Rewriting TV Advertising: A Historical Overview of the CTV Industry
In the early days, securing a prime-time ad slot was the ultimate goal for media buyers. Ad space was limited, and missing that coveted 30-second spot on a top-rated TV show often meant missing the chance to make an impact. This was the world of traditional linear TV. But with the arrival of Connected TV (CTV), the landscape transformed, kicking off a new era in TV history and fundamentally reshaping the advertising industry. According to a recent FreeWheel report, CTV has captured an impressive 83% of ad views in the U.S. for the first half of 2024, showing how deeply it has penetrated the advertising world.
CTV has done more than change our viewing habits; it's redefined how advertisers connect with audiences, offering unparalleled precision and personalization that traditional TV could never match. The era of "one-size-fits-all" ad buys is over. Today, advertisers navigate a complex ecosystem of streaming platforms, where reaching viewers means mastering a fragmented world of smart TVs, streaming services, and apps.
This evolution has been driven by technology and our shifting interactions with content, making CTV's impact on advertising revolutionary. This timeline will walk through the critical stages of CTV's development and how it continues to shape the future of advertising.
B.C. (Before CTV)
Privacy challenges. Navigating the VPPA
The Video Privacy Protection Act (VPPA), initially designed in 1988 to protect VHS rental histories, has had some unintended impact on the yet-to-emerge streaming services industry, making it more challenging for advertisers to gain transparency into audiences' watching habits. The law prevents sharing personally identifiable information linked to viewing behavior, forcing brands to rethink their strategies regarding personalization.
But there's still a way for advertisers to reach their audiences while staying compliant. Brands can tap into broader content-level metadata, like the type of show or genre. For instance, if someone is streaming a comedy, advertisers can deliver ads for lighthearted products that match the mood. This keeps the content relevant without crossing privacy lines.
Stage 1: The beginnings (2010 - 2015)
The rise of OTT
OTT, or "over-the-top," refers to delivering video content via the Internet, bypassing traditional broadcast and cable systems. Despite the buzz, Connected TV and OTT are more than just different names for the same thing. Think of it this way: CTV is your smart TV or console device through which you watch on the largest screen in the house. OTT is the delivery method that bypasses traditional cable for internet-driven content.
Early days of programmatic advertising
Between 2010 and 2015, programmatic advertising started making strides in display and digital video. Initially developed for banners, programmatic had yet to reach CTV fully. During this period, most CTV transactions still occurred through direct insertion orders (IOs), and programmatic transactions were sparse. However, as technology developed, programmatic began to hint at its potential for targeting and efficiency in CTV.
ACR technology – from music to video
Automated Content Recognition (ACR) started in the early 2010s with Shazam, a platform famous for identifying songs. ACR technology would later advance into video fingerprinting, laying the foundation for TV applications. By recognizing audio and video frames, ACR opened up new targeting and measurement possibilities for advertisers, enabling insights into what viewers were watching and setting the stage for the CTV-specific applications.
Early interactive ads and VPAID standards
The early 2010s saw attempts at interactive ads, primarily through VPAID (Video Player Ad-Serving Interface Definition) standards, which enabled limited user interactivity within desktop video environments. Despite its potential, VPAID was quickly deprecated as publishers found it prone to exploitation, with advertisers using it to re-run auctions and boost profits. Though this early innovation didn't fully take off, it hinted at the potential for interactive advertising in CTV.
Digital video personalization and its challenges
During this stage, digital video advertisers experimented with basic personalization on desktop and mobile. But, without today's advanced tools, creating personalized ads for different audiences was costly and cumbersome. Publishers resisted handling multiple ad variations, setting the stage for more streamlined solutions that would emerge in the coming years.
Stage 2: Growth and maturation (2015 - 2020)
Programmatic expansion and the rise of private marketplaces
By 2015, programmatic technology matured, expanding into the CTV space. Although most CTV transactions still occurred manually through direct IOs, programmatic guaranteed deals and private marketplaces started gaining traction. Advertisers favored these direct deals and private marketplaces with trusted partners to avoid fraud and improve quality control compared to the risks of the open market.
ACR integration in CTV and measurement
ACR technology moved from its music recognition roots into the TV world, enabling CTV platforms to track what viewers watched and analyze behavior patterns. Alternative measurement providers began leveraging ACR to enhance targeting, measurement, and verification. This technology allowed advertisers to understand content engagement better and helped fuel data-driven targeting strategies within CTV.
Experimentation with interactive video
Building on Hulu's early experiments with interactive formats, such as the "choose your ad" model that allowed viewers to select the type of ad they wanted to see, Hulu later introduced new interactive ad formats, including "choose your own adventure" ads that gave viewers more control over their ad experience. This approach set the stage for shoppable ads, a more advanced form of interaction that soon became popular in streaming TV.
Personalization challenges and opportunities
Personalization continued to grow in importance, though it still faced hurdles. VPAID was never accepted into the CTV world, and was deprecated by the IAB, which meant that advertisers would have to create different .mp4 files for each creative variant they wanted to produce -- each encapsulated within their own unique VAST tag. Creating multiple variations of video ads and trafficking numerous VAST tags was complex, labor-intensive, and expensive, which deterred many publishers from adopting it at scale. However, the rise of data-driven insights fueled a more significant demand for personalized CTV advertising, pushing the industry toward tools and platforms that could streamline this process.
