What is connected TV? How CTV advertising works

What is connected TV advertising? Benefits & how it works

TL;DR: What is CTV advertising?

With the rise of streaming services and internet-enabled devices, viewers are increasingly ditching traditional linear TV and watching their favorite shows, movies, and live sports on demand through connected TV (CTV).

According to EMARKETER, CTV ad spend will surpass that of linear TV for the first time by 2028, accounting for 52.1% of the $91.23 billion USD in total TV ad spend that year. Meanwhile, the number of US households with pay TV is expected to drop below 50% before the end of 2026.

With consumers cutting ties with cable and flocking to streaming in droves, CTV has emerged as an ideal channel for advertisers to reach a more engaged target audience.

Whether you’re new to CTV advertising or looking for an in-depth refresher on how it works, here’s everything you need to know about CTV and how to successfully integrate it into your omnichannel advertising campaigns.

What is connected TV?

CTV refers to televisions that connect to the internet, either directly via built-in capabilities or through an external device, allowing viewers to stream live or on-demand video content from the comfort of their home. Examples of CTV include Smart TVs (e.g., Samsung, LG), streaming devices (such as Amazon Fire Stick, Apple TV, Roku, or Chromecast), and gaming consoles (like Xbox and PlayStation).

Unlike traditional linear TV, CTV allows viewers to access a wide range of video content through subscription-based or ad-supported streaming services like Netflix, Disney+, Max, Paramount+, Peacock, and Tubi. This flexibility provides advertisers with opportunities to target highly engaged audiences with more precision.

What is connected TV advertising?

CTV advertising is a form of digital advertising that delivers targeted video ads within streaming content on internet-enabled TVs.

CTV inventory (aka the available ad space on streaming platforms) primarily involves video ads—similar to traditional commercials—that run before (pre-roll), during (mid-roll), or after (post-roll) programming. CTV ads can also take the form of interactive or non-linear ad formats, such as shoppable ads or dynamic overlays, which appear within or on top of streaming content to increase viewer engagement and conversions (more on that later).

With its data-driven targeting and more granular measurement, CTV advertising is helping to democratize television advertising. It allows everyone from small businesses (SMBs) to major brands to target audiences through premium channels and high-demand content that were previously inaccessible (like award-winning series, top-rated reality shows, and live events) at a lower cost and with less minimum ad spend than traditional linear TV advertising.

How does CTV advertising work?

CTV advertising leverages automated, data-driven ad purchasing through programmatic buying to target and engage viewers across streaming content. Here’s a simplified look at how the whole process works step-by-step:

Step 1: Content selection and ad placement

It all starts with a viewer selecting something to watch, such as a movie, TV show, or live event, on a CTV device.

At the same time, the streaming platform automatically identifies available ad slots and shares relevant data (such as device type, content genre, and demographic or behavioral characteristics about the viewer) with an ad exchange, which facilitates real-time bidding among advertisers.

Step 2: Programmatic buying and bidding

An advertiser uses a demand-side platform (DSP) to purchase or bid on ad slots from the ad exchange through various types of programmatic deals, such as:

These deal structures streamline the ad-buying process by offering advertisers greater efficiency, control, and transparency than traditional linear TV ad buying.

Step 3: Ad delivery

Once an advertiser secures or wins the ad placement, the ad is instantly served and seamlessly integrated into the viewer’s streaming experience, much like traditional TV commercials, but tailored based on the viewer’s profile and interests.

Step 4: Campaign measurement and optimization

From there, advertisers track real-time metrics, including impressions, video completion rates, and conversions (e.g., online purchases tracked via pixels, or store visits measured through cross-channel attribution), which advertisers can analyze immediately to refine targeting strategies and further optimize campaign performance.

What’s the difference between CTV and other TV advertising channels?

Understanding the differences between linear TV advertising and other streaming-based advertising options is essential to crafting the right CTV advertising strategy. Here’s what you need to know.

OTT vs. CTV advertising

Over-the-top (OTT) refers to video content streamed on any device, like a desktop computer, smartphone, or Smart TV that’s connected to the internet. OTT gets its name because it bypasses traditional linear cable TV by streaming content online.

CTV is a subset of OTT. For example, if viewers watch Disney programming via Disney+ on their mobile device, they’re streaming OTT content. But if they watch it through an external device like a Google Chromecast or Amazon Fire TV Stick plugged into their TV, that would be considered CTV.

OTT advertising refers to any ad delivered directly to viewers over an internet-enabled device (like a computer or tablet), whereas CTV advertising refers to ads specifically targeted to viewers using a CTV device.

Because CTV content is often viewed on larger screens in a more relaxed environment, CTV ads are typically known for having higher ad recall than OTT ads, which are often displayed on smaller mobile and desktop screens.

Traditional linear TV vs. CTV advertising

Linear TV refers to traditional television programming that viewers watch at a scheduled time, typically through an antenna, cable, or satellite subscription.

The main difference between CTV and traditional linear TV advertising is that CTV ads can be played before, during, or after the streaming of on-demand content. In contrast, linear TV ads are delivered live during the commercial breaks of traditional TV programming.

