Direct Response TV is dead, long live Connected TV

While the term may have lost its luster, Direct Response Television (DRTV) – TV advertising intended to prompt an action such as calling a phone number or visiting a website – is still among the most popular marketing channels. The modern DRTV commercial has been around for approximately 30 years, which has made it a mainstay in many marketers’ advertising mix. DRTV has long been thought of as the only way to capitalize on the popularity of TV shows, news and cultural events, but there’s a new player on the scene.

DRTV is being disrupted

Connected Television (CTV) is here and it’s shining a light on DRTV’s shortcomings; namely, the fact it’s expensive, results are difficult to measure, and it doesn’t provide access to highly targeted audiences or the opportunity for coordinated multi-touch campaigns that increase conversions.

CTV is television content streamed over apps and smart TVs, mobile devices, or over-the-top (OTT) devices such as gaming consoles, Amazon Firestick, Apple TV, Roku and other streaming devices. Some examples of CTV services include Hulu, YouTube & YouTubeTV, Sling TV, Vimeo, Peacock and many more.

A growing audience for CTV

In 2020, COVID-19 pushed consumers indoors and CTV consumption shot up. Nielsen reports found that CTV viewing has grown from 2.7 billion hours during the pre-pandemic week of March 2, 2020 to 3.9 billion hours during the weeks of March 23, March 30, and April 6 –an 81% increase compared to the same period in 2019.¹

Even before 2020, the writing was on the wall for DRTV. Skyrocketing cable costs and premium, exclusive content on streaming services such as Netflix and Hulu were pushing audiences to CTV. A study by The Trade Desk found that 27% of U.S. cable TV subscribers plan to end their subscriptions by the end of 2021, up from 15% in 2020.² A recent study from the Leichtman Research Group estimates 80% of homes with televisions in the U.S. have at least one connected TV device, and 64% of TV households have three or more connected TV devices.³

The benefits of CTV

In January 2021, eMarketer reported that U.S. programmatic CTV video ad spend rose by 36.3%, reaching $4.36 billion.⁴ There are many benefits of CTV, including better audience targeting, access to younger consumers, real-time performance metrics and the ability to interact with users beyond the ad they viewed. In our guide to CTV, we discussed other important CTV capabilities – such as identity resolution through online and offline data matching, retargeting and message optimization to improve CTV ad performance.

In this article, we will explore how to use CTV to reach your target audience, lead prospects along the buyers’ journey and which metrics to pay attention to in order to best measure the success of your campaigns.

Some of the most important advantages of CTV over DRTV include:

1. Better audience targeting

DRTV doesn’t allow for ‘true’ audience targeting. DRTV advertisers need to make educated guesses about who their audience will be depending on when their ad airs. For example, an infomercial that airs in the middle of the day will probably reach retirees, the elderly and the ever-shrinking ‘homemaker’ segment. DRTV also means seasonal coverage – audiences are less engaged during the summer when most channels rely heavily on reruns.

Contrastingly, CTV allows advertisers to be as specific with their targeting as they are when they buy digital media, prompting Forbes to describe CTV’s targeting capabilities as the “holy grail” for advertisers.⁵

Here are three key ways to use data to guide your CTV targeting:

• Build a custom audience. We recommend building a custom audience for any digital campaign. Marketers can take what they know about their best customers – what they look like, how they behave, what incentives and offers they respond to, what they’re interested in – and use it (in combination with third-party data) to identify and target new consumers who have similar characteristics and are therefore more likely to convert.
• Customize your advertisements by key audience segments. The DMA has reported that segmented campaigns can lead to a 760% increase in revenue.⁶ DRTV does not allow for audience segmentation, but CTV does. Segmentation is effective because it allows your ads to be delivered to an audience that would find it relevant. Advertisers can invest in pre-packaged audience segments based on demographics, transactional history, interests, recently moved, and political affiliation. For example, a furniture retailer can use their CTV ad to target an audience with a higher projected interest in furniture, such as recent movers, new home owners, or recently engaged couples.
• Create geotargeted campaigns for each segment. Geotargeting allows advertisers to select audiences based on state, city and zip code so they can make their advertisements and offers more relevant. For example, a small local museum might only want to target locals, instead of spending precious advertising dollars marketing to people who aren’t going to travel for hundreds or thousands of miles to visit. Or, a health insurance company can use geo segmentation to advertise different products to audiences in different locations. (Read the full case study)

Example: Defenders of Wildlife create a modeled prospecting audience for their CTV campaign

Defenders of Wildlife tasked the Data Axle nonprofit team with creating a CTV campaign to raise brand awareness, engage prospective donors, and boost fundraising for Q4, 2020. Starting with Defenders’ own data, Data Axle leveraged their proprietary donor database, Apogee to create a modeled prospecting audience. The audience included digitally savvy households that had previously donated to a charitable cause, and fell within the Defenders’ target demographic. Once they had their audience, Defenders of Wildlife created a unique CTV ad which brought the nonprofit’s mission front and center, included a “text to donate” option and a custom URL.

