Cynopsis Special Report: OTT




Cynopsis Long Story Short
Wednesday March 11, 2020

Cynopsis: OTT Special Report
Cathy Applefeld Olson

It’s game on in the OTT market. 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. As advertisers seek to maximize this unprecedented opportunity to tap targeted local and regional audiences at scale, they need a playbook on facets including inventory, data targeting, measurement and ad fraud.

“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,” says Dennis Cook, VP of Marketing at Gamut, the Cox Media Group company specializing in local OTT advertising solutions.

Inventory: What’s Available, What’s Coming Up

The market is awash in OTT services, with more on the way including WarnerMedia’s HBO Max, which launches April 6, and Comcast NBC’s Peacock, on deck for a July 15 broad launch. While subscription services are making their mark, the expansion of ad-supported options is grabbing headlines.

That’s a boon for brands looking to reach cord-cutters and cord-nevers. “TV Everywhere Apps and vMVPDs offer the extension brands require as viewing behaviors continue to migrate to OTT. As Free to Consumer (FTC) services continue to grow steadily, major media companies are moving to acquire their assets and audiences to galvanize revenue that migrates to OTT,” says Anthony Greene, Gamut VP of Programmer Partnerships. “Forging meaningful 1:1 revenue partnerships with best of breed PayTV and FTC media owners is essential to complement linear strategies, not replace them.”

After Viacom snapped up ad-supported service Pluto TV for $340 million last January, other media companies have made AVOD plays of their own in recent weeks. Comcast recently acquired Xumo and Fox Corp. has its eye on Tubi. Hulu is seeing strong results with its ad tier, and Kevin Reilly, Chief Content Officer for HBO Max, said the service will add an AVOD tier a year after it launches as a subscription service.

To be successful in the local space, Greene says, advertisers find great success working with partners that reserve inventory at a direct-sold level. “Gamut’s local OTT scale enables broadcast buyers to reach audiences not duplicated in linear,” he notes. “It’s not a digital-only world, it’s a digital asset we view as television.”


Data Targeting: Just Because You Can, Doesn’t Always Mean You Should

OTT offers advertisers the first-ever opportunity to marry big-screen video and addressability outside of cable footprints. But Soo Jin Oh, Gamut SVP of Client Strategy and Solutions, cautions, “Just because you can, doesn’t mean you always should,” when it comes to heavy data-driven targeting. “You have to always go back to, what’s my goal with this campaign? Ultimately, OTT is a branding mechanism. When you layer in too much complexity, it starts to work against your original intention of branding.”

Oh suggests brands cast a wider net before getting into more nuanced mid- and lower-funnel messaging. “Some clients immediately gravitate to their lower-funnel customers, get really targeted, and try to apply those attributes to the top of the funnel… As a result, you’re not getting enough eyeballs because you’ve constrained your reach,” she says. “That’s where we have to have an educational conversation with our clients.” Gamut executives last year embarked on a 30-city tour to help educate marketers about OTT.

In the local market, geographic targeting—particularly DMA, which is less granular but more effective than ZIP code—can be a very effective targeting mechanism in some instances, she says. If a brand aims to reach Hispanics in Miami, Oh says, “in that market you get a high density of Hispanics; 7 out of 10 are Hispanic. So are you better served overlaying data, or is the geo good enough to have a broad strategy?” She also cites contextual/behavioral data as a strong predictor. “If the household watches Hispanic content all the time, you can assume the household is Hispanic,” she says. “The main goal is to reach an audience, and there are different tactics to get to that audience that don’t all have to be data driven.”

Measurement: The Market Finds Its Footing

Cross-device OTT measurement hit its stride in 2019, according to Traci Will, Gamut VP of Analytics. “We’ve seen it with many measurement providers. The industry seems to have finally figured out how to measure in this cookie-less environment. We’re also seeing more ability to get granular at the local level.”

“Given the nuanced nature of local markets,” Will says, “it’s critical that media companies work with the best measurement partner for a given campaign. We have many to choose from – we might choose partner A for one campaign and partner B for another, simply based on the objectives, the targeting, and the market of the campaign. Some measurement companies are better suited for local markets, than others,” she says. “And it might depend on which local market a campaign is targeting. Some vendors are set up really well in a top % of the markets, but others are able to measure in all markets because of their methodology. If you have individual franchise owners that need to understand their individual store results, the results of their region, while directional, might not be enough. We need to think about that as we choose the measurement tools.”

