What is OTT Advertising?

More people are watching their favourite shows on-demand than ever before. 

Whether it’s through a smart TV, a streaming stick, or a mobile app, audiences have shifted away from traditional broadcast schedules and into the world of online content.

This change has altered how we watch, and it’s transformed how brands show up.

Video advertising is no longer limited to prime time slots on TV or cable, or radio advertising. 

Businesses of all sizes are finding new ways to get in front of targeted viewers, wherever and however they stream.

One of these new ways is through OTT advertising.

It’s part of a broader shift towards digital-first media planning, where data, precision, and format flexibility matter more than channel loyalty.

As audiences scatter across platforms and screens, marketing strategies have had to evolve too 

That’s where OTT advertising comes in.

Key Takeaways

• OTT advertising delivers video ads via streaming services over the internet, bypassing traditional broadcast or cable TV to reach viewers on connected devices. 

• Ads are served using data-driven technology and programmatic systems, enabling advertisers to target specific audiences by demographics, interests, or location. 

• Common OTT ad formats include short video spots that play within streamed content, such as pre-roll ads before a show starts and mid-roll ads during breaks. 

• Key benefits of OTT advertising include precise targeting, high engagement, and rich analytics. 

• Despite its advantages, there are some pitfalls to OTT advertising. The streaming landscape is fragmented across many apps and services, making it tricky to achieve broad reach easily. 

• Small businesses can leverage OTT advertising on modest budgets. Many streaming platforms offer self-serve ad buying with lower minimum spends. 

What is OTT Advertising?

Over-the-Top (OTT) refers to video content delivered via the internet, bypassing traditional cable or satellite television services. 

Basically, viewers watch OTT content on streaming platforms like Netflix, Hulu, Amazon Prime Video, Disney+, etc., using devices such as smart TVs, connected streaming devices, computers, or even mobile phones. 

They don’t need a cable TV subscription, the content comes ‘over the top’ of conventional distribution channels through an internet connection.

OTT advertising is the act of placing ads within that streaming content. 

It’s buying ad space on streaming services so that your video adverts play during shows, movies, or other OTT video content that people watch online. 

It’s essentially the digital evolution of TV advertising. 

For example, a viewer might see a 15-second commercial break on Hulu or ITVX before their programme starts, or encounter an ad midway through a streaming episode. 

Streaming has gone mainstream (about 88% of households now use some form of video streaming service), so OTT advertising lets brands meet consumers where they are actually watching. 

The big difference is that OTT ads can be targeted and delivered in more flexible ways than traditional TV commercials, as they leverage digital delivery methods. 

How Does OTT Advertising Work?

OTT advertising operates using a data-driven, programmatic approach to serve video ads to viewers in real time. 

Unlike AtL marketing on traditional TV, where a commercial simply goes out to anyone tuned in, OTT allows specific ads to be delivered to specific viewers or households based on data and targeting criteria. 

Here’s a simplified look at how it works:

Campaign Setup & Targeting

An advertiser (or their agency) sets up an OTT ad campaign using either a direct platform or a programmatic ad exchange. 

They define the target audience (e.g. age, location, interests, viewing history) and budget, and choose where the ads should run. 

Modern OTT systems can even use first-party data (like a retailer’s customer list) or third-party data to build custom audience segments for targeting.

Ad Request & Real-Time Bidding

When a person is streaming content and there’s an ad break, the OTT platform identifies an available ad slot. 

It then sends out an automated request to ad marketplaces with information about the viewer and context.

This can include the viewer’s general profile or the type of content being watched. 

Advertisers that have an interest in that audience will bid for the slot through a Demand-Side Platform (DSP). 

This all happens in milliseconds. 

The highest bidder whose targeting criteria match the viewer wins the slot, and their advert is selected to play.

Ad Delivery (Insertion)

Once an ad is selected, it gets delivered and played in the viewer’s stream. 

In OTT, this can be done in two main ways. 

Client-side ad insertion (CSAI) means the ad is fetched by the user’s device/app and then played, which was the original method. 

Server-side ad insertion (SSAI) stitches the ad into the video stream on the server end, making it appear as a seamless part of the program, and creates a TV-like experience. E

Either way, the viewer sees the ad as if it were just another part of the show’s runtime. 

Notably, many OTT ads are unskippable, ensuring the message is seen by those viewers who are actively watching the content.

Tracking & Optimisation

Because OTT is delivered via digital channels, a wealth of data is collected during and after ad delivery. 

