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How OTT Fragmentation Is Hampering Ad Buying

February 27th, 2018   ||    by Todd Wasserman   ||    No Comments

As over-the-top (OTT) grows, so does OTT fragmentation. If you’re a regular user of streaming services, you’re not alone: a November 2017 Nielsen report found about 58.7 percent of U.S. households use a streaming device to access TV services.

Back in the days of broadcast, there were three major networks. And while the same is true for streaming, OTT is fragmenting rapidly. A 2017 survey from market research company Parks Associates found that Netflix, Amazon Video, and Hulu were the top three streaming services. But there are many others—including MLB.TV, HBO Now, and YouTube Red—that are creeping up on them.

The fragmentation of OTT has made the marketplace more complex for media buyers. Those who viewed OTT as an addition to their linear TV buys should look at it as a replacement with higher engagement rates.

Meanwhile, the industry needs to work harder to make placing buys easier as more supply becomes available.

How OTT Is Different

As MediaPost noted in September 2017, media buyers tend to assume that OTT viewers overlap with those they’re already reaching via linear TV. But since OTT viewers choose the shows they want to watch, there’s less channel surfing, and completion rates hover around 97 percent.

OTT programming also offers one-to-one targeting opportunities that rival those of digital media. Though the infrastructure for targeting and measurement is still nascent, OTT provides a means to granularly target TV viewership—something that hasn’t been possible outside of addressable TV before. Media buyers can now target viewership via zip code, designated market area (DMA), demographics, and behavioral and contextual groupings.

With a more refined targeting comes higher cost per thousand impressions (CPMs), which may make some buyers conclude that a national buy reaching a larger portion of uninterested viewers is more valuable.

But don’t be swayed: buyers might pay more to reach a smaller audience, but this audience will be more interested in the messaging, according to Digiday.

OTT Fragmentation

When it comes to OTT, Netflix, the largest streaming service, is currently ad-free and disconnected from the rest of the TV industry. This makes collective buys difficult to pull off.

But as more content providers enter the market, OTT advertising opportunities will become more robust. Unfortunately, OTT buys don’t generally fit into a programmatic TV framework, requiring insertion orders and different rules depending on the market.

But that’ll change with new entrants and competition. T-Mobile announced that it’s entering the streaming TV market this year. The introduction of its new 5G high-speed wireless network this year may also convince viewers to not only cut the cord but to yank their broadband service as well—since 5G provides comparable speeds.

Looking toward the future, more supply and greater demand from media buyers will likely result in a smoother buying environment—and soon. There’s too much at stake among cable providers, broadcast networks and advertisers for it not to work.

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