What is OTT Advertising And How Does it Work?

KEY TAKEAWAYS

• Video ads are directly delivered through streaming platforms with OTT advertising.
• Audience targeting becomes easy.
• OTT ads can’t be skipped, meaning the advertising will be watched by the user till the end. 
• There are multiple pricing models. 
• Brands can save significant amount of money with OTT advertising. 

OTT platforms have gained worldwide popularity and are used by millions of people daily. As of 2025, they are expected to be valued at $343.82 billion, showcasing their growth and constant use among users globally. 

With the rapid popularity of OTT platforms, OTT advertising has also become a new way for brands to promote their video content. They can now bypass the traditional cable and satellite channels. But what exactly is it?

In this article, I’ll mention what is OTT advertising and how does it work. I’ll be mentioning all the necessary details that need to be known about this topic. So, let’s get started. 

What Are OTT Services?

These are specialized services that can start streaming data to any connected device. These services are different:

TVOD or Transaction video on demand works on a pay-per-view model, meaning the payment is made for any specific content. It can be a movie or a series. Some examples include Vimeo, iTunes, and Google Play. 

Video on demand with advertising (AVOD) works on the free viewing model with advertising. These are resources with free subscription content that involve built-in advertising connections. YouTube, Twitch, and Hulu work on this principle.

Subscription video (SVOD), which works on the model of paying for content without advertising. It is usually for those who don’t want to advertise while streaming. Netflix, Disney Plus and Amazon Prime Video are some of the examples. 

Multichannel programmatic distributors (MVPD) assume payment for streaming and broadcast content. These are streaming content services such as AT&T Now or YouTube TV. Below you can see the OTT stats in India. 

What is OTT Advertising?

OTT advertising is a format of streaming video advertising that is delivered directly to the audience, bypassing third-party intermediaries. It is integrated in the following ways:

• Programmatic. Automated display, which is initiated by the video hosting service through specialized platforms. Even though these advantages look quite promising, advertisers still can’t decide at what time or place will the promotional materials will be displayed. 
• Direct purchase on the platform. OTT advertising directly gets involved with the device supplier. 
• Direct purchase from the publisher. This approach allows you to select the place and time of display of advertising materials as accurately as possible, as well as target the target audience. Even though this is effective, but the integration doesn’t come for cheap, it is going to cost significant amount of money, but it’s worth it. 

Advantages of OTT Advertising

The growth rate of streaming services built with the ability to launch advertising integrations is already twice as high as services without such an option. Video hosting services that are now offering professional materials have experienced significant growth in comparison to those that earn money in other ways. 

The main advantage of OTT advertising, from the consumer’s point of view, is the ability to view content for free. This way, you can save significantly on various paid subscriptions. The majority of the audience is looking for cheaper content, even if the promotional material is already built in it. 

Among other advantages:

1. Wide opportunities for targeting. Traditional advertising on television does not lend itself to any sensible targeting at all. You can choose, perhaps, the broadcast region. But still, it’s not possible to target any specific categories of the population. However, OTT advertising can do this by assuming the possibility of precise targeting with: 

• by geo parameters;
• by device types;
• taking into account demographics;
• based on behavioral factors.

2. OTT advertising does not require cookies. Video advertising is growing in demand, even though there is no way to create cookies. This is possible because:

• There are forms of behavioral advertising that do not require these files. Targeting is based on the specificity of the content being posted. 
• The hosting services themselves have sufficient statistical data on their audience. You can use them and fully configure the required target audiences.
• There are options for designing your own user based on metadata. So, if necessary, you can create your own white and black sheets.

3. OTT advertising has incomparably higher viewing rates. The inability to skip ads while viewing content forces users to watch the material. A person cannot install Adblock or switch to another video. Promos can’t be avoided, and they will be watched at all costs. The only option users have is to turn away from the platform when the ad is playing, but that rarely happens. 
4. Saving on integrations. Extensive opportunities for targeting and analyzing launched advertising campaigns help you manage your budget more effectively. While making a marketing strategy, all the possible platforms should be included. There is no need to limit yourself and stick to one source. Using every way possible to make your brand visible and gain a more loyal audience. 

Pricing in OTT Advertising

OTT advertising has several of its own parameters, based on which the efficiency of integration is assessed:

• CPM ‒ cost per thousand views.
• CPV ‒ cost per view. This is how much you pay for each ad launch.
• CPCV ‒ cost per completed view. This applies to integrations that require a complete viewing of promotional materials. Since the audience can’t turn off or skip the ads, this figure is much better than other forms of integration. 
• VCPM ‒ cost per display of integration in the visible part of the screen. Advertisement needs to be watched for at least two seconds.
• VCPV ‒ cost per full viewing of promotional material in the visible part of the screen. This is a kind of VCPM / CPCV.
• CPH/CPS ‒ cost of advertising per hour or per second. Payment for the time the ad is displayed (usually calculated per 1,000 visible impressions).
• CPE/CPI ‒ cost of acquisition/cost of interaction, for example, for a light box.

DID YOU KNOW?Globally, $207.52 billion is spent on OTT video advertising!

Final Thoughts

OTT advertising has proven to be a flexible way to reach a wider audience as they spend more time on OTT platforms in comparison to television. With precise targeting, high levels of enthusiasm, and the ability to escape the pitfalls of traditional TV, this format opens up new horizons for brands.

Understanding how OTT advertising works allows you to build more effective advertising strategies and adapt to changing media consumption habits. If individuals wish to learn about OTT advertising or how to achieve maximum efficiency, they should reach out to TeqBlaze, who are considered to be a reliable partner in this business. 

FAQ’s

---