CTV advertising also gives marketers more precise audience targeting and greater flexibility over how they spend their budgets. Linear TV, on the other hand, is designed to reach a broad audience, but is less precise and more expensive.

With pay TV usage declining and CTV expected to surpass linear TV in ad impressions by 2030, advertisers have a growing opportunity to reach audiences as viewing continues to shift toward streaming.

Addressable TV vs. CTV advertising

Addressable TV allows marketers to deliver targeted, personalized ads to specific households or audience segments, even if they’re watching the same TV show.

CTV advertising can leverage the targeting capabilities of addressable TV, but addressable TV isn’t limited to just CTV devices. Advertisers can also serve ads through cable, satellite, and internet protocol television delivery systems and set-top boxes.

What are the benefits of Connected TV advertising?

CTV advertising combines the precision of digital advertising with the high-res, high-impact power of traditional linear TV advertising. It allows advertisers to target the right audience at the right time and moment, captivating customers when they’re the most receptive: watching TV in the comfort of their homes.

Here are five of the main benefits of CTV advertising:

1. CTV offers enhanced targeting capabilities

CTV ads are sold as impressions, similar to programmatic video or display ads sold through a DSP. This means you can apply similar strategies using first-party data, third-party segments, and lookalike audiences to target ads based on user behavior, audience demographics, geographic location, and more, reaching the right audiences and wasting less ad spend.

2. CTV can be leveraged for retargeting

CTV ads use pixels or software embedded within an ad or app to capture device information and user behavior when a viewer engages with an ad. Advertisers can leverage this data for cross-device retargeting, allowing them to deliver relevant ads to viewers across devices, such as smartphones and computers— enhancing conversions and brand engagement.

3. CTV provides real-time optimization and measurement

With traditional linear TV ads, you’d often need to wait weeks, if not months, to receive performance reports and know how a campaign performed. With CTV, you can access real-time reporting and metrics like impressions, CPMs, and view-through conversions, making it easier to track campaign performance and optimize them on the fly.

4. CTV enables more holistic campaigns

Research shows that second-screen viewing is becoming more common while watching TV—and it’s not just among young people. New data from Omdia found that 52% of US viewers aged 45–54 now watch video clips on their phones while watching TV. Even 35% of viewers aged 55–64 are now multitasking with mobile video.

Unsurprisingly, this behavior is even more common among Gen Zers and millennials: 63% of 18–24 year-olds reported watching videos on their mobile devices while watching TV, along with 61% of viewers aged 25–34.

Instead of competing for attention, second-screen viewing creates additional opportunities for advertisers to reach specific audiences across their devices.

Incorporating CTV into your existing multi-channel strategy can help you get better campaign results and increase the likelihood of a conversion by capturing your audience’s attention wherever they are online.

5. CTV has increased viewer engagement

CTV is commonly known to offer higher levels of viewer engagement compared to traditional linear TV ads. CTV ads are often unskippable, broadcast in high-definition formats like 4K and 21:9 widescreen, and provide more interactive ad experiences that encourage interaction. This often leads to higher completion rates and longer viewing times than traditional linear TV ads.

What are some types of CTV ad formats, targeting, and metrics?

CTV offers the targeting, measurement, and flexible ad formats of digital advertising, giving advertisers real-time insights and the flexibility to create highly-targeted campaigns without losing the benefits of traditional linear TV campaigns.

CTV ad formats

CTV offers advertisers multiple formats to engage viewers effectively across streaming content. Here are some of the most common CTV ad formats advertisers can leverage:

CTV measurement

CTV provides the types of granular reporting and measurement that advertisers could never previously access with traditional linear TV campaigns. Here are some CTV metrics that can help you measure the effectiveness of your campaigns:

Additionally, marketers can use footfall attribution to measure how effectively their CTV ads drive customers to visit physical store locations, directly linking online ad exposure to offline activity.

CTV targeting capabilities

CTV provides more precise household targeting than traditional linear TV advertising, allowing advertisers to deliver personalized messages, optimize campaign performance, and reach the right audience more efficiently.

Here are some key targeting methods advertisers can use with their CTV campaigns:

Connected TV advertising best practices

Now that we’ve explained the features, benefits, and advantages of CTV advertising, let’s go over some of the best practices, strategies, and tips that can help you get the most out of your CTV campaigns.

1. Use CTV as part of a multi-channel strategy

CTV advertising should act as a complement to your existing multi-channel strategy, not a replacement for it.

Use CTV to retarget potential customers, tell a different side of your brand story, get in front of viewers on different devices, and push viewers further down the funnel.

2. Get creative with your CTV ads

The more ad creatives you have, the more opportunities you have to optimize your campaigns.

3. Reduce ad fatigue with frequency capping

4. Use CTV to boost brand awareness and gauge brand recall

5. Target the right audiences

6. Get interactive

Connected TV statistics

By now, you probably understand the benefits of using CTV advertising in your programmatic campaigns. But let’s wrap up with a few more noteworthy CTV stats that show where it’s headed, how it’s evolving, and why it needs to be part of your next marketing campaign.