connected tv vs. over the top: what’s the difference?

How people view and digest entertainment content is changing rapidly. The nuclear family gathering around the TV to watch a show as it airs is a thing of the past. Now, people are consuming and binge-watching their favorite shows on the bus, on their cell phones, and on Smart TVs whenever they want — and many are cutting the cord on traditional cable. Are you taking advantage of the marketing opportunities that are rapidly emerging?

As marketers and advertisers realize it’s imperative to consider streaming’s place in their digital strategy, it’s important to know the important terms associated with the delivery of digital video. Over-the-top (OTT) and Connected TV (CTV) are concepts that are critical to understand as you begin to build your approach. While CTV and OTT are closely related, it’s a misconception that they’re the same thing or even very similar.

defining OTT

OTT refers to methods of viewing content that neglect traditional television and cable methods. Streaming services like Netflix, Amazon Prime, and Hulu are all examples of OTT services — 

platforms that allow you to go over the top and cut out cable packages. 

There is no subscription to a TV service required for watching something OTT; as long as you have an internet connection and pay for the platform your desired content is on, you can watch it, whether via a TV, a tablet, or your phone. 

OTT platforms are becoming extremely popular, especially for conglomerates like AT&T and Disney who have a diverse selection of intellectual properties under their umbrella. This increasing competition has had a seismic impact on the landscape of OTT. 

Netflix, which began as a hub for existing shows and movies that they licensed for a limited-time on their platform, started producing original content in 2013 with their hit series House of Cards, and sparked the idea that these services could be more than just repositories for old content. By offering exclusive programming, Netflix both solidified its own value and created its fiercest competition by kicking off the “streaming wars” — a Big Bang of OTT platforms.

For a mega-corporation like Disney, it makes sense to have their own OTT service. Not only can original content draw in subscribers, but why accept a paltry licensing fee from Netflix to host your content when you can cut out the middleman and collect that money yourself?

OTT is the modern way to interact with content. And not just films and television — music streaming platforms like Spotify and Pandora are also OTT, and multiple companies are developing over-the-top models for streaming video games.

However, not every digital content platform falls under OTT. Although devices like the Nook and Kindle offer digital alternatives to buying a paperback, they are not considered OTT.

defining CTV

CTV has a more specific definition. Any television with internet capability (or that’s hooked up to a device with internet capability) is considered a Connected TV. Smart TVs that can access your WiFi and devices like Roku or the Amazon Fire Stick both fall under the category of CTV.

The difference is this: CTV is a means to access OTT content. If you have a PlayStation that you use to watch Netflix and HBO Max, the PlayStation is the CTV device facilitating OTT platforms.

CTV and OTT work hand-in-hand to accomplish the same thing: cord-cutting. People still want to watch television and movies, but there’s an increasing distaste for being tied to pricey cable packages that make viewers pay for over 200 channels, even though on average most people only tune into 15 to 20 of them.

The average cable package costs over $200 a month. If you paid for the medium package on each of the three most subscribed-to streaming platforms — Netflix, Prime Video, and Disney+ (although that’s different if you look at it globally, in which case China’s platform Tencent Video would take the third spot) — it would only run you $31 a month. Even with a dollar or so price inflation year after year, it would take a long time for cable and streaming to have comparable costs. Even then, the on-demand nature that CTV devices provide is an edge that cable will never be able to compete with.

why should you embrace CTV advertising?

Knowing the difference between the two terms helps in understanding how they can be used to deliver ads to households and viewers that have decided to go cable- or satellite-free. 

Start by remembering that your ads are another form of content. You can buy ad space on CTV platforms like Roku, but when audiences see your ads, they’re watching them as OTT content, specifically because they’re viewing them through a CTV device instead of via cable.

CTV ads can be bought programmatically through your demand-side platform (DSP). Or, you can also advertise directly on platforms that have ad-supported options. Hulu, for example, has a native ads manager you can tap without having to buy through a DSP.

The main benefit of CTV advertising is the ability to leverage the on-demand nature that modern audiences want to your advantage. 80% of households in the United States have at least one CTV device, with that number expected to grow by 10% throughout the rest of the decade. Audiences anticipate ads in their content, especially if they’re viewing it for free.

YouTube, for example — one of the largest OTT platforms — has both a premium, ad-free version called YouTube Red and a popular plug-in that can subvert ads, and yet most of the YouTube audience decline these options, opting to sit through ad breaks or at least the first five seconds of them. 

Four out of every five CTV viewers watch ad-supported content. While it seems like everyone complains about ads, they aren’t the deterrent that advertisers are led to believe.

But, by far the best reason to invest in a CTV ad campaign is the staggering decrease in traditional cable viewers. Over the course of 2020, more than 6 million homes ditched cable in favor of streaming and Connected TV devices. More than 30 million American households have cut the cord to date, meaning that advertisers’ choice for reaching this significant portion of their audience is CTV or bust. 

And, due to an increased amount of time spent indoors over the last two years, the watch time for these platforms has dramatically increased. In 2018, the average viewer spent around 50 minutes a day watching content via CTV or streaming — they’d watch one episode, likely a night after work, before turning off the TV. In 2020, watch time more than tripled, with the average household consuming 180 minutes of streaming content a day.

get started with CTV ads

With the audience steadily growing and time spent watching streaming content booming, it’s time to make CTV advertising a key element in upcoming campaigns. CTV audiences are attentive, willing to watch ads, and are just as susceptible to their influence as traditional cable viewers — perhaps even more so. Two, 15-second ads back-to-back pales in comparison to a traditional three-minute ad break, giving the viewer less time to get up and do other things while your ads play.

As these technologies are still evolving aren’t yet written in stone, the opportunity for advertisers to make their mark and do something revolutionary is still there, waiting for a brand to seize it.

Is that brand yours? Learn more about how Dragon360 used CTV to give Haven Life their best year ever, or get in touch with us.

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