Gamut solely uses measurement partners that care about statistically stable and reliable data, “so we can confidently say to clients, ‘Yes, this can be used to inform your decisions,’” she says. “The vendors we choose lean in on statistically relevant data that can inform a decision, and we are big believers in that approach. Sometimes a vendor will have interesting data but it is not a big enough sample to be reliable – and those we are not reporting on. Those [solutions] sometimes look fancier than others at the outset. They may be informative directionally, maybe, but they are not statistically relevant, so we don’t use them.”


The Local Play in a Politically Amped Year

In a campaign cycle where political ad spending will approach $7 billion, according to eMarketer, and reach nearly $1.6 billion in the 2020 cycle, according to Axiois, “OTT is in the forefront of people’s minds and people’s plans. Local OTT, very specifically CTV, is becoming the building block of successful media plans,” says Andrea Duggan, VP of Political Sales at Gamut.

On the agency side, Duggan notes there’s still some confusion about ownership of the OTT spend. “There seems to be a disconnect on who holds the OTT piece of the budget. Some broadcast buyers believe it’s a television extension, some digital shops think it’s a digital play so they should have that budget,” she says. “There are so many definitions out there… but the power of telling your story in a visual way will always win vs. print or outdoor or radio. So television/video will always be the granddaddy medium in political,” she says.

This season’s political advertising is skewing heavily to targeting women, minorities and the often-elusive Millennials and even younger demos. As Millennials tend to congregate around causes, Duggan says cause-oriented spending is robust. “I have a ton of issue plans right now. Issue groups are holding some funds until the path is more defined then heavy dollars will flow.”

Also of note, she says, “in the past, a lot of candidates brought their own data, but now they realize they need to get up-funnel a little bit, they just can’t target their database, so the data funnel has definitely opened up and most campaigns are inviting more people to their party. And, everybody is supporting a get-out-to-vote message.”

Fraud & Brand Safety: Past Lessons Guide Present Precautions

Regardless of how an ad is delivered, “the main concern remains that inventory is fraud free,” says Greene.

The digital delivery of content has been fraught with fraudulent ad delivery practices, particularly when advertisers have purchased programmatically, where ad fraud hovers around 40 percent. Fraudulent players are wasting no time seeping into the OTT space, where ad fraud manager Pixalate estimates ad fraud is robbing US marketers of up to $10 billion in ad spend.

“Advertising dollars follow the eyeballs and fraudsters follow the money. In OTT, there’s been more eyeballs, which means marketers are pouring money in, which means the bad players are also there,” says Oh. “Where fraudsters usually play is in the programmatic space given it’s a busy marketplace with so many buyers, suppliers, and companies in between that allow the fraudsters to do their dirty work unnoticed, so people who buy OTT programmatically will be at a higher risk.”

What’s a brand to do? “We have secured ourselves when building our OTT business,” Oh says. “Instead of programmatic, we have direct relationships with publishers and we buy in their ad server, in their system, so it minimizes the chances for bad players to infiltrate.”

As rampant as fraud is, Oh also notes the stats don’t tell the whole story. Server-side ad insertion (SSAI), which stitches ads into live content to minimize effects such as buffering, can bring a false positive due to so many impressions emanating from a single IP address. “That’s a trigger for a lot of companies to call it fraud. It’s a huge problem because of the economics. We, along with everyone else, will pay advertisers based on their numbers but if a good chunk of that is being misclassified as ‘fraud’ when in fact it’s SSAI, it plays into delivery and margin issues.”


Bottom Line

To be successful in the local OTT space in 2020, advertisers need to become well-versed in key areas of the business including inventory, data targeting, measurement and ad fraud. When building out a comprehensive local video strategy, OTT should be used as a complement to linear television in order to reach local audiences at scale, and own the living room viewing experience. ”These viewers are not available through linear TV, so marketers must combine linear and OTT together to amplify their reach and build their brands,” says Cook. Forward-thinking advertisers who take advantage of the capabilities within the OTT space will have a real opportunity to maximize their advertising efforts in every DMA.

Cynopsis Team

Lynn Leahey
Editorial Director
Kerry Smith
Division President
Access Intelligence

Roberta Caploe

Cynopsis Ad Sales
Mike Farina

Albert Nassour

Cynopsis Job Listings Sales
Trish Pihonak
Director of Operations


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