In 2019, the share of subscription OTT service users in the U.S equaled 55.3%. That figure is expected to increase to 60.6% by 2023. The significant OTT growth in the past couple of years has influenced many ad industries to shift their focus to OTT ad spending.
Zypmedia examined more than 20,000 campaigns in 2019 and then compared them to results in 2018. Their findings reveal that OTT ad spending is going strong.
Some findings on local advertisements:
- Local OTT advertising spend growth rate was nearly 7x higher than the overall digital advertising spend growth rate in 2019
- Local advertisers spent 127% more on OTT advertising in 2019 compared to 2018
- Regional year-over-year growth in the number of campaigns: Northeast increased 107%, the West increased 74%, the Midwest increased 69%, and the South increased 49%
Magna predicts a 31% growth to $5 billion by 2020. Their predictions for 2018 were that OTT ad revenues would hit $2 billion, and OTT ad revenues actually hit $2.7 billion at a 54% year-over-year growth rate. OTT ad spending has been increasing exponentially as consumers become more and more eager to cut the cord.
What is OTT?
OTT is the abbreviation of Over-The-Top. It is a channel in which video content is delivered to viewers. The channel reaches viewers directly via internet access instead of the traditional cable/broadcast providers. It was named Over-The-Top because it goes over the cable box and directly to viewers.
Skipping over the traditional cable box opened up many opportunities now that people can easily access OTT content with only two simple things: Internet access and a compatible hardware device. Access to your favorite movies and shows with your smartphone, computers, tablet, TV, gaming system, and more. Better yet, it's accessible anytime and anywhere!
OTT is not video content, but rather the channels in which that content is delivered to you.
Examples you’re likely familiar with are:
- Amazon Prime Video
- HBO Now
Trends in OTT
The OTT market is growing substantially due to the amount of content that can be reached by consumers.
- Increase in original content output.
- In 2019, Netflix launched an estimated 2,769 hours of original movies, TV shows, and other productions, which is a lot more than the previous five years. They also increased its produced content assets from approximately 1.4 million U.S. dollars to almost ten million between 2016 and 2019
- The number of Original shows to come:
- Netflix - 257
- Amazon - 97
- HBO Go - 64
- YouTube - 50
- Hulu - 53
- Facebook Watch - 27
- An increase in viewer demand and output for holiday movies.
This steady increase in content production means an increase in video ad inventory.
What is video ad inventory?
Video ad inventory is the number of ads or the amount of space a publisher has available to sell to advertisers.
- Examples of video ad inventory that doesn't rely on OTT:
- Social Media
- Video On Demand (VOD)
Trends in Video Ad Inventory
Spending on video ad inventory is increasing at a similar rate to ad spend on OTT content.
- SpotX reports recently seeing a 16% increase in video ad inventory across its global marketplace.
- Marketers report an increase in digital video budgets by 25% year over year.
- Nearly 3 in 4 buyers plan to increase their digital video ad spend in the next 12 months.
- Nearly two-thirds of digital budgets are allocated to video—with Mobile and Desktop video evenly allocated
Beware of Programmatic OTT Bait-and-Switches
Programmatic Video advertising is when the advertiser defines their ideal audience in detail, provides access to their ads, and sets a budget. Then bots buy ad space based on that information.
When working with programmatic video advertising in OTT, you need to know these rates to avoid confusion:
- If a company or television station offers low rates like $20/cpm, they are just streaming on their own content site, and it is not truly programmatic.
- True programmatic OTT costs over $30/cpm.
Is OTT the future of Video Ads Inventory?
All signs point to "yes!"
OTT and video ad inventory show significant growth in ad spending over the last couple of years. Furthermore, the increase in content demand and production will open up a noteworthy amount of video ad inventory availability in OTT. In other words, there is little doubt that OTT is the future of video ad inventory.