OTT Advertising: Types, Best Practices and Strategies

Over-the-top (OTT) advertising has transformed how brands connect with consumers. Thanks to OTT ads and video streaming, digital marketers can engage audiences during one of the most critical stages of the buyer’s journey: discovery.

In recent years, famous platforms like Netflix, Hulu, and Disney+ have seen a significant surge in popularity. Businesses big and small now wield OTT video advertising as a potent tool, enabling them to deliver tailored messages directly to targeted viewers.

But what is OTT in marketing, specifically? How does OTT advertising work? Which platforms are worth your time?

This in-depth guide has all the answers and explores:

• The various types of over-the-top advertising
• OTT video ad best practices for maximum ROI
• The top benefits of OTT advertising
• CTV vs. OTT advertising
• The most effective OTT ad insertion strategies
• OTT advertising costs and revenue
• The latest OTT advertising trends and statistics

Ready to uncover the transformative impact of OTT ads and unlock new opportunities for your brand to engage with consumers? Read on.

Key Takeaways

• OTT Advertising Definition: OTT advertising refers to the delivery of ads through video content provided via streaming services over the internet, bypassing traditional distribution methods like cable.
• Ad Formats: OTT ad formats include pre-roll, mid-roll, and post-roll advertisements.
• Monetization Models: OTT offers revenue generation through different monetization models, including AVOD, SVOD, TVOD, and hybrid.
• Targeting: OTT video ads target audiences according to data like demographics, preferences, and viewing behavior, ensuring that ads reach the proper audience at the right time.
• Cross-Device Reach: OTT advertising is available on all devices, such as computers, tablets, smartphones, and smart TVs.
• OTT Advertising Statistics and Analytics: These tools offer precise data on ad performance, viewer engagement, and deals. They help with data-based optimizations for better ROI.

What is OTT Advertising?

OTT advertising is a form of digital marketing where ads are delivered to viewers via the internet through streaming video services like Netflix, Hulu, Amazon Prime Video, Disney+, and others.

Unlike traditional TV ads, OTT advertising allows brands like yours to target highly-relevant audiences. With AI-powered data analytics and targeting capabilities, advertisers can reach viewers based on various criteria, including location, demographics, interests, and behaviors.

In short, OTT advertising offers a modern, targeted, and realizable way for brands to reach consumers—making it an effective marketing tool.

Key Features and Benefits of OTT Advertising

Over-the-top advertising offers some major benefits. For starters, OTT ads come in various formats, including pre-roll (before content), mid-roll (during content), and post-roll (after content).

They’re also interactive and personalized, which enhances engagement. Another significant advantage of OTT advertising is its cross-device compatibility. Unlike conventional TV ads, OTT video ads are shown on many devices, like smart TVs, phones, tablets, and computers—ensuring a broader audience will see them.

By delivering relevant ads that align with viewer interests and behaviors, OTT advertising enhances the overall viewer experience.

On OTT platforms, ongoing developments in ad tech—such as AI-driven targeting, dynamic ad insertion (DAI), and programmatic buying—improve ad delivery and productivity.

Here are four more significant benefits of OTT advertising:

• Increased Engagement: OTT ads provide higher engagement rates than traditional ones due to targeting and less ad boredom among viewers. A study by Samsung Ads found that OTT ad engagement rates are higher than standard TV ads.
• Improved Brand Recognition: Since OTT ads are more interactive, they let viewers engage more with the content. This boosts brand interaction and recall.
• Expanded Reach: OTT video ads reach cord-cutters (people who cancel a subscription to cable television services) and digital-first audiences. A study by Magna and IPG Media Lab also revealed that these cord-cutters aren’t just Millennials and Gen Z viewers, with 40% of non-linear TV or OTT platform viewers being ages 38 to 53 or older with high-income households of $100,000. This highlights the advantages of reaching more diverse and affluent audiences.
• Affordable: OTT video ad campaigns are tailored to advertisers' budgets and marketing goals, offering flexibility in managing campaigns and the ability to reach broad audiences.

8 Types of OTT Advertising Methods

There are different types of over-the-top advertising methods that you can use to reach audiences on OTT platforms. Let’s take a look at some examples of OTT advertising methods below.

