A Beginner's Guide to TV Streaming Advertising

12 min read·Jun 02, 2023

In the last 5 years, streaming media has revolutionized the way Americans approach and consume television. Netflix may have started it all over a decade ago, but today’s landscape is unrecognizable compared to the early days of DVD mailers. Interestingly, while consumers are probably the first to come to mind as the main beneficiaries of TV’s digital transformation, the real winners might actually be - you guessed it - advertisers. Not only has streaming television allowed marketers to target audiences at a granular level with optimizable campaigns, but the recent exponential growth of AVOD (Ad-supported Video On Demand) and FAST (Free Ad Supported Television) channels is exponentially growing the inventory advertisers can bid on. In the words of our friends at The Verge: “The future of TV is free, it has ads, and it involves a lot of channel surfing. It’s a lot like the TV business of old, really. That’s actually kind of the point.” It’s a massive market opportunity that’s evolving at break-neck speed to benefit advertisers and publishers of all sizes. Let’s have a look at how it all works, who the major players are, how to get started, and what it’ll cost ya!

What is streaming advertising?

Let’s begin by defining terms. In the world of advertising, television streaming is more commonly referred to as CTV (Connected Television) in order to differentiate it from short-form video streaming or audio streaming on services like Spotify. The term CTV itself can be confusing, however, as it has come to refer to both:

  • OTT (Over The Top) which is the content itself and 
  • CTV, which originally only referred to the device on which OTT content was streamed (Amazon Fire Stick, Samsung TV, Apple TV, Roku dongle, PlayStation, etc.). 

CTV stands in contrast to traditional or “linear” television which encompasses broadcast and cable programming, and this year marks the first time US households have spent more time watching streamed over linear content. 

Today, the advantages of CTV advertising are pretty clear: it brings together the cachet of TV’s premium inventory and viewing experience with the power of digital targeting, tracking, and measurement. Meanwhile, CTV onboarding and campaign management are completely different. Contrary to traditional television ads which require large, long-term budget commitments, CTV campaigns are much more closely aligned with traditionally self-serve digital mediums like Meta or Google, allowing advertisers to launch and track entire campaigns in just a few clicks.

Ease-of-use for both viewers and advertisers explains this year’s sharp turn towards streaming during 2022 upfront negotiations (where large TV ad contracts are bought and sold every year), where Disney reported 40% of its $9 billion in commitments would be reserved for its streaming platforms while NBCU reported streaming sales up 20% from the previous year. Meanwhile, GroupM predicted in its 2022 end-of-year forecast that linear TV providers would fall below 50% U.S. household penetration by 2025. And while advertisers still invest in the medium, ad dollars have continued to shift to digital platforms. In fact, as of 2023, 94% of US households are reachable with connected devices, as opposed to 22% just 4 years ago. 

Now that most major broadcasters have launched a streaming service or at least started licensing their content on streaming platforms, the next evolution of CTV is marked by the exponential growth of ad-supported channels (vs subscription-supported channels). The meteoric rise of Netflix in the early aughts led many to believe that viewers hated ads more than they actually did. It turns out that what they really hate are irrelevant ads next to content they are not particularly interested in. Today, consumers want customized, relevant content, and they’re willing to sit through some ads to get to it. 

According to a recent The Trade Desk survey, two-thirds of viewers would prefer to watch ads rather than pay for a subscription to watch content, as long as those ads are relevant and not too burdensome. Many cord-cutters originally ditched cable to avoid the big monthly bill, so they are selective in how many subscription streaming channels they sign up for. The demand for inexpensive streaming experiences is so clear that even subscription-based services are shifting models: HBO Max recently introduced a new, cheaper subscription model that included ads to help make up the price difference. With thousands of channels for consumers to pick from, many viewers are willing to sit through a few ad breaks in exchange for free, or less expensive, premium content. After all, Hulu may have one or two originals everyone wants to watch, but channels like Freevee or Pluto have every single season of The Bachelor or CSI for free. That’s hundreds more hours of viewing. These new free platforms are the channels advertisers are vying to place their content on. 