The platform can track whether the ad was played to completion, if the viewer clicked on it, and other engagement metrics. 

Advertisers receive reports showing how many impressions were served, completion rates, and sometimes downstream actions. 

With these insights, advertisers can adjust their campaigns.

For instance, tweaking targeting, capping the frequency a single viewer sees the ad, or swapping in a different creative if performance is under expectations. 

This feedback loop is much faster and more granular than traditional TV advertising, allowing continuous optimisation of OTT campaigns.

OTT Advertising Types

OTT advertising can take several forms, much like traditional TV ads but with some digital twists. 

Here are the main types of ad formats you’ll encounter in OTT:

Pre-Roll Ads

Pre-roll ads are the video commercials that play before the selected content begins. 

For example, if a viewer clicks on an episode or movie on an ad-supported streaming service, a 15 or 30-second ad might roll right before the content starts. 

Nearly all viewers will see a pre-roll ad because it’s a condition of starting the content. 

Mid-Roll Ads

Mid-roll ads are the commercials inserted during the content, pausing the program at natural breakpoints.

If you’re watching a 40-minute show on a free streaming app, you might get a mid-roll ad break after 10 minutes, for instance. 

Mid-rolls often achieve the highest completion rates of any OTT ad format. 

This is because by the time they appear, the viewer is already invested in the content and willing to sit through a short ad break to continue watching. 

Streaming platforms are smart about mid-roll placement, as they tend to insert them at logical scene breaks or cliffhangers to minimize disruption. 

For advertisers, mid-roll slots are valuable since they catch viewers in the middle of engagement.

However, the creative needs to be compelling enough to hold attention, as viewers might be tempted to do something else during the break if the ad doesn’t interest them.

Post-Roll Ads

Post-roll ads appear after the content has ended. 

For instance, when a movie or episode finishes, the service might show an ad before the next thing plays. 

Post-roll advertisements generally have lower view rates because many viewers will stop or exit once their show is over. 

However, those who do watch a post-roll tend to be highly engaged. 

Post-roll placements can work well for certain goals, like promoting related content or reinforcing a message to binge-watchers who might stick around. 

Since the audience might be smaller by the end, advertisers often use post-roll for quick messages or calls-to-action for the most interested viewers.

Other OTT Ad Formats

Beyond the standard video slots, OTT platforms are experimenting with interactive and non-traditional ad formats that take advantage of digital capabilities:

Interactive Ads

These ads invite the viewer to engage actively.

For example, an ad might let you choose which storyline to watch or use your remote to play a short game or poll during an ad break. 

Interactive OTT ads can significantly boost engagement rates because they turn a passive viewing experience into an active one. 

The challenge is that creating interactive ad content is more complex, and not all devices handle interactivity well.

Pause Ads

A clever newer format where a static ad is displayed on screen when a viewer hits pause. 

For example, pausing a show might show a subtle banner or image ad until playback resumes. 

Since the viewer has voluntarily paused (maybe to grab a snack), pause ads are designed to be non-intrusive and often have no sound. 

They’re good for brand awareness.

A simple message or logo can sit on the paused screen without disrupting the user. 

Overlay Banners

These are small banner ads that appear at the bottom or edge of the video during streaming, without fully interrupting the content. 

They’re usually semi-transparent or otherwise unobtrusive. 

Overlays can contain clickable elements or QR codes for viewers to act on if they’re interested. 

The benefit is they don’t require a separate ad break, but the message has to be concise and not too distracting.

Shoppable Ads

An emerging format that aims to let viewers purchase or get more info on products directly from the ad. 

For example, an OTT ad for a clothing brand might show a QR code that, when scanned, opens a link on your phone to buy the featured outfit. 

Some platforms allow clicking or using the remote to get a product detail page. 

While promising, shoppable OTT ads are still developing and often require viewers to be very engaged. 

They work best when the product is relevant and the process is seamless (like sending a link to your phone).

OTT Advertising Benefits

OTT advertising has quickly become popular among marketers because it offers a combination of targeting and measurement capabilities that traditional TV simply can’t match.

This is all while maintaining TV’s ability to captivate on a big screen. 

Below are some key benefits of OTT ads:

Precise Targeting

One of the biggest advantages of OTT is the precision in audience targeting. 

Streaming platforms know quite a bit about their viewers, as users often log in, providing data on age or gender, and viewing habits are tracked across shows and genres. 

This means advertisers can target by demographics, interests, behaviours, location, and even more granular factors, instead of just broad TV demographics. 