• Pre-Roll Ads: Ads that appear before the content starts fall under this category. They are comparable to traditional TV ads but tailored to OTT streaming platforms.
• Mid-Roll Ads: These OTT ads play in the middle of streaming content, interrupting the watching process momentarily. They are generally shorter than traditional TV ad breaks.
• Post-Roll Ads: Ads shown when the content has finished or during credits are called pre-roll ads. They allow brands to engage viewers who have completed watching their chosen content.
• Interactive Ads: Here, ads allow viewers to connect directly with the content by clicking on overlays, choosing various paths within the ad, or purchasing directly from it.
• Display Ads: These ads are fixed or animated and appear alongside or on streaming content. The OTT ad examples in this category include banners, overlays, or pop-up windows that don’t interrupt the primary video.
• Sponsored Content: Companies can advertise specific content, episodes, or even series on streaming platforms. where their brand or products are integrated into the storyline or featured prominently throughout the content.
• Branded Content: Like sponsored content, branded content involves creating custom content for the OTT platform that aligns with the brand's mission and values.
• Companion Ads: These ads display while the main content is playing, usually without interrupting the content-watching process. Such OTT advertising examples include banners, logos, or other visual elements.

So, what does “OTT” stand for in advertising? It still means “over-the-top,” but now you know the different types of OTT video advertising methods. These OTT ads allow advertisers to customize their messaging to fit their target audience's viewing patterns and choices on streaming platforms, increasing the impact of ads and audience engagement.

Best OTT Advertising Platforms

There are many OTT advertising platforms that brands can leverage to reach their target audiences effectively. Here are some of the best OTT advertising platforms:

• YouTube: As the largest video-sharing platform globally, YouTube offers advertisers robust targeting options and extensive reach through its TrueView (where the number of times a skippable video ad is viewed to completion or 30 seconds) and bumper ad formats.

Google Ads is the central platform for managing YouTube advertising campaigns, providing powerful tools to connect with diverse audiences effectively.

• Hulu: This OTT TV advertising platform is well-known for its extensive library of TV shows and movies. It allows advertisers to reach engaged viewers with personalized OTT video ad experiences, including interactive and non-skippable ads.
• Roku: As one of the best OTT advertising platforms, Roku provides access to thousands of channels. It offers targeted advertising opportunities through its Roku Channel and third-party apps.
• Amazon Fire TV: With Amazon's Fire TV platform, viewers can access streaming services and apps on various devices. This allows advertisers to reach Amazon's massive audience through various OTT video ad formats.
• Disney+: This streaming service has gained significant popularity worldwide. It’s one of the best OTT advertising platforms for brands to reach family-friendly audiences through ad-supported and branded content options.
• Apple TV+: This streaming service offers a premium platform for advertisers targeting affluent and tech-savvy audiences through its exclusive content and personalized ad experiences.

The above examples are among the best platforms for OTT advertising. They vary in audience demographics, content offerings, and ad formats, providing advertisers with diverse options to tailor an OTT advertising strategy based on the target audience and campaign objectives.

How Do OTT Platforms Measure the Success of Advertising Campaigns?

OTT advertising companies and platforms measure the success of ad campaigns through various methods and analytics tools, such as:

• Ad Impressions: Tracks how many times an OTT ad insertion is shown to viewers, which helps you understand the audience size and reach of your campaigns.
• Viewability: OTT video advertising campaigns also measure viewability. Whether viewers watch an ad and the duration for how long such ad was watched.
• Ad or Viewer Completion Rates (VCR): The percentage of viewers who didn’t skip the ad and watched until the end is another valuable metric. It indicates the ad’s ability to retain viewers’ attention, although OTT ads can also be in non-skippable format, automatically boosting this metric. inoRain, as a state-of-the-art OTT advertising platform, provides the above measuring tools to its users.
• Gross Rating Points (GRP): Measures how much impact an advertising campaign has. It shows how many people saw the ad and how often they saw it. You find GRP by multiplying the percentage of your target audience that saw the ad by the number of times they saw it. This helps advertisers understand how wide and frequent their campaign’s reach is.
• Target Rating Points (TRP): TRPs are like GRPs but focus only on your specific target audience. TRP measures how much of your target audience saw the ad and how often. This helps you understand how well your OTT ad is performing with the people you want to reach the most.
• Click-Through Rates (CTRs): For interactive ads, CTR measures the number of viewers who click on the ad to take further action, such as visiting a website, downloading an app, or purchasing something. It indicates the level of interest in the ad. OTT platforms may also monitor other engagement activities, such as actions with interactive elements within the ad (e.g., clicks on overlays), video interactions (e.g., rewinds, pauses), or social shares.
• Conversion Tracking: Many OTT platforms also offer conversion tracking capabilities to measure actions that viewers take after seeing the ad, such as buying, signing up for a newsletter, or visiting a physical store location. This helps advertisers tie ad exposure directly to business outcomes.
• Audience Demographics: One of the biggest benefits of OTT advertising is the ability of OTT platforms to provide information on the demographic characteristics of viewers exposed to the ad, including age, gender, location, and interests. This data helps advertisers understand their target audience and prepare for future actions and campaigns.
• Return on Investment (ROI): OTT platforms enable advertisers to analyze ROI, assess their campaigns' overall effectiveness, and make data-driven decisions for future OTT advertising strategies.

