target ads based on user behaviour, audience demographics, geographic location, and more to reach the right audiences and waste less ad spend.

2. CTV Can Be Leveraged for Retargeting

CTV ads utilize pixels or development software embedded within an ad or app to capture device information and user behaviour when a viewer engages with an ad. This data can enable cross-device retargeting, allowing advertisers to deliver personalized ads to customer smartphones and computers, enhancing conversions and brand engagement.

3. CTV Provides Real-Time Optimization and Measurement

With traditional linear TV ads, you’d often need to wait weeks, if not months, to receive performance reports and know how a campaign performed. With CTV, you can access real-time reporting and metrics like impressions, cost per completed view (CPCV), video completion rate (VCR), and view-through conversions, making it easier to track campaign performance and optimize them on the fly. 

4. CTV Enables More Holistic Campaigns

Research says 84% of US adults report browsing the internet on a separate device like a smartphone, tablet, or computer while watching TV. Incorporating CTV into your existing multi-channel strategy can help you get better campaign results and increase the likelihood of a conversion by capturing your audience’s attention wherever they are online.

5. CTV Has Increased Viewer Engagement

CTV offers higher levels of viewer engagement compared to traditional linear TV ads. CTV ads are less skippable, broadcast in high-definition, like 4K and 21:9 widescreen, and provide more interactive ad formats. This often leads to higher completion rates and longer viewing times than traditional linear TV ads.

Connected TV Ad Formats, Targeting, and Metrics 

CTV offers the targeting, measurement, and flexible ad formats of digital advertising giving advertisers real-time insights and the flexibility to create highly-targeted campaigns without losing the benefits of traditional linear TV campaigns. 

CTV Ad Formats

There are numerous smart TVs and devices viewers can watch CTV on. Here are some of the most common CTV ad formats advertisers can leverage:

1. In-stream Ads: Pre-roll, mid-roll, and post-roll video ads play before, during, or after streaming content. Similar to traditional TV ads, these ads usually appear between episodes or scenes of a TV show or movie.
2. Non-linear Ads: Also known as overlay ads, non-linear ads are static images, text, videos, or animations displayed alongside or on top of content without pausing or interrupting it.
3. Companion Ads: These ads are served alongside or surrounding content. They often appear as text, images, rich media, or skins. Companion ads provide consistent visibility by surrounding video content without interrupting the TV viewing experience.

CTV Measurement

CTV provides the types of granular reporting and measurement that advertisers could never previously access with traditional linear TV campaigns. Here are some CTV metrics that can help you measure the effectiveness of your campaigns:

1. Impressions: This metric tracks how many times viewers see your CTV ads, helping you understand the scale and reach of your CTV campaigns.
2. Watch Time and Video Completion Rate: These metrics measure the average number of seconds viewers watch a CTV ad and how many viewers watch it to the end. They provide insights into how engaging your content is.
3. Cost Per Completed View (CPCV): This metric measures how much of your campaign’s budget is spent on each ad watched by a viewer from start to finish.
4. Return On Ad Spend (ROAS): This metric measures the revenue earned for every dollar spent on CTV advertising, helping you understand the effectiveness and profitability of your CTV campaigns.
5. View-Through Conversions: This metric measures how many viewers converted (for example, made a purchase) after viewing an ad. It gives you a holistic view of how campaigns are performing, helping you measure the true return on advertising spend and providing a baseline to help improve future CTV campaigns.

CTV Targeting Capabilities

CTV provides more precise household targeting than traditional linear TV advertising, allowing advertisers to deliver personalized messages, optimize campaign performance, and reach the right audience more efficiently. 

1. First-Party Targeting: Data collected through form submissions, in-store visits, previous purchases, and 1st-party cookies can be leveraged by advertisers to target households directly using hard data like their IP addresses and device IDs, if a platform provides them.
2. Location Targeting: Leverage 1st-party data to target CTV ads to viewers based on their geographic location by country, state, city, or zip/postal code.
3. Platform and Device Targeting: Target specific CTV platforms and devices like Roku, Fire TV, Apple TV, and more.
4. Demographic Targeting: Leverage 1st and 3rd-party data to target audiences based on viewer demographics like age, income, and household size.
5. Contextual and Interest-Based Targeting: Deliver hyper-relevant ads based on the types of content their viewers consume by targeting specific genres, viewing times, and keywords.
6. Lookalike Targeting: Find common characteristics shared between existing customers in 1st- and 3rd-party data and use lookalike targeting to find potential customers who share those similarities. This helps advertisers expand the reach and profitability of their campaigns. 
7. Retargeting: Use retargeting to re-engage and convert viewers who have already shown interest in a brand or product—for example, by visiting a website, making a purchase, or watching a CTV ad in full—and serving an ad again in the hopes of a conversion.

