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  • Writer's pictureRussell Vilardi

Programmatic Advertising Growth in CTV: A Primer

Conceptual illustration of programmatic advertising growth on a connected TV

What is programmatic advertising for CTV, and why is it growing? If you’re an advertiser who has not yet taken advantage of programmatic advertising for streaming video, you’re missing out on a huge opportunity to reach and grow your audience. Similarly, streaming video providers who haven’t yet embraced programmatic advertising aren’t maximizing the potential of their available ad inventory.

The rapid growth of programmatic advertising revenues isn’t by chance—it’s a new, potent way to buy, sell, and target advertising to the CTV audience.

Key Takeaways
  • Programmatic advertising automates the buying and selling of ads to CTV viewers.

  • Programmatic advertising uses demand-side platforms and supply-side platforms to match advertisers with content providers.

  • With programmatic advertising, marketers can micro-target their ads and campaigns.

  • Successful programmatic advertising requires the exchange of detailed viewer data and equally detailed information about a marketer’s target audience.

What is Programmatic Advertising for CTV?

Programmatic advertising for connected TV (CTV) entails the automated buying and selling of digital advertising on over-the-top (OTT) streaming video networks. This system typically uses a variety of algorithms and AI technology to conduct real-time auctions for ad time available on OTT networks. Different advertisers bid on the available ad time, with the high bidder winning the auction and having their ad displayed in the streaming content.

Today’s programmatic advertising lets advertisers personalize their ads to highly targeted audiences, using the wealth of viewer data available from OTT providers. This results in more targeted impressions for advertisers, higher ad rates for providers, and more relevant ads for viewers.

Connected TV advertising explained.

How Does Programmatic Advertising Work?

The programmatic auction process starts when an advertiser notifies one or more demand-side platforms (DSPs) of the ads they want to run. This is often done through a data management platform (DMP). This notification includes information about the target audience and the marketer’s budget.

Simultaneously, an OTT provider (publisher) posts its available ad inventory on supply-side platforms (SSPs), often through an ad exchange. This listing contains information about the program’s content and viewers to help marketers better target their advertising.

The SSPs and DSPs then swap information and use automated bidding software to match advertisers with publishers. The DSP bids on the desired ad space, including how high it’s willing to bid, while the SSP selects the highest bidder.

At that point, the selected advertisement is sent to the provider for integration into the streaming program. It all happens in near-real time.

How programmatic advertising works.

How Fast is Programmatic Advertising Growing?

Advertising-supported video on demand (AVOD) and free ad-supported streaming television (FAST) are skyrocketing. This growth has expanded the OTT ad space and fueled advertisers’ demand to reach CTV audiences.

Statista projects that there will be more than 2.83 billion SVOD/FAST viewers by the end of 2023, up from 2.6 billion the previous year. This will contribute to almost $27 billion in CTV ad spending this year, an increase of 14.4% from 2022 numbers.

What is Driving Programmatic Advertising Growth on CTV?

For advertisers, the chief benefits of programmatic advertising include the following:

  • Enhancement of a multichannel media mix with video ads

  • Access to large audiences through OTT services

  • Precision targeting for specific audiences

  • Ability to go beyond demographic targeting into behavioral targeting

  • Geotargeting to specific ZIP codes

  • Detailed analytics and powerful insights from granular data

  • Maximization of limited ad spend

  • Less expensive than traditional broadcast

  • Unique appeal to younger audiences through streaming video

  • Higher watch rates due to non-skippable ads

These and other important factors are driving the unprecedented growth in programmatic OTT advertising.

How Marketers Bid on Programmatic Ads

The process of bidding on programmatic ads is refreshingly simple. A marketer designs an advertising campaign for a specific audience and then has two choices:

  • If the marketer knows where they want to advertise, they can purchase ad space directly from the content provider. This is the traditional method.

  • If the marketer would rather use programmatic bidding to place ads across a variety of appropriate programming, they submit their audience and bid information to a DSP. At that point, the programmatic auction process goes into effect, and the marketer’s ads are placed in relevant programming where they are the high bidder.

For programmatic bidding to work, the marketer must set a CPM range they are willing to spend. The automated bidding software will start bidding at the minimum CPM and bid until the maximum CPM is reached. This ensures that the marketer never overpays yet spends enough to win the bid.

How marketers bid on programmatic CTV advertising

How to Maximize the Performance of Programmatic Ads for CTV

Generating programmatic ad revenue isn’t as simple as making ad space available. It’s also not as easy as running an ad on the next available program. Both OTT providers and advertisers need to follow best practices to optimize ad performance and revenues.

OTT providers should:
  • Offer a mix of 15- and 30-second spots as streaming audiences prefer shorter ads

  • Provide detailed metadata about program content

  • Provide detailed data about the program’s viewers (location, age, income, education, gender, ethnicity, language, interests, online behavior, home value, wealth index, etc.)

In addition, advertisers should:
  • Specify a detailed target audience

  • Take advantage of microtargeting opportunities

  • Personalize their ads for specific audiences

  • Properly format their ads for different devices (CTVs, smartphones, computers, etc.)

  • Ensure ads meet proper specifications

When OTT services provide detailed information and advertisers use it, programmatic advertising can deliver highly targeted ads with a big impact.

Boost Programmatic Advertising Revenues with Video-On-Demand Solutions

OTT providers can further grow programmatic advertising revenues with video-on-demand solutions such as Penthera’s 2nd Look. These solutions optimize available ad inventories in real-time, leading to higher fill rates and more targeted audiences for advertisers.

Contact Penthera today to learn more about programmatic advertising for CTV.


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