MediaPost

Local OTT Advertising: An Essential Part of the Media Mix in 2020 and Beyond

Written by Dennis Cook, VP of Marketing at Gamut

The increasing popularity of OTT streaming services provides local and regional advertisers with a unique opportunity to reach a growing streaming audience at scale and to target their key consumers like never before in every DMA.

 

According to a July 2019 report from eMarketer over 218M U.S. adults are projected to stream OTT video services by 2022, which will be equal to 65% of the U.S population. This year alone, the OTT audience is expected to grow by 4.2 million viewers and by 2022 it’s expected to grow by 12.6 million viewers.

 

There’s a direct correlation between the increase of OTT viewing consumption and the decline of linear TV viewership.  In 2019, there were 75 million estimated traditional pay TV subscribers with 64.6% penetration of U.S. TV homes, according to Pivotal Research Group. In five years, the penetration is projected to drop to 42%.  In 2019, over 3.5M HH’s cancelled their traditional cable/satellite service according to the same eMarketer report, totaling 40.2M HHs that are either cord-cutters or cord-nevers. This group of “Non-Pay TV” households is expected to grow another 39% by 2023.

 

As younger generations, who are early adopters of streaming services, mature into key purchasing demos, the number of cord-cutters and cord-nevers will grow significantly.

 

With this change in viewership, advertisers are looking to maintain the reach of their local video buys in the markets that matter most to them, while also maximizing their return on ad spend. How are they doing this? By complementing their traditional local broadcast and cable TV buys with local OTT advertising inventory aggregated from premium ad-supported streaming services. As consumers shift their viewing habits, advertisers need to adapt in order to continue to reach their key audience segments.  Agencies and brands are now recognizing the impact of local OTT campaigns and are increasingly incorporating local OTT into their media mix. In fact, local OTT ad revenue is projected to reach an impressive $2.13 billion by 2024, according to research from BIA Advisory Services.

 

This evolving marketplace sets up a great opportunity for advertisers to find their local audiences at scale while creating a rewarding experience for the viewer with the help of digital technology. It’s a powerful asset, and it has pivoted the traditional advertising mindset for ‘local.' Brands are now able to address audience needs and place targeted ads within relevant, brand-safe, premium OTT content to ultimately, improve the customer experience and drive viewer engagement. As brands and their agencies increasingly see results from OTT campaigns, they are shifting budgets to take advantage of the opportunity. In a 2019 IAB report, 50% of media buyers and planners surveyed reported that they would be increasing their OTT video budgets this year. 

Local OTT advertising combines the power and impact of TV with the targeting and measurement of digital in order to deliver the business outcomes that matter most to advertisers.

Local OTT Campaigns: Effective with Proper Execution

Buying advertising in the local OTT space can be complex but the buys are highly effective.

Whether targeting audiences based on geographic, demographic, behavioral or contextual data, advertisers can now reach more of the right viewers in the markets that matter most.  OTT campaigns allow you to track and analyze campaign data and results in real-time, a capability the TV industry lacked in the past. Marketers can now measure consumer reactions and responses and leverage real-time data to create a steady flow of insights in order to optimize their campaigns.

This allows marketers to target different audiences with the most effective messages in order to increase the odds of engagement and purchase.  For example, auto advertisers selling different models of a vehicle can target based on in-market auto intender preferences derived from website visitation; QSRs trying to drive in-store foot traffic can run different sales promotions based on purchase behavior; and political campaigns can reach voters based on zip level or statewide targeting.

Local OTT advertising allows you to personalize your campaigns in order to create an authentic connection with your customers and speak to an audience that is increasingly difficult to reach through traditional media channels. It’s important to note that advertisers have to be careful to not layer on too many data targets when planning their OTT media buys as this could limit the scale of their campaigns. Finding the right balance of data usage is key to successfully using OTT as a full-funnel solution in order to not only build brand awareness but also drive purchases with current and prospective consumers. 

OTT is now a vitally important complement to linear television when building out a comprehensive local video strategy in order to reach the full marketplace and own the living room viewing experience.

More Inventory in the Marketplace

This year, we will see an insurgence of new OTT services. Some, like NBCU’s Peacock, are entering the market as ad-supported services, while others, including WarnerMedia’s HBO Max and Disney+, are launching as subscription services. Many in the industry believe though that they will eventually add an ad-supported tier to increase their audience base. Introducing ads into these services will be a delicate process to make sure subscribers maintain the best viewing experience.

Disney recently announced that its streaming service Disney+ had gained 28.6 million subscribers since launching in November 2019.  According to a recent Sensor Tower Report, Disney is spending $24 billion to ramp up programming.  This is compared with $10 billion for Netflix, $8.6 billion for Amazon Prime and $1 billion for Apple.

ViacomCBS also recently announced plans to bulk up its CBS All Access streaming service later this year by launching a new “House of Brands” product that will add select film and TV assets from the company’s library to CBS All Access.  This expanded offering will complement the company’s existing free Pluto TV and pay Showtime OTT services in a three-pronged approach to the market.

As media companies continue to invest in and distribute content directly onto streaming platforms, and away from linear TV, the amount of available inventory in the OTT market will increase over time.  This addition of premium quality must-see OTT content will only accelerate the growth of OTT viewership.

The Opportunity is Now

Forward-thinking advertisers who take advantage of this new advertising model and expansion in ad inventory will have a real opportunity to build their brands by reaching untapped local audiences at scale in every DMA.  These OTT audiences are not available through linear TV, so marketers must combine linear and OTT together in their media mix in order to maximize their reach and build their brands among their total addressable market.