CTV vs. OTT: Is there a difference?
The shift from traditional TV to streaming brings with it a whole lot of confusing terminology, leading to a whole lot of questions. But one of the most common questions we hear about streaming advertising is this:
What’s the difference between CTV and OTT?
Thankfully, the answer is pretty straightforward.
What’s the scoop on CTV vs. OTT?
OTT refers to video content delivered over the open internet to any device.
CTV is a subset of OTT, in which content is watched on an actual television — either directly connected to the internet or via CTV devices (e.g. Roku, Fire TV Stick, gaming consoles like Xbox, etc.).
For most OTT services, somewhere north of 80% to 90% of viewing takes place on an actual television, making it CTV, as well.
This is why the two terms are often used interchangeably.
Why do we have both OTT/CTV terms?
If the difference between CTV and OTT is so slight, why are there two different words for it? And do the differences actually matter?
As television viewing was transitioning from linear to streaming, there was an expectation that a sizable percentage of that streaming viewing would take place on mobile devices and laptops. This was how digital video was largely viewed, so it seemed reasonable to assume that television would be too — hence the decision to call this type of viewing “OTT.”
But viewers had other ideas.
For a variety of reasons, many people began watching OTT content on their connected TV (CTV) instead of their OTT devices:
Cost: The price of high definition, smart TVs (connected TVs) has fallen dramatically over the past five or so years, making them the cheapest screen in the house by far.
User experience: Video just looks better on a big screen. Unlike digital video, television content like shows, movies, sports, and news command multimillion dollar production budgets, the results of which are best appreciated on a larger viewing platform.
Community. TV viewing is often a group activity, and families can’t gather around an iPhone to watch a movie together.
While industry insiders expected a clean delineation between CTV and OTT viewing, that’s just not how it played out in reality. Most OTT viewing happens to fall into the CTV category, too.
So, the two terms are now used relatively interchangeably when it comes to OTT/CTV advertising. CTV advertising seems to be superseding OTT advertising, though — and the more all-encompassing “streaming” is rapidly gaining popularity as a third option.
Viewers now watch a hybrid of OTT, CTV, and linear TV
And what about linear TV vs. OTT?
While cord cutters are a growing population, most TV viewers today are actually still considered “hybrid” viewers. This means they’re watching a combination of linear (broadcast and cable) and streaming (OTT and CTV).
How much they watch of each type varies widely from viewer to viewer and patterns are often seasonal. For example, a football fan may mostly watch NFL games on broadcast during the fall and then use the winter to catch up on all the streaming series they’d missed via CTV.
For advertisers, this creates a conundrum as to how best to reach viewers in their target audience, especially on streaming, where processes and procedures are still evolving.
CTV or OTT, streaming is the future of television
The past few months have seen a remarkable shift in the status of ad-supported streaming, as major subscription services like Netflix and Disney have announced plans to launch ad-supported tiers, joining HBO Max/Discovery, Hulu, Paramount and Peacock in the ad-supported streaming category.
Amazon and Apple TV, the two major ad-free holdouts, now run ads on their live sports programming as well.
Throw in the dozen or so FAST (free ad-supported streaming TV) services like Pluto, Tubi and The Roku Channel, as well as hundreds of independent and niche apps, and we now have a very robust ad-supported streaming ecosystem.
As a result, consumers, who have largely adopted a hybrid viewing pattern, now have more reason than ever to spend the majority of their time on streaming.
That is not an unreasonable expectation, given that 87% of U.S. homes now have at least one connected TV device and that 46% of U.S adults watch video content via those connected devices on a daily basis.
Forward-thinking advertisers are therefore continuing to shift their ad budgets to CTV ads.
The future of OTT and CTV
As the major subscription video on demand (SVOD) services all ramp up their ad-supported tiers, the assumption is that OTT/CTV will become the primary TV advertising vehicle for many brands — particularly those looking to reach younger, more educated, and more affluent consumers.
That shift will engender other changes as well. Two that we see playing a major role are localized OTT advertising and interactive advertising.
Digital capabilities of OTT make it much easier to pinpoint consumers based on location via their IP address.
This means ads can be hyper localized and served to viewers in a much smaller geographic region than on linear. It also means that messaging can be customized based on the viewer’s geography. For instance, a car dealership with three locations can send the appropriate commercial to the viewers closest to a specific location.
Digital delivery makes it much easier to roll out interactive ads that viewers can control via their remote controls — and the possibilities here are endless:
Viewers could agree to watch a longer version of an ad in exchange for getting to view the rest of the program ad-free
Advertisers could build t-commerce (television commerce) sites for viewers to shop right from their TVs
Advertisers could engage viewers with choose-your-own-adventure type ads where the viewer controls what happens next.
Brands and agencies are just beginning to realize the possibilities that OTT/CTV offers, and we can expect to see much more innovation in the years to come.
The case for OTT/CTV
Whether you call it OTT or CTV or simply just “streaming”, delivery of television programming via the open internet is most definitely the future.
We can see this in the way every major broadcaster is doubling down on their streaming service. We can also see it in how Comcast, the largest cable provider in the U.S., has rolled out its own branded smart TV and (together with Charter) its own streaming operating system.
The question brands should be asking is no longer about CTV vs. OTT.
Instead, the question should be how fast advertisers can build their CTV/OTT strategies to stay in front of and more effectively engage their evolving audiences.
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