What are the main streaming platforms today? 

When it comes to the word “platform,” people use it in multiple ways. “Platform” may refer to the actual device used for streaming. Popular platforms include Roku, Fire TV, and Apple TV. Alternatively, “platform” may mean a channel found on one of these devices, whether that’s Netflix, Pluto TV, or Disney+. These channels are available across the devices listed above, in the same way an app is available on both iPhone and Android phones.

A few examples of ad-supported streaming services, or those with ad-supported tiers, include:

  • Hulu
  • Peacock
  • Sling
  • Paramount+
  • HBO Max
  • Pluto TV
  • Fubo TV

But don’t be fooled by name recognition! There are hundreds more ad-supported streaming channels you may not have heard of yet that can deliver your ads to highly engaged audiences at increasingly affordable CPMs (Cost Per Thousand Impressions). Ever heard of Xumo? Philo? Crunchy Roll? No? Well thousands of your customers have, and you can finally reach them there before the competition does.

Although the comparison to traditional TV and earlier versions of streaming TV like the Netflix or HBO of a few years ago makes sense, it’s important to remember that today’s FAST and AVOD channels have a different approach to viewer engagement that should be reflected in your advertising strategy. The value these new streaming platforms provides is an inexhaustible catalog of customized content, as opposed to owning exclusive rights to expensive blockbusters and Oscar-nominated series. They don’t care what you watch as long as you’re watching, so sending you down an infinite Gordon Ramsay rabbit hole or hooking you on all 11 million episodes of Project Runway is a pretty easy choice. It’s important for your streaming ads to follow the same principles in order to drive results: customized, hyper-targeted ads featuring clear, relevant content. 

According to a Pluto executive, “Part of our job, via algorithms and merchandising, is to get the right piece of content to the right viewer, learn about what they’re interested in, and then superserve them more.” He’s not thinking about how to reach the whole audience but, rather, how to convince each individual person to keep watching. The big-name shows and movies tend to bring people in, but that’s not why they stay. “What drives a lot of our viewing time are the single series or the franchise channels,” he says. “The Star Treks of the world, CSI, Three’s Company. That drives a lot of viewing time. And what people come back for is a lot of the classic TV and a little more of the niche channels — your food, your home, your lifestyle channels.”

FAST channel revenue grew almost 20 times between 2019 and 2022 — and is set to triple again before 2027, at which point it will be a $12 billion annual business. Early adopter advertisers who learn how to grow with these channels will be setting themselves up for strong, scalable growth without breaking the bank. 

How to create an ad for streaming?

In a nutshell, there are two main ways to purchase ad space on streaming platforms: private deals and open programmatic. For most small and medium businesses, the best way to dip their toes in streaming advertising is with simple, programmatic, self-serve ad platforms that handle budgeting and bid requests for you. 

The process couldn’t be simpler:

  • Choose a CTV ad platform with solid targeting capabilities, a large channel inventory, and a simple interface.
  • Enter your campaign timeline, budget, and targeting preferences (demo, geo, interest, etc.)
  • Select the channels you wish to advertise on (ESPN+, CNN, Pluto, Tubi, Bravo, peacock, and hundreds more)
  • Install a pixel to your website to monitor traffic from households who have seen your ad. *optional*
  • Upload your ad. Most platforms accept 15 second and 30 second ads. A simple mp4 or .mov file should do the trick.
  • Launch your campaign and watch results roll in in real time!

How much does streaming advertising cost?

Of course you could decide to gamble on traditional TV and drop $7 million into a single Super Bowl ad like The Farmer's Dog, which won USA Today's 35th Ad Meter. You could even throw similar amounts at vast designated marketing areas (DMA) or live events and sponsorships, but you don’t have to make a splash anymore to stand out. By pairing first-party retailer data with solid, creative video content delivered on TV streaming platforms, you can laser focus whatever budget you have for a powerful impact.

