As streaming continues to overtake traditional linear TV, advertising budgets are following suit. Over-the-top (OTT) advertising has emerged as a preeminent and progressively favored advertising solution. Though Insider Intelligence’s most recent data shows that subscription OTT (sub OTT) viewer growth is stagnating, it also shows that sub OTT connected TV (CTV) platform ad spend will grow by double digits through the end of the forecast period in 2025.
What is OTT?
OTT is streaming video that’s delivered over the internet independently of a traditional pay TV service that appears on any screen. The main categories of OTT include subscriptions, ad-supported, and multichannel video programming distributors.
- Sub OTT (also known as paid subscription video-on-demand, or SVOD) consists of paid subscription streaming services (e.g., Netflix, Disney+, and Max).
- Free ad-supported streaming TV (FAST) services—also called ad-supported video-on-demand, or AVOD—are exclusively ad-supported streamers with no paid tiers (e.g., Pluto TV and Amazon Freevee).
- Virtual multichannel video programming distributors (vMVPDs) are services that deliver live and on-demand content over the internet through multiple channels (e.g., YouTube TV, Hulu + Live TV, and Sling TV).
How does OTT advertising work?
OTT ads are shown through OTT streaming video, as opposed to linear TV. Advertisers can purchase ads to be shown during commercial breaks, or before/after video content is played on OTT platforms.
Benefits of OTT advertising
It’s estimated that 245.3 million people in the US will watch OTT video services at least once per month in 2023, per Insider Intelligence’s April 2023 data. This accounts for 72.2% of the US population. While growth in OTT may be slow, penetration is at an all-time high—and it will only get higher. Advertising through an OTT service gives marketers a greater chance of having their ad seen.
Types of OTT ads
The most popular OTT advertising methods are ad tiers and brand partnerships.
Ad-supported tiers have been gaining popularity in recent years. Netflix, which added its ad tier in late 2022, said it had reached nearly 5 million subscribers by May 2023. And though FASTs haven’t received as much attention as their subscription-based counterparts, consumers looking to cut back on discretionary spending have started seeking them out.
By aligning with brands, OTT platforms can increase awareness across a wide spectrum of consumers. Currently, sports streaming has been a popular method of leveraging OTT advertising. For example, in 2023, YouTube TV will lead the entire OTT category in viewership growth, almost entirely due to its acquisition of the NFL Sunday Ticket.
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What marketers need to know about OTT advertising
After years of streamers offering limited ad options, the time has finally come for advertisers to take full advantage of the entire OTT landscape. With sub OTT ad tiers and FASTs gaining popularity and live sports becoming increasingly streaming-focused, marketers are in a prime position to benefit from investing in OTT advertising.
What are the top OTT advertising platforms?
Of all the top OTT platforms, Netflix, Amazon Prime Video, and Hulu are the most popular in terms of viewership, according to Insider Intelligence’s forecast.
The Roku Channel, Tubi, and Pluto TV take the top spots for FASTs. Though only a fraction of the viewership totals for sub OTT’s top platforms, FASTs have received millions of new subscribers, with The Roku Channel, Tubi, and Pluto TV all gaining over 50 million viewers.
YouTube TV is the top vMVPD, and its access to the NFL Sunday Ticket is expected to bring in as many as 2 million cord-cutting sports viewers, according to Insider Intelligence’s forecast. Due to the high cost of implementation, however, vMVPDs are the smallest category of OTT services.
How big is the OTT advertising market?
Insider Intelligence expects US sub OTT video ad spend to near $10 billion and account for 3.4% of all digital ad spend—and 10.2% of total video ad spend—by the end of 2023. US sub OTT CTV ad spend is also on the rise, with an expected increase of 49.6% in 2023 to reach $8.04 billion. This is due in large part to streaming platforms like Netflix and Disney+ gaining ad tiers.
- Though data on FASTs and vMVPDs is sparse, considering the substantial consumer interest in cost-cutting and streaming services signing live sports exclusivity deals, respectively, it’s likely these categories will continue to grow, potentially resulting in greater ad spend.
What’s the difference between OTT and CTV?
The two categories are closely linked: They both deal with digital streaming, and OTT content is often viewed on a TV set.
However, OTT services are accessible across all screens and devices, whereas CTV refers to internet-connected video that can only be watched on a TV screen, either through a peripheral device (e.g., an Amazon Fire TV Stick, Roku, Apple TV, or Google Chromecast) or directly through a smart TV (i.e., a TV set with built-in internet capabilities). CTV advertising is a particularly robust marketing channel, and Insider Intelligence forecasts it will reach $26.92 billion in 2023 sales.