Server-side ad insertion and growth of CTV users' base
Server-side ad insertion (SSAI) is a technology that stitches together ads within a video stream before the stream loads on a user’s device.
From 2015 to 2020, server-side ad insertion gained significant traction in the Connected TV (CTV) market. As CTV adoption snowballed, SSAI emerged as a preferred method for delivering seamless ad experiences. During this period, the technology matured, offering benefits such as improved user experience, ad-blocking prevention, and increased viewability. By 2020, SSAI had become a crucial component in the CTV advertising ecosystem, with the CTV user base reaching 203 million in the United States alone.
Stage 3: Acceleration and transformation (2020 - Present)
The pandemic's impact on CTV growth
The COVID-19 pandemic accelerated the adoption of CTV, with audiences flocking to streaming services for at-home entertainment. As traditional TV viewership declined, streaming platforms surged, prompting publishers to launch their own streaming apps and, years later, self-serve ad platforms. This shift made CTV a crucial avenue for advertisers to capture fragmented audiences. FreeWheel reports noted an overall increase in CTV ad views and ad spending as a direct result of the pandemic-driven boom in streaming.
AI-driven creative and dynamic personalization
The rise of AI in the 2020s has revolutionized ad personalization. With tools like Waymark, Veed.io, and HeyGen, advertisers can now produce ad variations for different audience segments in minutes. AI-driven ads allow brands to test and optimize campaigns in real-time, customizing elements like visuals, language, and tone to suit various demographics. As noted in the FreeWheel report, this adaptability has made dynamic creative personalization achievable and economically viable for advertisers aiming to maximize engagement.
The emergence of shoppable ads and enhanced interactivity
Interactive ads have taken an interesting turn with the introduction of shoppable ads, designed to make it easy for viewers to engage directly with products on-screen through QR codes or clickable elements. However, while these ads are heralded as innovations that “blur the line between entertainment and retail,” there’s reason to approach them with a critical eye. The concept may feel fresh, but it’s more of an evolved take on the age-old shopping channel model than a groundbreaking shift. As the retail media space matures, the true advantage of shoppable TV will come from aligning online and in-store experiences seamlessly. This approach has proven effective for retail giants like Walmart. Today’s shoppable ads go beyond novelty, turning passive viewers into active consumers and becoming essential components of a CTV campaign, but only when they’re executed with real audience value in mind.
Programmatic advancements and the shift to private marketplaces
As advertisers increased their CTV budgets, programmatic technology became more sophisticated, with a clear shift towards private marketplaces and programmatic guaranteed deals. According to FreeWheel's 2024 Video Marketplace Report, programmatic views increased by 15% in the U.S. and 41% in Europe, underscoring the growing adoption of automated ad buying across CTV and other video platforms. This movement toward programmatic buying has allowed advertisers to target audiences precisely while minimizing fraud and maximizing ad quality.
ACR and data-driven targeting
ACR technology has become integral to CTV, enabling advertisers to glean real-time insights into what viewers are watching. With clean rooms and planning tools, ACR has created a privacy-compliant framework that gives advertisers hyper-relevant insights for planning and competitive analysis. The rise of ACR has elevated targeting capabilities, allowing advertisers to engage viewers based on content and behavior without violating privacy regulations.
At Simulmedia, we leverage enriched ACR data to offer advanced media planning and intelligence tools and convergent TV audits, enabling advertisers to make data-driven decisions with greater confidence and precision.
The challenges with SSAI’s structure and ad fraudsters
Since 2020, Server-Side Ad Insertion (SSAI) has become a fixture in the CTV market, delivering seamless ads with high viewability and completion rates. However, SSAI’s structure makes it an attractive target for fraudsters, with ad fraud impressions surging by 220%. Schemes like ParrotTerra exploit SSAI’s benefits to siphon ad spend, creating challenges for verification due to SSAI’s layer between the tech stack and the viewer’s device. The industry is intensifying its defenses, employing advanced fraud detection, IAB standards, and cybersecurity partnerships to safeguard ad integrity. While challenges persist, SSAI’s value remains pivotal in the CTV landscape.
The evolution continues: where CTV is headed next
In the heyday of TV’s golden age, advertising success meant throwing your brand in front of the masses, hoping some of it would stick. You’d pay top dollar to land a spot during Friends or The X-Files, betting on prime time to make prime impressions. Fast forward to 2024, and Connected TV has turned this model on its head, with precision so sharp it’s practically surgical.
Today, a winning CTV ad doesn’t need millions of eyeballs; it needs the right ones. In minutes, AI can generate a custom spot that speaks directly to your ideal viewers—people interested in your offering. And thanks to real-time data, we’re no longer stuck watching from the sidelines. We’re adapting, testing, and optimizing on the fly.
The game has shifted from grand gestures to smart strategy, and it’s a landscape that rewards bold moves and quick pivots. The world of TV advertising is changing at the speed of streaming, and if you’re tuned in, you’re already halfway to winning. So, let’s stay sharp, stay agile, and keep our fingers on the pulse—because the future of TV is here, and it’s just getting started.