In conjunction with the CTV ads, the campaign included programmatic components – users who were exposed to the CTV ad were also served display retargeting ads with similar messaging and design, to drive additional exposure and maximize fundraising opportunities.

The ads ran through Q4 and into Q1 of 2021 and boasted a video completion rate (VRC) of 94%.

2. Lead viewers down the buyers’ journey through innovative ad design and testing

Whereas DRTV commercials ask viewers to perform a specific action, such as call a 1-800 number, or visit a website, CTV ads provide opportunity for better exposure, improved brand awareness, and a clearly outlined path-to-purchase. For example, advertisers can use a variety of ad formats.

• In-stream video ads: these are unskippable 15- to 30-second ads that play before or during a CTV program.
• Interactive pre-roll ads: similar to in-stream video ads, they play before or during a show and are 15-30 seconds long. They also include an interactive component – like allowing viewers to click through to a website or landing page.
• Home Screen Placement ads: these are stagnant ads that sit on the home screen – much like a banner ad. Viewers can usually click to be directed to website or landing page.

CTV also allows for sophisticated testing, unlike DRTV. A/B testing is an age-old method and while some advertisers may think of it as cumbersome, technology advancements have significantly streamlined the process. Advertisers can A/B test ad types, messaging and CTAs to see which ones better resonated with their target audience.

Case study: Fintech company, Self, lowers cost-per-impression with A/B testing

Fintech company Self used a video service company to help them create their CTV ad. Self wanted to target two different segments – single, middle aged women and urban-dwelling families. They created eight different videos, with two different scripts for each target audience, to test for their next CTV campaign. By catering to each audience segment and testing key creative elements Self was able to lower their cost-per-impression by 28%.⁷

3. Comprehensive performance metrics

CTV provides advertisers with important metrics, such as video completion rate (VCR), unique households reached, cost per unique household, after-ad influence and offline conversion tracking. When it comes to measuring ROI for CTV, there is no industry standard, which leaves the door open for advertisers to define what success looks like and which KPIs they want to hit. KORTX reports that marketers have come to expect VCR percentages of 95%+ for CTV campaigns,⁸ but depending on your goals, VCR might be less important than after-ad influence or cost per completed view (CPCV).

Example: Meineke measures the effectiveness of CTV vs. DRTV

National automotive repair franchiser, Meineke, worked with an agency to increase the effectiveness of their digital media strategies. Their agency used third-party data to find the right target audience for the brand and bought advertisements during NHL and NFL events. Through CTV, the agency was also able to use frequency caps to avoid showing the same viewers the same ads over and over. This kind of control is not available with DRTV advertising. The agency found that CTV viewers were exposed to the same ad 33% less frequently than linear TV viewers.⁹

Using the Nielsen Over-the-Top (OTT) measurement capabilities, the agency was able to calculate that the On-Target Percentage (OTP),a metric that measures how much of a campaign’s results stem from the targeted audience, across all the target demos was higher on CTV compared to DRTV.¹⁰ For ages 25-54, CTV’s OTP was 46% higher than the OTP for DRTV and across a younger demographic, 18-34, CTV was able to provide exposure to this audience 180% more often than DRTV. Using CTV advertising, Meineke was able to gain brand awareness among their desired demographic.

Conclusion

There’s a ton of potential in CTV for savvy brands that are looking to expand their reach. Marketers need to know how to include this emerging channel into their marketing mix or they will be left behind.

_{¹ https://www.forbes.com/sites/bradadgate/2020/06/12/connected-tv-viewing-is-not-returning-to-pre-pandemic-levels/?sh=22c589be3aa5
² https://www.tvtechnology.com/news/report-quarter-of-us-households-intend-to-cut-cable-in-2021
³ https://www.forbes.com/sites/bradadgate/2020/06/12/connected-tv-viewing-is-not-returning-to-pre-pandemic-levels/?sh=22c589be3aa5
⁴ https://www.mediapost.com/publications/article/359655/the-lowdown-on-ctvotv-growth-prospects-and-chall.html
⁵ https://www.forbes.com/sites/bradadgate/2020/06/12/connected-tv-viewing-is-not-returning-to-pre-pandemic-levels/?sh=22c589be3aa5
⁶ https://www.campaignmonitor.com/resources/guides/guide-to-segmentation-for-the-evolving-marketer/
⁷ https://quickframe.com/blog/creative-tips-ctv-ott-video-ads/
⁸ https://www.kortx.io/four-tactics-to-maximize-your-ctv-strategy/
⁹ https://www.riseinteractive.com/our-work/case-studies/connected-tv-ads-in-store-visits
¹⁰ https://www.riseinteractive.com/our-work/case-studies/connected-tv-ads-in-store-visits}