How Does the Cost of Advertising on OTT Platforms Compare to Traditional TV Advertising?

The rise of Over-the-Top (OTT) streaming services is disrupting the traditional advertising landscape, and as audiences shift their viewing habits, marketers are naturally curious about how advertising costs compare between OTT TV and traditional television. Let's break down the key factors influencing the cost of advertising in both arenas.

OTT TV vs Traditional TV Advertising

OTT Advertising: More Cost-Effective and Targeted

OTT advertising generally offers several cost advantages over traditional TV. The cost per thousand impressions (CPM) on OTT platforms is often significantly lower than on cable or broadcast television due to less competition and more efficient audience targeting.

Plus, many OTT platforms operate on a pay-per-view model, meaning you only pay when your ad is actually viewed to completion, reducing wasted spend. OTT's precise targeting mechanisms also allow you to reach specific audience segments, minimizing your spend on viewers who are unlikely to be interested in your offering.

Traditional TV: Mass Reach, But at a Premium

Traditional television remains relevant for mass-market campaigns but comes with a higher price tag. For one thing, creating high-quality TV commercials can be very expensive due to the high costs of production crews, talent, and editing.

Traditional TV's audience reach is vast, yes, but less focused at the same time, so you may end up paying to reach viewers outside your target demographic. And while audience measurement tools exist, it's harder to track specific conversions from TV ads compared to the granular data available on OTT. In short, you can't be 100% sure of what you're getting.

Factors Influencing OTT Advertising Costs

It's important to note that OTT advertising costs aren't entirely fixed. Several factors can influence them. Your platform of choice is one thing. Popular streaming services with large audiences may command higher CPMs. Remember, too, that the more niche your target audience, the more expensive it may be to reach them.

Ad format is another important consideration. Interactive or premium formats tend to be more expensive than standard video spots. And while you have less demand than with traditional TV, there still is competition. Ad pricing can fluctuate based on the level of competition within your industry.

OTT for the Win

OTT advertising generally offers greater cost efficiency and targeting precision compared to traditional TV. For many businesses, it enables a smarter budget allocation and a higher potential return on investment (ROI). However, traditional TV can still hold value for campaigns focused on achieving maximum reach with less emphasis on pinpoint targeting.

Finding the Optimal Balance

The most effective advertising strategy may mean taking a hybrid approach. Consider your campaign goals, target audience, and budget allocation. A savvy combination of OTT's precise targeting with traditional TV's mass appeal might be your winning formula.

It's important for businesses to stay nimble and adapt their advertising strategies. By understanding the cost dynamics of OTT platforms and their strengths compared to traditional TV, you can make smart, data-driven decisions to maximize the impact of your advertising dollars. ​We can help. Contact us at Lightcast now and set up a strategy call.