Connected TV Advertising Best Practices

Now that we’ve explained the features, benefits, and advantages of connected TV advertising, let’s go over some of the best practices, strategies, and tips that can help you get the most out of your CTV campaigns.

1. Use CTV as Part of a Multi-Channel Strategy

CTV advertising should act as a complement to your existing multi-channel strategy, not a replacement for it.

Use CTV to retarget potential customers, tell a different side of your brand story, get in front of viewers on different devices, and push viewers further down the sales funnel.

2. Get Creative With Your CTV Ads

The more ad creatives you have, the more opportunities you have to optimize your campaigns. 

Once you have the visuals, storyline, and call to action (CTA) planned, experiment with different ad lengths, imagery, and copy to target different audiences with more personalized ads and figure out which variations work best.

3. Reduce Ad Fatigue with Frequency Capping

We’ve all been there: you start streaming a show, and every time you reach a commercial break, you’re greeted with the same ad again, and again.

There’s an adage in marketing that a customer needs to encounter an advertiser’s message seven times before it starts to stick. But ad fatigue can force viewers to stop paying attention faster than that. 

Use frequency capping to ensure your ads reach unique audiences and aren’t shown to the same viewers repeatedly.

4. Use CTV to Boost Brand Awareness and Gauge Brand Recall

CTV is an ideal channel for increasing top-of-funnel awareness and measuring campaign performance from a single platform. 

For example, StackAdapt customer Add3Connect leveraged 1st-party and 3rd-party segments to target CTV ads directly to customers interested in supplements and healthcare products for their client Nuun. Then, they used an in-platform brand lift study to measure ad and brand recall, improving relative lift for ad recall by +18.7%. They’ve since continued to use CTV as part of their full-funnel approach to digital marketing.

5. Target the Right Audiences

Whether you need to ensure compliance or want to target a specific customer at a particular time of day, use a programmatic CTV advertising platform like StackAdapt to ensure you’re reaching the right audience and getting the most out of your ad spending. 

For example, ThomasARTS used CTV and display retargeting to increase incremental reach by over 50,000 users and drive qualified leads further down the funnel for one of the most trusted banks in the Western United States.

6. Get Interactive

Thanks to the functionality of devices like Apple TV and Roku remotes, viewers can now click on and interact with in-stream ads. This allows them to do things like input their email address, quickly scan a QR code, or get redirected to a website—either on their phone or the CTV device itself—to learn more about a product.

Although still in their infancy, interactive CTV ads will surely help advertisers increase conversions as the technology develops.

Connected TV Statistics

By now, you should be sold on the benefits of using CTV advertising in your programmatic campaigns. But in case you’re not, let’s wrap up with a few more noteworthy stats about the power of connected TV.

• According to Nielsen, 38.7% of total TV usage in July 2023 was from streaming (the most popular program was “Suits”—a show that ended in 2019, but was watched over 18 billion minutes, primarily by new viewers, that month).
• Good news for advertisers who rely on retargeting: 69% of consumers say they won’t skip an ad if it’s for a product or service they’re already interested in.
• CTV usage amongst younger generations is constantly increasing, with Statista forecasting that 62.6 million millennials and 56.1 million Gen Zers in the US will watch CTV in 2025.
• According to eMarketer, CTV ad spending will account for 42% of the total CTV and linear ad spend in 2027.
• A survey by the IAB found that 84% of advertisers believe CTV delivers better targeting capabilities than traditional linear TV.
• Almost 90% of CTV advertising is sold programmatically.

The Future of Connected TV

Every day, more consumers say goodbye to their cable TV packages and shift to streaming TV.

Connected TV provides the same full-screen advantage as traditional linear TV advertising, but with the technical capabilities to take your programmatic campaigns to the next level.

In the future, expect more interactive and shoppable ads, AI doing more of the legwork when it comes to creative and campaign optimization, and even more viewers signing up for FAST platforms to save a few dollars.

But you don’t have to wait to experience everything CTV has to offer.

Add CTV advertising to your media mix. Request a demo today.