By Aziz Rahimtoola, CEO, Sabio
Advanced TV promised to usher in a new level of targeted ads. But the move beyond linear broadcasts did not fully deliver on that promise. It was still challenging to understand who in a household was actually viewing a given program and the ads tied to it. Plus, relying on TV targeting without complementary channels meant that granular individual habits, which are observable via other devices, remained left out of the TV ad targeting equation.
The combination of smart TVs and mobile devices that informs today’s ad targeting on CTVs is expanding the possibilities of TV ad targeting and fulfilling the promise that advanced TV left unfulfilled. By combining smart TVs and mobile, advertisers can leverage the most granular individual behavioral data, conduct direct response campaigns, provoke immediate action — and measure the results.
Here’s why advanced TV fell short of its promise and how CTV advertisers can use the channel to achieve a new level of targeting.
Advanced TV’s shortcomings
Through ATV, companies have been able to reduce the amount of wasted spend typical of traditional TV advertisements. Instead of delivering a single ad to a large and variable audience, advertisers have been able to target viewers by household using their IP address or a set-top box.
But while ATV uses internet access to deliver targeting options and has eliminated some of the limitations of linear TV, advertisers still fail to reach viewers on a more granular level. This is because ATV alone is unable to identify individual viewership and habits within a household.
For an example of ATV’s shortcomings, consider two households in the same neighborhood who watch similar programs on HGTV: one with middle-aged parents and teenagers, and one with younger parents and school-aged children. Based on the viewing habits of the household, ATV would allow a company selling car insurance to show an ad to the family with teenagers. In this example, the advertiser could distinguish between the family with teens who watch MTV on demand and the family with younger children who watch Nickelodeon on demand.
However, it would be next to impossible for the car insurance company to know which member of the household is actually viewing their ad. Because the data used for targeting in ATV is refined only to a household level, ad personalization stops there. This impacts the advertiser’s ability to develop relevant creative and accurately measure campaign performance. In extreme cases, viewers can even become frustrated or angered by irrelevant ads, leading to a negative perception of the brand in the advertisement.
The exclusion of data from other devices reduces the ROI of ATV. This is especially true when hyper-targeted ad options exist, opening the door to greater product and direct response campaign performance. This data goes beyond the physical TV (and its static location), comprising multiple devices, access points, and individual viewing habits to help advertisers deliver a better ad experience and run more effective campaigns.
The promise of CTV
Between 2014 and 2021, the number of US households with an internet connected TV skyrocketed by 32%, growing from 50% in 2014 to 82% in 2021. As the consumption of CTV and over the top (OTT) viewing continues to accelerate, targeting options through CTV advertising have naturally followed. A 2023 study from Fox revealed that 80% of advertisers now believe streaming TV is a highly valuable channel. Additionally, 40% of ad buyers planned to increase CTV budgets compared to 1% who plan to decrease CTV ad spend.
Unlike ATV, CTV is valuable because it works with data from multiple sources. Instead of relying only on the IP address of a household or a few set-top boxes, CTV advertising combines data from individual connected devices—including smart TVs, mobile phones, and tablets—allowing marketers to implement campaigns based on individual behavior. This data includes consumer preferences for consuming content via advertising video on demand (AVOD) and subscription video on demand (SVOD) channels; common points of interest among groups of consumers; as well as consumer mobile app preferences, from shopping and games to music and travel.
If advertisers leverage CTV advertising properly, they have an opportunity to reach their target audience on a micro level. This would be a far cry from the days of linear TV, delivering the personalized and non-intrusive ad experience that today’s consumer expects, and leading to higher engagement rates and ROI for advertisers. It would also mark an improvement on ATV’s less granular targeting.
CTV advertising’s power shines in the case of direct response campaigns. In the example of the company who wants to sell car insurance to teens and their parents, the company can use CTV advertising to take their targeting to the next level. Not only can they distinguish between households with teens based on the streaming apps and channels those households watch most frequently, but they can also use data from the mobile devices in those homes to identify consumers who would be most likely to convert. In this example, a teenager’s mobile activity should vary significantly from their parents’ activity. By leveraging device-level VOD app data, the car insurance company can deploy separate sets of creative, each designed to provoke action: one targeted at parents, and one targeted at teens, as these two demographics have different wants, needs, and emotional trigger points. Connecting CTV and mobile can close the measurement loop, allowing for ongoing optimization.
Additionally, the advertiser would be able to create separate landing pages with different conversion goals for each audience. The results of the campaign would be measurable in real time and more directly attributable to TV advertising than ever before.
An ideal moment for CTV and mobile
With the growth of CTV advertising, the industry is finally seeing the targeting and ROI that ATV once promised. As this rising star of programmatic advertising continues on a path of innovation, the use cases for smart TV and mobile device data—as well as competition for premium inventory—will only continue to rise with it.
The level of creativity and targeting offered by CTV and OTT towers over that of the TV ads of days past. Not only can advertisers expect higher engagement and greater returns on their campaigns, but consumers can also enjoy a greatly improved experience—without the annoyance of irrelevant or repetitive ads.
Additionally, emerging technologies like AI and machine learning will play a role in the automation of CTV. As this channel continues to increase in efficiency and campaigns continue to perform at scale, marketers will invest further.
ATV has already upgraded linear TV advertising, but CTV is now forging the category’s future.