What do we know about OTT advertising efficiency?

Remember when watching TV meant sitting down at a specific time to catch your favorite show? That world has vanished like rabbit ears on television sets. Today’s viewers hop seamlessly between smart TVs, phones, tablets, and laptops—consuming content on their own schedules across multiple platforms. This fundamental shift in viewing behavior has catapulted OTT (over-the-top) advertising from a supplementary tactic to a central component of modern marketing strategies. Yet despite growing investment in this channel, marketers still grapple with a crucial question: how efficient is OTT advertising really, and how do we measure its true impact?

What is OTT advertising and how does it work?

OTT advertising refers to ads delivered through streaming content that bypasses traditional television distribution channels. Rather than coming through cable, broadcast, or satellite TV providers, these ads reach viewers directly via internet-connected devices—whether that’s a smart TV, mobile phone, tablet, or computer. This direct-to-consumer approach fundamentally changes how ads are delivered, targeted, and measured.

The OTT ecosystem encompasses several distinct environments that marketers should understand. Connected TV (CTV) represents the fastest-growing segment, delivering ads on television screens through streaming devices like Roku, Apple TV, or smart TVs running platforms like Fire TV. Mobile OTT involves ads delivered through streaming apps on smartphones and tablets, while web-based OTT includes browser-based streaming experiences on computers and laptops.

Unlike traditional TV advertising with its broad audience buys and limited targeting options, OTT platforms leverage digital capabilities to offer more precise audience targeting. Most OTT platforms operate on a AVOD (advertising-based video on demand) model like Hulu or Peacock, SVOD (subscription video on demand) model like Netflix’s ad tier, or FAST (free ad-supported streaming TV) model like Pluto TV or Tubi. Each model presents different advertising opportunities, inventory availability, and audience composition that marketers must navigate strategically.

The growth and evolution of OTT advertising

OTT advertising has transformed from a supplementary channel to a primary focus in strategic marketing campaigns. According to Statista, the number of OTT video service users in the United States alone is projected to surpass 241 million by 2025. This massive audience base creates unprecedented opportunities for brands to connect with consumers who have increasingly abandoned traditional television.

The surge in OTT adoption extends far beyond North America. eMarketer reports that consumers worldwide are increasingly turning to OTT platforms, with global OTT video ad spending expected to reach $32.05 billion by the end of 2023. This impressive growth trajectory reflects the channel’s expanding footprint across international markets and diverse demographics.

Recent research further validates OTT’s dominance in the media landscape. A 2021 Nielsen survey reported that streaming accounted for 28% of total TV viewing in the U.S., while Deloitte’s Digital Media Trends report found that over half of U.S. consumers now subscribe to at least one OTT service. These figures underscore an undeniable reality: OTT has evolved from an emerging medium to a dominant force in digital advertising. As consumers continue migrating toward on-demand content, marketers must adapt their strategies accordingly.

Is OTT advertising efficient?

Understanding the efficiency of OTT advertising requires examining both engagement metrics and financial returns. Video completion rates serve as a vital indicator of viewer engagement and attention. According to GroupM’s outlook, OTT ads achieve a remarkable 98% completion rate—far exceeding most digital advertising formats. This near-universal completion suggests viewers actually watch OTT ads rather than skipping or ignoring them, creating powerful opportunities for brand storytelling and message delivery.

Financial efficiency metrics paint an equally compelling picture. ROI Revolution’s 2023 report reveals that marketers investing in OTT experience an average 8:1 return on ad spend (ROAS), significantly outperforming many traditional advertising channels. This impressive return highlights OTT’s potential cost-effectiveness when properly implemented and measured. Beyond direct response metrics, InvespCRO’s research indicates that targeted OTT ads can increase brand lift by 20%, directly impacting purchase consideration and conversion rates.

These efficiency metrics, while promising, come with an important caveat: they depend heavily on proper targeting, creative quality, and accurate measurement. Marketers achieving the highest efficiency from OTT typically employ sophisticated audience targeting strategies, develop compelling creative specifically designed for the OTT environment, and implement comprehensive measurement approaches that capture both direct and indirect impacts of their campaigns.

Key benefits of OTT advertising

OTT advertising combines television’s high-impact visual storytelling with digital’s precision targeting capabilities—a powerful combination that offers unique benefits. The full-screen, often non-skippable nature of OTT ads delivers exceptional viewability and completion rates compared to many other digital formats. When viewers actively engage with streaming content, they typically experience fewer distractions than when browsing social media or websites, potentially increasing ad recall and brand awareness.

The targeting capabilities represent another significant advantage over traditional TV advertising. Instead of purchasing broad demographic segments across general programming, OTT enables marketers to reach specific audience segments based on interests, behaviors, geography, and other factors. This precision minimizes wasted impressions and creates opportunities for more relevant creative messaging tailored to specific viewer segments.

OTT also offers valuable access to cord-cutters and cord-nevers—audiences increasingly difficult to reach through traditional television. These viewers, who skew younger and often have higher disposable income, represent a valuable demographic for many brands. As traditional TV viewership continues declining among these groups, OTT provides a critical channel for maintaining reach while delivering ads in a premium, brand-safe environment that combines television’s impact with digital’s measurability.

Targeting capabilities that enhance efficiency

OTT’s sophisticated targeting options fundamentally change how marketers approach television advertising. Unlike traditional TV’s broad demographic targeting, OTT platforms enable audience segmentation based on first-party viewer data (viewing habits, subscription information) and third-party data integrations that provide deeper insights into viewer interests, purchase behavior, and demographic profiles.

