Why CTV is the New Powerhouse in Programmatic Advertising: A Full Guide to CTV

Polina Smoliar

Connected TV (CTV) advertising is quickly becoming a dominant force in programmatic advertising, with projected revenue expected to exceed $40 billion by 2027, according to eMarketer. However, for this growth potential to be fully realized, the industry must first tackle standardization issues across CTV ad formats.

This guide delves into the rise of CTV as a programmatic powerhouse, including its advantages, market dynamics, and strategic insights for advertisers. It explores how CTV can help brands reach highly targeted audiences while navigating the complexities of a digital landscape.

1. What is CTV and Why It Matters in Programmatic Advertising

CTV encompasses any television that can stream content through the internet, such as Smart TVs, set-top boxes, and gaming consoles. This format allows advertisers to deliver targeted, data-driven ads on a large screen, bridging the gap between traditional linear TV and digital advertising. Unlike traditional TV, which casts a wide net with limited targeting, CTV advertising leverages programmatic technology to reach audiences based on behavioral insights and viewing preferences.

2. The Rise of CTV Platforms and Market Saturation

Established streaming giants like Netflix and Disney Plus now face increasing competition from niche and freemium services such as Shudder, Mubi, Freevee, and Roku Channel. Over the past decade, the number of streaming platforms has more than doubled as new contenders entered the market to disrupt traditional entertainment and challenge major incumbents.

This saturation has made it challenging for all but the largest platforms to sustain long-term growth. Even major players like Netflix UK have seen diminishing returns, growing their subscriber base by only 4% in 2022 after years of consistent double-digit growth. This phenomenon, often referred to as "SVOD fatigue," has led many consumers to scale back their subscriptions in favor of ad-supported options.

Paul Gubbins, former VP of CTV strategy at Publica by IAS, notes, "Many TV audiences are dialing back the number of subscriptions they have, and leaning into free or low-cost AVOD and FAST services."

Samsung Ads conducted research in collaboration with LongTerm CoLab and ISBA to understand evolving consumer behaviors in the CTV space. Their report sheds light on the factors driving ad acceptance and reveals essential insights for advertisers aiming to maximize CTV’s potential.

Key Findings from the Research:

TV Moments Hierarchy: Ad acceptance is strongly influenced by "TV moments" or the viewer's context. This hierarchy, which takes into account viewer motivations (e.g., why and when they’re watching), showed an 80% higher variance in ad acceptance compared to environmental factors like genre or show type.
High Ad Acceptance Opportunities: Samsung Ads identified three "moments" with high ad acceptance:
- News Catching (85% ad acceptance)
- Evening Escape (66% ad acceptance)
- Family Time (50% ad acceptance)
Shared Viewing and Ad Acceptance: Ad acceptance increased by 19% when more people were present, with a 33% rise in ad memory encoding, highlighting the value of shared viewing for deeper brand engagement.

Generational differences also play a role in ad acceptance, with Gen Z generally more receptive to ads due to their familiarity with ad-heavy environments like social media. Meanwhile, older generations align more with traditional TV ad experiences, though younger millennials tend to resist ads, favoring ad-free subscription models instead.

3. Why CTV is Essential for Advertisers Today

CTV advertising isn’t just a promising tool; it's becoming essential for brands aiming to stand out in an increasingly crowded digital landscape. Here’s how CTV’s unique capabilities are creating unparalleled opportunities for advertisers:

Enhanced Targeting. With CTV, advertisers gain access to a level of audience targeting that far surpasses what linear TV ever offered. Leveraging granular data like demographic profiles, viewing patterns, and behavioral insights, CTV campaigns can deliver highly relevant and personalized ad experiences. For example, a sportswear brand can target fitness enthusiasts with tailored content, or a streaming platform can promote content genres based on prior viewing habits.
Interactive Ad Formats. CTV allows advertisers to experiment with interactive ad formats, fundamentally altering how audiences interact with content. Rather than passively viewing ads, audiences can click on them, participate in polls, or engage with additional content directly from their screen.
Measurable ROI. Unlike traditional TV, where ad performance is estimated based on limited metrics, CTV offers concrete, real-time data that’s invaluable for tracking and optimizing ROI. Key performance indicators (KPIs) like completion rate, click-through rate (CTR), and engagement time can reveal a campaign’s effectiveness almost instantaneously.

4. Strategies for Effective CTV Advertising

1. Embrace Data-Driven Strategies. Utilize audience data to create segmented campaigns that speak to viewer preferences and behaviors.

2. Optimize for Device and Viewing Context. Design ads that adapt well across different screen sizes and accommodate varying viewing contexts, such as family time or solo watching.

3. Leverage Interactive Ad Options. Use features like "click to download" or "scan to learn more" to make ads more engaging and relevant.

4. Test and Learn with Ad Format Variations. Explore different formats (e.g., pre-roll, mid-roll) to identify what works best for your target demographic.

5. IAB Tech Lab’s "Ad Format Idol" Initiative and CTV Standardization

Aiming to streamline CTV ad scalability and facilitate programmatic transactions, the IAB recently launched "Ad Format Idol" — a new initiative to create common standards for emerging CTV ad formats and optimize the bidstream for seamless "build once, serve everywhere" functionality. This initiative runs from October 22 through January 22, giving the industry time to evaluate submissions and establish technical standards for scalability.

The goal is to create a unified framework for CTV advertising formats, enabling advertisers to design campaigns that can seamlessly operate across different platforms and devices without customization for each environment.

6. Future Trends in CTV Advertising

As CTV continues to evolve, here are key trends to watch:

Increased Focus on Audience Engagement. New formats will emphasize not just reaching audiences but engaging them meaningfully.
Growth of AVOD and FAST Channels. As subscription fatigue grows, free ad-supported channels are expected to increase.
Personalized Ad Experiences. Advances in AI will further personalize ads based on real-time viewer preferences and habits.
Hybrid Models Combining SVOD and AVOD. Platforms may begin blending subscription and ad-supported models to balance viewer preferences and revenue goals.

CTV advertising has emerged as the next evolution of television advertising, marrying the reach of traditional TV with the precision of digital ads. With ongoing standardization efforts, like the IAB Tech Lab's "Ad Format Idol," CTV is poised to offer advertisers a scalable, effective channel to connect with audiences in ways that were previously unimaginable. As CTV continues to mature, advertisers who embrace this dynamic, consumer-centric approach will stand to benefit the most.