Best Practices for OTT Advertising

Over-the-top advertising has become increasingly prevalent as OTT platforms have grown in popularity. Here are some of the OTT advertising best practices for well-known OTT platforms.

Take Advantage of Advanced Targeting

Companies can use data-driven insights to target specific demographics or behavioral segments. For example, Hulu's targeted advertising options allow brands to reach audiences based on demographics, interests, and viewing habits, ensuring relevant and impactful ads.

Use Interactive Elements

Interactive elements like clickable overlays or mini-games also increase engagement. For instance, Netflix's interactive content, such as "Bandersnatch," allows viewers to make decisions that affect the storyline, creating more engagement with branded content. You can also use QR codes, call-to-action buttons, or gamification for a more immersive ad experience.

Deliver Personalized Ad Experiences

Hyper-personalization based on viewer preferences or viewing history allows you to create different variants of your OTT video ad to cater to specific demographics. For example, Amazon Prime Video uses viewer data to recommend content and serves ads corresponding to the viewer’s interests, enhancing relevance and effectiveness. You can also implement dynamic ad insertion (DAI) to serve the most relevant ad to each viewer.

A major part of ad personalization is ensuring that OTT advertising placements fit naturally within the OTT viewing experience without disrupting the content flow. A great example is YouTube TV, which integrates ads into its platform to mimic the traditional ad experience, making them less intrusive and more acceptable to viewers.

Maintain Consistent Ideas and Branding Across Platforms and Devices

Use consistent branding and messaging across OTT platforms to enhance brand recognition, awareness, and recall. For example, Disney does an excellent job of this on its OTT platforms (Disney+ and Hulu), reinforcing its brand identity and ensuring a unified viewer experience.

Measure Ad Performance

Set clear and attainable key performance indicators (KPIs) to monitor the success of your OTT advertising strategy. Some noteworthy metrics include view-through rates, engagement, and conversions. Leverage powerful analytics to optimize your OTT ad insertion campaigns in real time.

For instance, Roku offers detailed analytics that help advertisers track viewer engagement and adjust ad strategies accordingly, improving campaign effectiveness.

Be Innovative

Experiment with new ad formats (e.g., 360-degree videos, AR experiences) to stand out and capture viewer attention. For example, during live sports streaming on OTT platforms, ESPN's AR enhances viewer interaction and provides a memorable advertising experience.

Focus on Ad Frequency and Timing

Control the frequency of your OTT ads using frequency capping to avoid viewer fatigue and negative perceptions. For example, Spotify allows users to choose their ad experience by offering a premium ad-free subscription, minimizing interruptions while listening to music or podcasts.

You can also optimize ad delivery times to reach targeted viewers when they are most likely to be receptive. The goal is to balance the frequency of an OTT video ad with the right timing for maximum impact.

Align Your OTT Ads With Relevant Content

Deliver ads to your targeted audiences that are related to the content. It’s unlikely that an ad about beauty products will appeal to many viewers watching a nature survival show. For example, HBO Max inserts OTT ads relevant to the shows' concepts, ensuring that the displayed ads truly resonate with the audience.

Be Data-Compliant

Follow privacy laws and maintain clear policies on how viewer data is used. For instance, Apple TV+ emphasizes user privacy by limiting ad tracking and giving users control over their data, fostering viewer trust.

OTT Advertising Statistics

Still wondering whether OTT ads are an effective form of marketing? Let’s look at some of the latest OTT advertising statistics for an answer.

• OTT ad spending in the United States is projected to reach $14.6 billion by 2024, up from $8.1 billion in 2021. (eMarketer)
• The global OTT market size is predicted to grow from $121.61 billion in 2020 to $1,039.03 billion by 2027 at a compound annual growth rate (CAGR) of 29.4%. (Grand View Research)
• Netflix, Amazon, Hulu, Disney+, and Max are among the top global streaming platforms in 2024. (Forbes)
• 99% of U.S. households have at least one OTT service subscription. (Forbes)
• 62% of OTT viewers prefer ad-supported services with free content over ad-free subscription services. (Forbes)
• OTT users spend an average of 21 hours per week streaming content. (Forbes)
• Pre-roll ads have an average completion rate of 90% on OTT platforms. (Innovid)
• Compared to traditional TV ads, interactive ads on OTT platforms can increase engagement rates by up to 5 times. (Hulu)
• 80% of adults use ad-supported streaming services. (JamLoop)
• 45% of OTT viewers make a purchase after seeing an ad on an OTT platform. (Statista)
• YouTube, Hulu, and Roku are among the top OTT platforms advertisers prefer due to their extensive reach, diverse ad formats, and targeting capabilities.