Geographic targeting capabilities range from national campaigns down to hyper-local ZIP code level targeting, allowing national brands to deliver region-specific messaging and enabling local businesses to access television advertising previously beyond their reach. This location-based precision eliminates wasted impressions on viewers outside a brand’s service area and creates opportunities for tailored messaging based on regional preferences or market conditions.

The household-level targeting unique to OTT creates interesting strategic possibilities. Advertisers can engage specific household members with tailored messaging or implement frequency capping at the household level to prevent oversaturation. Some advanced platforms now offer individual-level targeting within households based on viewer profiles, though this capability varies across platforms and depends on how viewers log into their streaming services.

Measurement challenges impacting true efficiency

Despite OTT’s sophisticated targeting capabilities, measuring its true impact remains surprisingly complex. The fragmented nature of the OTT ecosystem creates significant measurement challenges, with viewing spread across dozens of apps, devices, and platforms. Each platform maintains its own measurement standards and data access policies, making comprehensive cross-platform analysis difficult even for sophisticated marketing teams.

Attribution presents another major challenge. The gap between viewing an OTT ad on a television and taking action on another device creates inherent tracking difficulties. While some platforms offer attribution solutions, these typically capture only a fraction of OTT’s total impact. Traditional digital attribution models struggle with OTT’s influence on the customer journey, particularly for upper-funnel metrics like awareness and consideration that don’t translate to immediate conversions.

These measurement limitations mean many marketers undervalue OTT’s true efficiency. Standard platform reports typically show only direct conversions attributable to OTT campaigns, missing their broader impact on other channels. When an OTT campaign drives viewers to search for a brand, visit a website directly, or engage through social media, these valuable interactions often remain uncredited to the original OTT exposure. Prescient’s approach to marketing measurement addresses this fundamental challenge by capturing OTT’s total impact across channels, rather than viewing it in isolation.

Understanding OTT’s halo effects

OTT advertising creates powerful ripple effects throughout your marketing ecosystem that standard measurement approaches fail to capture. When consumers see your compelling CTV ad, they don’t necessarily click directly through to purchase (an action often physically impossible on many streaming devices). Instead, they might search for your brand later, visit your website directly, or engage with your social channels—actions that traditional attribution models rarely connect back to the initial OTT exposure.

These halo effects represent a substantial portion of OTT’s true value. Prescient AI’s work with luxury mattress retailer Saatva demonstrates this impact. After implementing Prescient’s recommendations for TV ad spend allocation across streaming and linear channels, Saatva experienced a remarkable 75% year-over-year increase in branded search volume. This dramatic lift illustrates how OTT campaigns drive significant activity across other channels—including branded search, direct website traffic, and even in-store visits for omnichannel retailers like Saatva.

These indirect impacts often outweigh direct attributable conversions, making standard performance metrics like ROAS misleading when applied to OTT in isolation. In Saatva’s case, the platform revealed that properly measuring these halo effects led to a 22% increase in revenue generated by TV ads when budget was reallocated based on a more complete understanding of performance. Without capturing these broader effects, marketers risk severely undervaluing their OTT investments and making misguided optimization decisions.

Prescient’s marketing measurement platform specifically addresses this challenge by capturing these halo effects across channels. Our models identify how OTT campaigns influence organic traffic, direct visits, branded search, and other channels, providing a comprehensive view of their true impact. This approach reveals OTT’s full contribution to your marketing ecosystem, preventing the undervaluation that occurs when measuring only direct conversions.

Future outlook for OTT advertising efficiency

The OTT measurement landscape continues evolving rapidly, with promising developments on the horizon. Industry initiatives around standardized measurement frameworks aim to address current fragmentation challenges, while technological advances in identity resolution are improving cross-device tracking capabilities. These developments promise to enhance both targeting precision and measurement accuracy across the OTT ecosystem.

Privacy changes present both challenges and opportunities for OTT advertising. While cross-platform tracking faces increasing limitations, OTT’s emphasis on contextual relevance and household-level targeting provides viable alternatives less dependent on individual user tracking. Marketers who develop strategic approaches balancing personalization with privacy considerations will maintain effectiveness even as technical capabilities evolve.

Artificial intelligence and machine learning advancements are revolutionizing OTT optimization capabilities. These technologies enable more sophisticated audience modeling, creative optimization, and performance prediction, helping marketers maximize efficiency across the complex OTT landscape. Combined with more comprehensive measurement approaches that capture OTT’s complete impact, these tools will enable increasingly strategic applications of OTT advertising within integrated marketing strategies.

Wrapping it up…

OTT advertising offers remarkable opportunities to reach engaged audiences with high-impact video content, precise targeting, and growing scale. Yet its true efficiency remains partially hidden when viewed through conventional measurement frameworks that fail to capture its complete impact. Understanding OTT’s role within your broader marketing ecosystem—particularly its halo effects on other channels—provides the context needed to assess its real value.

The most sophisticated marketers approach OTT not as an isolated channel but as an integrated component of their marketing strategy. They recognize its unique benefits while acknowledging its measurement challenges, supplementing platform metrics with more comprehensive analysis that reveals OTT’s total contribution. This balanced perspective enables more strategic decisions about when and how to leverage OTT advertising for maximum impact.