How does connected TV advertising work to scale and transform brands? Many small to medium sized brands are finding that connected TV advertising has increased their ROAS, improved brand equity and increased sales faster than any other advertising methods.

Connected TV (CTV) advertising has transformed how brands engage with audiences in a digital-first world. Combining the storytelling power of traditional TV with the precision and measurability of digital advertising, CTV enables advertisers to reach viewers who stream content on smart TVs, streaming devices, and gaming consoles. But how does it work, and what makes it a valuable tool for marketers?

In this article, we’ll break down the mechanics of CTV advertising, from the technology behind it to the ad formats, targeting capabilities, and measurement tools that make it a game-changer in modern marketing.

How Does Connected Tv Advertising Work? The Basics:

At its core, CTV advertising delivers video or display ads to audiences watching internet-connected devices. Unlike traditional broadcast television, CTV leverages streaming platforms to reach specific viewers based on data and user preferences.

  • Where Ads Appear: On platforms like Hulu, Roku, YouTube TV, Amazon Fire TV, and Apple TV.
  • Who Uses It: Brands across industries, from retail and automotive to healthcare and entertainment.
Key Distinction:

CTV differs from over-the-top (OTT) advertising. While OTT refers to content delivery over the internet (on any device), CTV specifically focuses on ads on connected televisions.

The Technology Behind CTV

CTV advertising works through a combination of programmatic technology and advanced data analytics:

Programmatic Advertising

  • Programmatic ad buying automates the process of purchasing ad slots using algorithms. Advertisers set parameters like budget, target audience, and campaign goals, and the system bids in real-time for ad placements.
  • Example: A brand targeting millennial sports fans might use programmatic technology to place ads during live-streamed NBA games on Hulu.

Ad Servers and SSPs

  • Ad Servers: Deliver the actual ad creatives (videos or display ads) to the viewer.
  • Supply-Side Platforms (SSPs): Manage ad inventory for publishers (like streaming platforms) and ensure ads match the target viewers.

Internet Connectivity

  • Internet-connected devices like smart TVs, gaming consoles, or streaming sticks (Roku, Amazon Fire Stick) facilitate ad delivery. This infrastructure ensures seamless ad integration within streaming content.

Ad Formats in CTV

CTV advertising supports several ad formats, offering flexibility for brands to engage audiences in unique ways:

Pre-Roll, Mid-Roll, and Post-Roll Ads

  • Video ads appear before, during, or after a program.
  • Example: A streaming service like Peacock showing a 30-second pre-roll ad for a new movie before a sitcom episode.

Interactive Ads

  • Enable viewers to interact directly with the ad. For instance, click on an ad to explore a product or service more.
  • Example: Toyota runs interactive ads on Roku, allowing viewers to book a test drive directly from their screen.

Shoppable Ads

  • Allow viewers to purchase products directly from the ad.
  • Example: Walmart showcasing a product catalog during a holiday campaign, enabling viewers to add items to their cart with a remote.

Sponsored Content

  • Branded content integrated into programming, such as a segment or short video showcasing a brand story.
  • Example: A fitness app like Peloton sponsoring health-focused mini-documentaries on Hulu.

Audience Targeting and Segmentation

One of the standout features of CTV advertising is its precise targeting capabilities. Unlike traditional TV, where ads are broadcast to a broad audience, CTV uses data to reach specific demographics.

Key Targeting Options:

  1. Demographics: Age, gender, income, and more.
  2. Geographics: Targeting viewers in specific regions or cities.
  3. Behavioral Data: Leveraging viewing habits, interests, and past purchase behaviors.
  4. Retargeting: Reaching viewers interacting with a brand on another platform or device.
Example: A luxury car manufacturer may target high-income households in urban areas, showing ads for their latest model on platforms like YouTube TV during premium shows.

Third-Party Data Integration

Many CTV platforms partner with data providers to refine audience segmentation. For instance, a fitness apparel brand might target viewers based on their health app data, ensuring ads reach active consumers.

How Does Connected TV Advertising Work To Deliver Ads?

The delivery of CTV ads involves several components:

  1. Bidding and Placement
    • Advertisers bid on real-time ad slots through demand-side platforms (DSPs).
    • Example: A travel company bidding for ad space during a travel documentary on Amazon Fire TV.
  2. Dynamic Ad Insertion (DAI)
    • This technology ensures ads are seamlessly integrated into content streams without disrupting the viewing experience.
  3. Real-Time Adjustments
    • Campaigns can be optimized mid-flight. If an ad isn’t performing well, creative targeting or bid strategy adjustments can be made.
  4. Measuring the Success of CTV Ads

One of the most significant advantages of CTV advertising is the ability to measure campaign performance using detailed analytics.

Key Metrics to Track

  1. Impressions: How many times an ad is shown.
  2. View-Through Rates (VTR): Percentage of ads watched to completion.
  3. Click-Through Rates (CTR): Interaction rates for clickable ads.
  4. Conversion Metrics: Purchases, sign-ups, or other actions attributed to the ad.
  5. Attribution Across Devices: Tracking whether a CTV ad led to an action on another device (e.g., smartphone or desktop).
Example: Airbnb’s Measurement Strategy

Airbnb ran a CTV campaign targeting families searching for vacation rentals. By using advanced analytics, they tracked which ads led to bookings, identifying their most effective creative and optimizing for future campaigns.

  1. Advantages of CTV Advertising
  2. Personalized Ad Experiences

Using data, CTV ensures that ads are tailored to individual viewers, making them more relevant and impactful.

  1. Reach and Engagement

With millions of people shifting to streaming platforms, CTV advertising captures a growing audience. Additionally, the immersive screen experience ensures high engagement.

Example: Coca-Cola’s interactive ad campaign on Hulu encouraged viewers to explore new product flavors, significantly increasing brand recall.

Non-Skippable Inventory

Many CTV platforms include non-skippable ad formats, ensuring your message gets across.

The Role of CTV Platforms

CTV advertising is only possible with the growing ecosystem of platforms. Popular platforms include:

  1. Hulu: Offers programmatic and direct ad placements with audience targeting features.
  2. Roku: Known for its extensive reach and advanced targeting.
  3. Amazon Fire TV: Integrates with Amazon’s ecosystem, making it ideal for product-based campaigns.
  4. Peacock and Paramount+: Focus on premium content with opportunities for sponsorship and branded segments.
Example: A Home Decor Brand on Roku

A furniture company partnered with Roku to promote its summer collection, targeting homeowners based on past purchase data. The campaign led to a 25% increase in website traffic.

Challenges to Consider

While CTV offers numerous advantages, it’s not without challenges:

  1. Ad Fatigue: Overloading viewers with ads can lead to frustration.
  2. Fragmented Ecosystem: With multiple platforms, managing campaigns across them can be complex.
  3. Cost: While programmatic buying offers flexibility, premium ad inventory on platforms like Hulu or Netflix can be expensive.

Connected TV advertising is revolutionizing the way brands connect with audiences. By leveraging advanced targeting, engaging ad formats, and measurable analytics, CTV offers marketers an unprecedented opportunity to deliver impactful campaigns. As streaming continues to dominate, understanding how CTV advertising works will be critical for businesses aiming to stay ahead in the competitive digital landscape.

Whether you’re a small business or a global brand, the potential of CTV advertising is immense, offering the tools to create personalized, scalable, and performance-driven campaigns.