By: Hope Horner

Marketing is wholeheartedly embracing all things digital. And with the exponential growth of over-the-top media, or OTT, its time marketers understand how and where to invest their 2020 budgets, says, Hope Horner is CEO and founder, Lemonlight Video Production.

What You Should Know About Over-the-Top Media
The ongoing streaming wars are heating up as more companies aim to capture a portion of the massive video subscription market. Established industry players — think Netflix, HBO, and Hulu — now find themselves fighting to ward off giants such as Apple, Disney, AT&T, and others. No one can say for sure who will come out on top, but one thing is certain: Marketers and advertisers have been forced to evolve in a post-cable world.

And evolved they have.

The budgets that used to allocate huge sums to TV commercials now pour piles of money into over-the-top (or OTT) media. Clearly, the marketing world is embracing the move to digital — of course, the industry hasn’t had much choice.

Cutting Through the Noise
As more households cut the cord on cable and switch to streaming services, OTT media ads have emerged almost out of necessity. In the digital landscape, other channels are quickly losing relevance, and radio stations and newspapers have already taken the hardest hits (though podcasts provide a digital-friendly alternative to radio that’s seemingly gaining traction). Still, video streaming is now the arena that almost everyone wants to play in.

The landscape is admittedly complicated, but the gist is this: With so many players competing for viewership, each platform must find a way to differentiate itself. Additionally, platforms must make major marketing investments to keep up with competitors. That heavy spending will likely require additional revenue streams to sustain it.

Following the Money
Platforms can generate new revenue in a number of ways, but most will look to marketing and advertising. When compared to TV advertising, OTT media offers more in-depth data (including audience demographics) that those in the industry can use for targeting.

This is a Big Deal.

Nielsen’s system — a decades-old method for measuring television’s reach — takes a small percentage of people and extrapolates the group’s viewing habits. That data is then applied to the entire population, and the patterns are broken down into large demographic categories (e.g., adults 18 to 49). The problem with this method is that the people submitting their data to Nielsen don’t necessarily reflect an accurate reading of the entire population.

Also, categories (such as adults 18 to 49) are much too broad and provide no real meaning in terms of segmentation. Focus is critical in the modern marketing world. This is most clear on social media, where hypertargeted ads tend to perform significantly better than more general ones. The Nielsen model doesn’t allow hypertargeting in an accurate or practical way.

Enter cost per impression: This model mirrors the approach that social media platforms typically employ, and it can be calculated across every channel viewers might use (including mobile devices, smart TVs, laptops, and others).

The opportunity to gather so much data about viewers will be hard for streaming companies to pass up. For marketers and advertisers, this means demand for OTT media will likely grow in the near future as platforms without ads start to launch those features. When those avenues open, industry players can reach new viewers and capitalize on the traffic that some of the streaming giants (like Netflix) generate.

What will that look like?

Understanding OTT Delivery Systems
For advertising, the main model OTT platforms employ is the ad-supported video-on-demand approach, also known as AVOD. YouTube’s basic service is a good example: The platform itself is free to use (you don’t have to pay a fee to watch videos), but revenue from advertisements is what makes that possible. Viewers have no choice but to watch ads if they want to use the platform.

YouTube also offers a premium version of its platform, which allows users to pay for ad-free video streaming. This hybrid model is relatively common among streaming giants, with platforms such as Hulu and CBS All Access providing two more good examples that are popular in the U.S.

A number of different ad types exist that are available for purchase on OTT media services. Here are some of the most popular:

1. Addressable TV spots. These ads target specific demographics on a home-by-home basis. That means two households watching the same program might see completely different ads. Although these ads make it easier to zero in on specific audience segments (when compared to the traditional model of TV ad buying), they lack the automation and precision of programmatic ad buys.

2. Automatic content recognition ads. These ads help advertisers or marketers identify the types of content watched on a device; in this way, they can tailor messaging to viewers based on that content. In other words, fans who spend time watching crime dramas will receive different ads than their friends who primarily watch cooking shows.

3. Connected TV spots. Because these ads are served through internet-connected OTT devices, advertisers and marketers can tie them to behavioral and lifestyle data collected via other devices on the network. This allows them to take advantage of more touchpoints (like serving video ads to your smartphone and PlayStation 4 simultaneously). This is just one reason connected TV spots are on the rise.

4. Programmatic ads. This automated, data-driven programmatic-buying system allows those in the industry to deliver highly targeted messaging based on data collected by distribution platforms. YouTube, which has collected user data for years, is the only major VOD service that boasts targeting and reach-measurement tools to rival those of other platforms (such as Google or Facebook). As such, it’s the undisputed leader in the programmatic ad-buying space.

Know Who You’re Talking To
Digital marketing and advertising offer so many capabilities that just aren’t possible offline. Digital models provide unprecedented insight into your audience’s online habits, which allows you to amplify your marketing in a way that simply wasn’t possible just several years ago. Understanding your goals and audiences allows you to single out the platform that makes the most sense.

Marketers shouldn’t wait until companies announce support for OTT media to start creating video content. Video should be a priority now, and your focus should be on testing your content in a variety of settings to discern which tactics work (and which don’t). Every brand and audience is different, and what works for one company might not work for another. Create content early and frequently, and try to glean what kind of returns you can expect from video advertising. With a thoughtful video marketing strategy already in place, you’ll be better positioned for success when you decide to enter the OTT game.