These OTT advertising statistics highlight the increasing effectiveness of over-the-top ads in reaching and engaging with audiences due to advanced targeting capabilities, high viewer engagement rates, and growing consumer adoption of streaming services.

OTT Advertising Cost and Revenue: Monetization Process

Wondering how to buy OTT advertising? What about the expenses, monetization strategies, and potential outcomes? In this section of our OTT advertising guide, we answer these questions in detail.

What Does OTT Advertising Cost?

OTT advertising costs vary according to factors like OTT platforms, target audience, ad format, pricing model, and ad space competition. Generally speaking, OTT ads cost less than traditional TV advertising, with Cost Per Mile (CPM) or cost per thousand impressions ranging from $5 to $30.

For example, YouTube has an average CPM of $20–$25, while connected television (CTV) ads sit in the $35–$65 CPM region. Here’s a breakdown of other types of OTT advertising costs and pricing models:

• Cost Per View (CPV): Charged each time an OTT ad is watched, usually for a specific duration.
• Cost Per Click (CPC): Charged based on the number of clicks on the ad.
• Flat Rate: A set price for a specific ad placement or time period.
• Programmatic Bidding: Costs are determined through automated bidding systems based on audience targeting and competition.
• Ad Placement Fees: OTT ad expenses may include placement fees based on ad format, position, and viewer demographics. Utilizing advanced targeting capabilities and audience data provided by OTT platforms may involve additional costs.
• Ad-Serving Fees: OTT advertising costs may also include ad-serving fees related to serving ads to viewers, ad-serving technology, and platforms.

How to Buy OTT Advertising: 10 Steps

To buy OTT ads and ensure maximum impact and ROI, you need to adopt a strategic approach. Here is a step-by-step guide detailing the process:

1. Identify Your Target Audience

Determine the demographics, interests, and viewing habits of your desired audience.

2. Choose the Right Platform

Select popular OTT platforms like Hulu, Roku, Amazon Prime Video, or others that best reach your target audience.

3. Set Your Budget

Decide on how much you’re willing to spend on the campaign, including CPM, CPV, or other pricing models.

4. Select OTT Ad Formats

Choose from various OTT ad formats, such as pre-roll, mid-roll, post-roll, or display ads, depending on your campaign goals.

5. Create Compelling Ad Content

Develop high-quality, engaging OTT ads tailored to your target audience and platform specifications.

6. Use a DSP or Direct Buy

Utilize a Demand-Side Platform (DSP) for programmatic ad buying or contact the OTT platform directly to purchase ad space.

7. Target Your Ads

Use the platform’s targeting options to reach specific audience segments based on demographics, location, behavior, and interests.

8. Launch the Campaign

Schedule your OTT ads to run at optimal times and on relevant content to maximize exposure and engagement.

9. Monitor and Adjust

Track performance metrics and adjust your campaign as needed to improve results and ROI.

10. Analyze Results

Review the relevant analytics during and after your campaign to understand its effectiveness and gather insights for real-time changes or future efforts.

Monetization: OTT Advertising Revenue Models

There are also different types of OTT advertising revenue or monetization models that allow businesses to generate revenue on an OTT platform, such as AVOD, SVOD, and TVOD.

• Ad-Supported (AVOD or advertising-supported video on demand): Users can access the content without a fee, but ads appear during playback.
• Subscription (SVOD or subscription video on demand): Users pay a monthly subscription fee for on-demand access to a premium content library.
• Transactional (TVOD or transactional video on demand): Users can pay a one-time charge to access specific content.
• Hybrid: This model combines multiple monetization models (e.g., SVOD +TVOD).

OTT platforms generate revenue by selling ad inventory to advertisers. This income is typically based on the number of impressions, clicks, or other engagement metrics delivered.

Some OTT platforms offer ad-free subscription models, generating revenue directly from subscribers who pay for access to content without ads. OTT platforms may share advertising revenue with content creators or providers based on agreements, where content owners generate revenue from ads displayed alongside their content.