This level of targeting far exceeds traditional TV’s options and ensures your ads reach the people most likely to be interested, reducing wasted impressions.

Cross-Device Reach

Unlike a traditional TV ad that only hits people watching a television set, OTT campaigns can reach viewers on any device they use to stream. 

Your video ad might appear on a 50-inch smart TV in someone’s lounge, on another person’s tablet, on someone else’s smartphone during their commute, or on a laptop in a dorm room. 

In fact, with OTT you can cover smart TVs, streaming devices, games consoles, computers, and mobile devices. 

This cross-device reach means you meet your audience wherever they happen to be watching. 

A single campaign can thus engage a user on multiple screens throughout their day. 

It provides a holistic coverage that combines the big-screen impact with the flexibility of mobile.

High Engagement

Viewers who are watching OTT content are typically more engaged and attentive compared to many other media environments. 

They have actively chosen a show or movie to watch on-demand, as opposed to casually channel surfing. 

As a result, when an ad comes on, they’re more likely to actually watch it rather than treat it as background noise. 

Moreover, most OTT video ads are unskippable, especially on premium platforms, which means viewers will see the message through. 

Fewer ads are shown per break as well, so each ad gets a bit more attention from the viewer. 

This high engagement environment leads not only to more people seeing the whole ad, but also better ad recall and impact. 

Studies have found that ads on streaming platforms can drive higher brand recall than similar ads on linear TV, likely because of this combination of viewer attention and completion rates.

Measurable Performance

Because OTT ads are delivered digitally, they come with a suite of analytics and measurement capabilities that old-fashioned TV could never offer. 

With a traditional TV commercial, you might know how many people, in theory, were watching the channel.

However, you have no idea how many actually paid attention or what they did after. 

In OTT, advertisers get detailed metrics – impressions served, the percentage of the ad that was watched, clicks or interactions, and even downstream actions like app installs or website visits if tracking is set up. 

OTT brings online-style accountability to video ads.

You can measure Return on Ad Spend (ROAS) by seeing, for example, how many people visited your site after seeing your OTT ad. 

This measurability allows for real-time optimisation too. 

If one piece of creative isn’t performing.

Cost Efficiency & Flexibility

In the past, TV advertising was often out of reach for small or even medium businesses due to the high cost of entry. 

OTT has changed that by offering flexible buying options and more efficient use of ad spend. 

Many OTT ads are sold via automated, auction-based marketplaces, which means advertisers can set their budgets and bids much as they do for online ads, and even start with a modest budget. 

You don’t necessarily have to commit to a huge upfront spend.

This flexibility extends to pausing campaigns or adjusting targeting on the fly – something you could never do with a traditional TV spot once it’s booked.

Possible OtT Advertising Pitfalls

While OTT advertising offers many advantages, it’s not without drawbacks.

Fragmented Audience: 

The OTT landscape is highly fragmented across many platforms and apps. 

Viewers are spread out.

There’s no single ‘OTT network’ that everyone watches; instead, there are dozens of streaming services, each with their own audience. 

This fragmentation means that to get broad reach, an advertiser often needs to run campaigns on multiple platforms. 

Managing buys across many services or going through aggregators can be complex. 

It also can lead to frequency capping issues.

Limited Ad Inventory and Costs

Unlike traditional broadcast TV which has a decades-old robust advertising infrastructure, some OTT platforms offer limited ad slots. 

For instance, a streaming service might only allow a couple of minutes of ads per hour of content. 

Popular shows on popular platforms thus have a fairly scarce number of ad opportunities. 

High demand and limited supply can drive up the cost of OTT ads, especially for premium content or prime times. 

It’s not unheard of for certain OTT placements to carry hefty price tags, sometimes approaching the cost of traditional TV spots on a per-impression basis. 

Additionally, some top-tier streaming services have minimum spend requirements for direct deals that small businesses might find too high. 

The competition for quality inventory means small advertisers could be priced out of the most desirable slots, or their ads might run at less optimal times. 

This doesn’t mean OTT is always expensive, but to scale up reach, costs can accumulate. 

Ad Avoidance & Viewer Experience

Although OTT ads are generally less skippable than, say, YouTube ads, that doesn’t guarantee every viewer’s full attention. 

Some viewers will use the ad breaks to look at their phones or leave the room. 

Moreover, tech-savvy users sometimes find ways to reduce ads.

For example, using browser extensions when watching on a computer, or simply fast-forwarding through ads when possible. 

