What’s the difference between OTT and other TV advertising?

by | May 22, 2020

Like everyone else, I’ve been stuck at home for the past two months. Also like everyone else, I’ve been watching a lot more TV. I’ve often told friends that we live in the “Rogue Golden Age” of television. The phenomenon I’m pointing to when I say that is our relatively newfound ability to access an incredible amount of high-quality TV content.  That’s the “Golden Age” bit, I call it the “Rogue Golden Age” because there is simply so much content out there. It would be incredibly hard for one person to consume all the stuff out there that interests them. This allows the content they inherently want to consume ‘go rogue’ and pass them by as time goes on and even more new shows come out. 

Consider the juxtaposition of the current state of television compared to that of the 1950s when TV’s started to take their place in living rooms across America and the world. During that time, there were around four or five channels depending on where you lived, and they all had similar content. Imagine that, four channels compared to the endless waterfall of content that an internet subscription provides for you. Not to mention the improvements in quality. Cameras and special effects have made tremendous leaps in the past 70 years. We went from this  to this

The question I would like to answer is what does this shift in media mean for advertisers and marketers like myself? How is TV advertising different from that of the past? 

Let’s start by diving into traditional TV advertising: 

TV Advertising – How does the commercial you see on the screen get there?

So let’s say you’re a business owner who wants to put a commercial on TV. How do you do it? Well first, let’s talk about the different types of TV advertising: 

Broadcast TV – The First TV Stations

Broadcast TV, a type of linear TV, advertising is placing ads on stations that are unique to your market. These are the local CBS, ABC, and Fox affiliates that bring you the news that is localized to your area. While they provide local news coverage alongside their national content, the vast majority of these stations are owned by a handful of telecom companies. You might think that having your “local” news brought to you by large companies could be problematic, and you’d be right, but that’s another blog.

These companies employ advertising account executives that work with business owners to air their spots during their programming. There are some great things about broadcast TV advertising, for instance, you can reach large groups of people very quickly. When you buy a spot on a local news station, you will appear in every household that is tuned into that station within that market, regardless of their TV provider. The other side of that coin is problematic. If your business only draws from a small area around its location, or if your target audience doesn’t line up with the TV station’s, advertising to the entire market can be wasteful.

Remember when we were talking about TV in the 50’s? Those “four or five channels” were broadcast stations. If you were a business owner or brand during that time, you bought commercial spots on those channels and you reached everyone! Easy-peasy! Then, things changed, when cable came around. 

Cable TV Advertising – From “Four or Five” to “Four to Five-Hundred”

As soon as TV’s started going into homes across America, cable companies arose. These companies laid underground cables that brought the signals of broadcast companies into the homes of rural localities. By the late 60s, the cable companies began offering access to premium stations that offered additional content to that found on broadcast stations. The first of these was TBS. Cable companies began adding to the array of stations they offered. Fast-forward to today, and with a premium cable subscription, you probably have access to hundreds of channels. As the cable companies’ programming evolved, so did their advertising offerings. 

What effect does a consumer having 400 channels to choose from have on cable advertising? Well, different people like to watch different things. So if you want to reach young men, but not necessarily older women, you can place your spot on ESPN instead of the Food Network. By fragmenting the TV audience, cable companies are able to offer their clients’ campaigns that are targeted at semi-specific groups of people. 

Furthermore, with cable advertising, you can choose what geographic area your commercials air in. Because cable subscriptions are delivered via underground wires, companies like Comcast are able to segment certain geographic areas from each other and only air spots in that geography. This can lend itself well to business owners who find no value in reaching consumers outside a certain radius. These advantages don’t come without their drawbacks, however. 

Cable is not as effective anymore

With cable, if you are only buying local cable systems, then (in most cases) your ad will only be served in households that have a subscription with that cable provider. This can sometimes limit your audience. There are some caveats to this, as some cable providers have formed partnerships with other TV providers to expand their offering. For instance, if you purchase a spot in all 28 cable systems in Pittsburgh with Comcast (now Effectv), you can pay higher rates to have that spot also appear in Dish and DirectTV households. With that, you lose the benefits of selecting specific areas that are important to your business. 

Another thing to consider is the prominence of ‘cutting the cord’. Below, there is a chart measuring the percentage of households with a television that have a wired cable subscription over time. 