What matters most today, and what current ad budget trends clearly show, is flexible, addressable media. There’s no point paying for millions of viewers to see your ad when only a fraction of them are in-market for your product. That’s why, contrary to linear TV or print ad budgets which base their cost on the quality of the content that ads are attached to, streaming ad campaign budgets are based on costs per impression. That means advertisers are only paying for the impressions that have actually occurred. In that context, the main way to compare platform pricing is to look at their average CPM (Cost Per Thousand Impressions.)

A variety of factors influence average CPMs for streaming ads:

  • Channel or platform prestige. It can be tempting to go for big names like Netflix, but that impulse is a remnant of an old way of thinking. Remember, the goal here is to target the right audience at the right time, not necessarily to go for the most popular channels and cross our fingers that our customers will be there. In this case, for example, Netflix CPMs start at $60 when other platforms typically offer rates between $20 and $30.
  • Multiple targeting dimensions. As tempting as it can be to pile on targeting criteria to avoid wasting impressions, be careful not to go overboard. The more narrowly advertisers set their targeting parameters, the more their average CPMs will increase. A campaign targeting women between 25 and 44, for example, can start getting a lot more expensive if it is also limited to just a few ZIP codes, a certain household income, on just a few channels. Avoid this type of issue by segmenting your campaign into ad sets focusing on one or two targeting dimensions at a time.
  • Platform type. Not all CTV ad platforms are created equal! Some charge monthly fees on top of campaign costs, others add hefty premium on top of basic CPM charges, and others still add account management fees at every corner. Try to find a self-serve platform with exceptional UX and no contract fees that will allow you to independently run your campaigns.
  • Machine learning. At the end of the day, the absolute most important part of programmatic ad buying is mature, high quality machine learning. Platforms with mature bidders will be able to win ad slots at a higher frequency and lower cost than those just starting out. Vibe.co, for example, has over 5 years of R&D behind its bidder, which explains why our CPMs typically hover right between $15 and $25! 

Given these factors and the many factors that go into developing a campaign, it can be difficult to pinpoint an exact price per campaign, but here are some tips:

  • The first question is: how widely are you distributing your campaign? If you’re only targeting a few specific zip codes, $500 during a short period of time can be great for a quick test. A nationwide campaign, on the other hand, would of course cost more. Generally speaking, you probably want to hover around $2k-$5k per quarter for an impactful campaign.
  • Now if you’re not sure about your targeting parameters, but you have a sense of the amount of impressions you would like to achieve, a great way to get a ballpark figure for your budget is to simply calculate backwards from that number of impressions, divided by a thousand (because our budget currency is cost per thousand impressions), multiplied by Vibe’s average CPM. It’s simple. Let’s say, for example, that you wish to reach 100K impressions during the course of your campaign. Simply divide that number by 1000 and multiply it by Vibe’s average CPM (Cost Per Thousand Impressions) which hovers around $18 to arrive at your campaign budget. That would put your budget at $1800! Easy!

What’s next for streaming?

Digital ad buying in general is undergoing a massive transformation as cookie deprecation, privacy regulations, and AI are rapidly shifting the way business is done. CTV advertising is at the forefront of this transformation, with retail media, CTV, programmatic buying and search remaining on the rise. Why? Shorter ads, innovative formats, and smarter analysis of effectiveness. To bring about this future, advertisers, publishers, and vendors will need to collaborate closely, leveraging their unique assets to build solutions together.

Undoubtedly the most important innovation in 2023 will be the explosion of ad-supported streaming TV - a boon for both cash strapped consumers and advertisers hungry for more inventory. Marketers who recognize the opportunity for affordable inventory and clever targeting ahead of their competitors will be poised to make large incremental reach gains unattainable on other more traditional platforms.

Ready to learn more about streaming advertising? Read A Beginner's Guide to Video Marketing for Small Business for more examples!

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