The impact of ad blockers on OTT is relatively small compared to web browsing, especially with server-side ad insertion, but it’s not zero. 

In addition, a negative viewer experience can create diminishing returns. 

This is more about campaign execution, but it’s a pitfall to consider: ad frequency needs to be managed. 

Measurement and Attribution Challenges

Ironically, while OTT provides a lot of digital-like metrics, it’s still evolving in how to measure cross-platform performance and attribution. 

If you run ads on three different OTT services and a user sees it on all three, piecing together that it was the same person can be difficult unless you use an advanced measurement solution. 

Each platform has its own reporting, and there isn’t a standardised, third-party cookie or universal ID that spans all OTT environments. 

As a result, advertisers might end up with siloed reports and potential double counting of conversions or reach. 

Additionally, connecting an OTT ad exposure to an actual sale or store visit is possible but not as straightforward as, say, click-through conversions in online ads. 

The measurement landscape for OTT is improving, but it’s still a bit of a patchwork, which is a drawback compared to the relatively mature analytics in other digital channels.

OTT vs CTV Advertising

OTT and CTV are closely related terms in the modern advertising lexicon, and they’re sometimes (mistakenly) used interchangeably. 

Here’s the difference:

• OTT (Over-the-Top) refers to the method of delivering video content (and ads) over the internet, bypassing traditional cable/satellite distribution. It’s an umbrella term covering all streaming video delivered via broadband. If you’re watching a TV show on an app or streaming service via the internet, that’s OTT.

• CTV (Connected TV) refers specifically to the device. Essentially, a television screen that is connected to the internet and used for streaming content. This could be a smart TV with built-in apps, or a regular TV hooked up to a device like a Roku, Chromecast, Amazon Fire Stick, or gaming console. The key is that it’s a TV set (the big screen in your living room, for example) getting content via internet.

CTV is a subset of OTT. 

All CTV content is delivered OTT, but not all OTT content is watched on a TV. 

For instance, if someone watches Netflix on their phone, that’s OTT but not CTV. 

If they watch Netflix on their smart TV, that’s both OTT and CTV

OTT vs VOD Advertising

OTT and VOD are two terms that often come up together in streaming media, but they describe different (complementary) concepts:

• OTT (Over-the-Top), as explained, is about how content is delivered – over the internet, on-demand or live, to various devices, without traditional broadcast/cable infrastructure.

• VOD (Video on Demand) is about what/when. It refers to content that does not follow a scheduled broadcast time, but rather can be watched whenever the user chooses. If you can hit play, pause, or choose from a library of titles at any time, that’s VOD content. Examples of VOD include a Netflix series you binge at your own pace, or a catch-up TV episode available the day after airing, or a movie you rent online to watch tonight.

Most OTT content that people think of is indeed VOD. 

Netflix, Amazon Prime Video, Disney+, etc., are primarily libraries of on-demand content. 

However, not all OTT content is VOD. 

Live streaming delivered over the internet is OTT as well, but it’s not VOD because the viewer isn’t choosing the timing – it’s happening in real-time.

For instance, a live sports match streaming on an app, or a 24/7 linear streaming channel are OTT but not VOD. 

They’re more akin to traditional TV in that you have to watch what’s on, when it’s on (though delivered via the internet).

Final Thoughts

OTT advertising has fundamentally changed the game for video marketing. 

It marries the wide reach and emotional impact of television with the precision and accountability of digital advertising. 

For advertisers this opens up exciting opportunities. 

With OTT, a mid-sized or small company can run highly targeted video ads.

The rapid adoption of streaming media is only continuing. 

By 2023, an estimated 60% of US households had cut the cord on cable entirely (and the UK is seeing similar trends in the shift to on-demand viewing). 

This means a large segment of consumers can now only be reached on TV via OTT platforms. 

Advertisers who embrace OTT are positioning themselves to reach these streaming-first audiences. 

For a small business owner reading this, the takeaway is – OTT advertising is a powerful addition to your marketing toolkit. 

Success in OTT does require strategic planning – you’ll want to choose the right platforms, craft a compelling video ad, and be mindful of the unique challenges like frequency management and cross-device measurement. 

But done right, OTT advertising can boost your brand awareness and drive results in ways that were once possible only for the big players on television. 

It’s leveling the playing field in video advertising.

For more information on OTT advertising, or help with any and all of your marketing needs, then get in contact with us here at Neon Atlas Digital Marketing today.