Corkboard Concepts Cable Penetration Over Time 1Cable Penetration Over Time Source

We’ve seen a steady decline in the proportion of households with cable subscriptions over the past 15 years as more and more people find themselves drawn into streaming services like Hulu, Netflix, and Amazon Prime Video.

From an advertiser’s perspective, this is concerning as the potential reach of cable TV campaigns is dwindling. So the question then becomes, how can advertisers leverage these new streaming services to reach their target audience?


Over-the-Top (OTT) – The New TV

Remember going to Blockbuster? That sweet aroma of endless entertainment and two-day old popcorn. Spending 30 minutes looking for the right movie, or rushing to the store after school to get the newest release, it was a special experience.

Corkboard Concepts Block Buster

The unfortunate demise of Blockbuster and other movie rental stores points to the economic power that we as consumers possess. Virtually everyone wanted easier access to entertainment, companies like Netflix provided it, Blockbuster did not, so Blockbuster is no more. 

Fast forward again to today, that demand hasn’t gone anywhere. There are countless streaming services available: Disney Plus, Hulu, Sling TV, Peacock, Xumo, among others. How do these different services aid marketers? First, let’s cover some definitions. 

A delivery device or over-the-top device is the physical hardware that allows you to stream content. If you have a ‘smart TV’ or a TV that connects to the internet, that’s your delivery device. If your TV does not natively connect to the internet, then you will need a device like Google’s Chromecast, a Roku, or Amazon Fire Stick. These are the devices that allow you to load the software that then in turn allows you to stream. Products like the Chromecast are called ‘over-the-top’ devices because they allow consumers to go ‘over-the-top’ of the cable box to get to their content. Clever, right?


Defining streaming services

So now that we understand what an OTT device is, how are streaming services defined? A streaming service is the software that your connected TV uses to serve you content. Think of Netflix, Prime Video, and the others mentioned above. It’s important to distinguish between the main types of streaming services and their corresponding business models. 

  • Paid Subscription: users pay a subscription fee, and their content has no ads (ex: Netflix)
  • Ad-Supported: users do not pay a subscription fee, and their content has ads (ex: Xumo)
  • Hybrid: users pay a subscription fee and their content has ads, or the subscription has a tier model that allows consumers to remove ads (Hulu, Sling TV)

For clarity, we will be focusing on the latter two of these. 

So, now that we understand what these different devices and services are, how do advertisers place ads within streaming content? 

If you are a large, national brand, it may make sense to approach the streaming service providers directly and form a relationship with their advertising sales department. This will allow you to work closely with the platform and achieve efficiencies that can only be achieved with such a relationship. For most advertisers, however, these partnerships are simply too costly and don’t offer the level of targeting precision they need. 


In comes digital agencies

For most advertisers, working with a digital agency is the answer. Digital advertising agencies are able to use sophisticated computer software to place ads on OTT services for their clients. At Corkboard, we refer to this as Programmatic OTT. One of the great benefits of utilizing Programmatic OTT is that it allows our clients to access a multitude of different streaming services with a single relationship. Furthermore, because we are combining the audiences of all these different streaming services, we are able to segment it based on a combination of targeting factors such as demographics, behaviors, and geography. This allows our clients to reach their ideal audience within long-form content that adds equity and value to their brand. 

It’s also important to consider the difference in measurability between traditional TV and OTT. When you run a commercial with a broadcast TV or cable company, your rep will probably tell you that your commercial will get ‘x’ number of impressions, ‘y’% of reach, etc. Those statistics are collected in a number of ways and they are definitely useful in measuring the efficacy of a schedule, but they are by no means exact.

However, with OTT, we are able to tell clients exactly how much of their ad was watched, how many people it reached, how many times that audience saw the ad, and more. 

Screen Shot 2020 05 22 at 12.46.27 PM

Example of OTT reporting from client report

We are even able to tell if someone who saw your OTT ad physically visited your business’s location at a later time. Pretty cool, right?

Where to from here with TV advertising/OTT?

Overall, OTT is an exciting and relatively new tool for marketers. It simultaneously allows them to reach a precisely targeted audience and measure the results of their campaign. This can be done in ways that the TV advertising space previously didn’t allow for. 

It’s hard to sum up 70 years of change in a single blog post. However I hope that reading this has helped you gain a greater understanding of the TV advertising landscape and some of the offerings within it. It’s important to note, especially with OTT, that the space is constantly in flux. There is always something new to learn.


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