About 40% of US households use OTT and it’s not just Millennials, according to eMarketer. They may have been the first to cut the cord, but Gen X closely followed. According to GfK MRI’s recent “Cord Evolution” study, the average age for a cord cutter is 43.
If you binge on Netflix, you know it’s an ad-free service. In fact, about half of the total OTT consumption — Netflix, Amazon and HBO — doesn’t have ads. But the good news for advertisers is that 4 out of the top 10 OTT services do provide advertising (Hulu, MLB.TV, CBS All Access, Sling TV).
So as OTT grows overall and linear TV declines, we must lay the foundation for how we engage with this quickly growing ecosystem, and try not to retrofit it into the old way of buying and selling TV. Sure, both connected and linear TV involve sitting on a couch and watching a flat screen. But for marketers, that’s where similarities end.
Learning from our Mistakes
First, let’s review some ad tech history. Look at what happened with mobile. The year of mobile actually went on for quite a few years. As a buying community, we made a big mistake in assuming that mobile would work like desktop. The ad tech community was not very proactive in telling us that we were wrong because incentives were not there. Initially, we did not account for the lack of cookies as consumers chose apps over mobile web browsing. Since all ad tech at that point was built on only using cookies, it simply did not work.
Additionally, general engagement and purpose for a mobile device was completely different from a desktop. Shrinking desktop banner ads to thumbnail sizes to fit mobile screens was (and still is) a horrible user experience. This slowed down adoption because nothing was being measured in a way that a buyer could usefully understand. It took the industry years to catch up and start building more mobile focused platforms. Understanding the similarities and differences here will allow us to set appropriate expectations and speed up meaningful adoption of the OTT channel.
Next thing to consider is the importance of audience targeting and how to apply it to OTT. TV may still be the most powerful advertising tool in the world, but accurate targeting is more cost effective.
When something more accurate is available, why ignore it? Linear TV allows targeting only by age and gender based on small sample panels. OTT is much more accurate because it uses the digital understanding of a user. Of course, we should not expect the micro-segmentation we get from desktop and mobile just yet. In an effort to convince the TV buyer, we need to first deliver on efficiency through audience accuracy in an apples-to-apples comparison (i.e., age and gender). Only then should we layer on additional data points.
Since OTT uses the same tech as desktop and mobile, we should also expect to measure it in the same way. Why apply measurement methods that were wrong to begin with? Now that we have something more accurate, less media needs to be bought to get to the same KPI.
Taking Programmatic to the Next Level
Lastly, because of technological similarities between OTT and other digital channels, programmatic will play a huge role in OTT. It’s safe to say that anything that can be automated, will be automated. To paraphrase Jeff Green, CEO of The Trade Desk, everything we have done in programmatic up to this point is just a dress rehearsal for what’s to come as OTT adoption grows.
OTT is here and it’s the future of TV. It’s time we learn from our mistakes, set realistic expectations, evolve our method of planning and buying, and lay the foundation as adoption and scale grow.