Three Ways to Succeed in your OTT Advertising Strategies with inoRain

Considering OTT advertising services or platforms but not sure where to start or if you’ll succeed? Below are three proven ways inoRain can help.

Leverage Contextual Targeting

inoRain helps you connect with your specified audience by targeting content that is contextually compatible with your campaign. This way, your ads are much more relevant and engaging—leading to higher viewer retention, better conversion rates, and ultimately, an increased ROI.

Maximize Your Revenue With Flexible Monetization Models

With our 10+ monetization models, you can select the one that best fits your business goals. Whether you prefer AVOD, SVOD with ads, or hybrid models, inoRain provides the flexibility you need to adapt your strategy and maximize revenue while catering to your audience’s preferences.

Implement a Custom White-Label OTT Solution

Do you want to establish your own brand-specific OTT platform to build brand awareness, bolster thought leadership, and increase your revenue? If so, our all-in-one customized white-label OTT solution is for you.

Designed to meet the demands of modern digital audiences, our OTT white-label solution offers comprehensive content management and robust streaming tools. This ensures effective content delivery across multiple platforms and targeted audiences for maximum effectiveness.

Want to know more about how inoRain’s OTT solutions can drive your success? Request a demo or book a free consultation today.

OTT Advertising Trends

No OTT ad guide is complete without looking at some of the latest OTT advertising trends. Let’s see what market shifts are currently taking place.

• SVOD is the most common OTT monetization model. Users need to subscribe to access ad-free content. The challenge of keeping subscriptions has led to new AVOD and free ad-supported TV (FAST) options.
• AVOD and FAST channels have become more popular in recent years. Nowadays, most CTVs come pre-loaded with them. AVOD and FAST give users flexibility in enjoying entertainment, making them the most popular OTT models. FAST streaming delivers live TV viewership without a subscription.
• Today’s digital audience expects a personalized advertising approach. That’s why OTT platforms offer highly targeted ads related to content. Irrelevant ads are a waste of money and effort, so OTT platforms show ads based on viewers' habits, searches, and demographics. Location-based OTT ads allow advertisers to engage the right targeted groups, maximizing the impact of brands’ ads.
• Interactive ad formats are getting more popular. OTT ad types, such as clickable overlays, interactive videos, and personalized ad experiences, are being increasingly adopted. These formats enhance viewer engagement by allowing users to interact directly with the ad content, leading to better brand recall and higher conversion rates.
• OTT advertising campaigns are focused on measurement and analytics. Thanks to the advent of generative AI, many OTT platforms have powerful analytics tools. They typically track viewings, ad clicks, future actions, and buying behaviors. This helps businesses optimize campaigns in real-time and track ROI.

Thanks to these OTT advertising trends, brands can reach the right audiences with less effort and more cost-effective strategies. Unlike traditional CTV ads, OTT ads are also more relevant, driving higher engagement and increased ROI.

FAQs

What is CTV vs. OTT advertising?

Connected TV (CTV) advertising targets viewers through internet-connected devices like smart TVs and streaming boxes. Over-the-top (OTT) advertising refers to ads delivered via streaming services over the internet, bypassing traditional cable or satellite TV. While CTV focuses on the device, OTT emphasizes the content delivery method.

Is Netflix OTT or CTV?

Netflix is categorized as an OTT platform because it delivers content directly to viewers online without requiring a traditional cable or satellite TV subscription.

Is AVOD the same as CTV?

No, AVOD and CTV are not the same. AVOD is a monetization model where users have free access to content, but the content is interspersed with ads. In contrast, CTV is the hardware (connected TVs, such as smart TVs like LG, set-top boxes like Roku, and gaming consoles like PlayStation) that allows users to access streaming services, including AVOD platforms, on their TVs.

How do OTT platforms use subscriber growth rates to evaluate campaign success?

OTT platforms use subscriber growth rates to assess advertising campaigns' effectiveness, ROI, and overall impact on business objectives. By leveraging this data, OTT platforms can optimize advertising strategies, allocate resources efficiently, and drive sustainable growth in a competitive digital streaming landscape.

OTT Advertising: The Bottom Line

OTT or over-the-top advertising is a big threat to traditional ads. It’s more affordable, more flexible, and more targeted—allowing businesses to reach a wider, higher-quality audience. With various content-based OTT ad types, real-time data insights, and flexible monetization models, tech-savvy brands are leveraging OTT advertising platforms to drive business growth and stay competitive.

The question is, are you? Contact inoRain today to stay ahead with best-in-class end-to-end OTT solutions.