The Different Types of TV Advertising Explained

Traditional terrestrial and cable TV are well past their heyday, trailing behind streaming media in reach, measurability, and content quality. Video-ad views on OTT (over-the-top) devices grew 63% year over year in Q3 2016, and the trend has continued to accelerate, further eroding the appeal of traditional TV advertising.

Streaming content via the Internet is the new television, and the opportunities it offers advertisers are pushing more brands to shift ad dollars away from legacy broadcast formats. To understand where TV advertising is heading, it helps to trace its roots — from terrestrial broadcast through cable and satellite, and into the advanced TV landscape that dominates the conversation today.

Source: FreeWheel Q3 2016 Video Monetization Report

Traditional TV

Terrestrial TV

Terrestrial television uses roof-mounted antennas that transmit analog signals — a technology that, by modern standards, has long since been surpassed. Around 2010, analog terrestrial TV underwent a switchover to digital broadcasting, which brought HD image quality and more consistent signal distribution.

Cable TV

Cable TV originally emerged to serve areas where traditional antennas were challenged by terrain or environmental factors. Large community antennas were constructed to pick up broadcast signals, with coaxial cables running from those central points to individual households — hence the name.

Cable television was initially analog. Like terrestrial TV, the transition to digital cable began around the 2000s. Signals travel through coaxial or fibre-optic cables directly to each home, eliminating the need for external antennas. The same cable infrastructure is often used to carry FM radio, high-speed Internet, telephone service, and other non-television content.

Satellite TV

Satellite TV delivers television programming via communication satellites orbiting the globe. Signals are received through an outdoor satellite dish and decoded by a dedicated satellite receiver — either an external set-top box or a unit built directly into the television set.

Satellite television provides a wide range of channels and services, and is particularly valuable in areas where terrestrial broadcast infrastructure is impractical or impossible due to geography.

Advanced TV

Advanced TV is the successor to traditional broadcasting. The term was coined by the IAB to describe all forms of non-traditional television — TV that is not delivered through a broadcast, cable, or satellite connection. It encompasses Interactive TV, Connected TV, Smart TV, Over-the-Top (OTT) devices, and Linear Addressable TV.

The primary advantage of advanced TV over its predecessors is that it allows ads and other content to be targeted to specific households and dynamically inserted into live programming.

Types of Advanced TV Delivery

Several terms are used when discussing programmatic and advanced TV. They overlap in ways that can be confusing, so here are the key definitions:

Connected TV: A Smart TV or a television set connected to the Internet — either directly or through OTT devices such as Blu-ray players, streaming boxes, sticks, or gaming consoles — enabling access to web-based content.

TV Everywhere: A model that allows consumers to watch live or on-demand content on any device other than a television, from any location. Most cable channels require authentication via a cable or satellite login to access content through their apps.

Video on Demand (VOD): An umbrella term for content available for viewing at any time, on demand. VOD encompasses content accessed through set-top boxes, OTT devices, mobile web browsers, mobile apps, and video-streaming services.

These categories are closely related and often overlap. For simplicity, the devices and services that enable advanced TV are typically grouped under the single term OTT.

OTT Devices

OTT refers to all over-the-top devices and services that enable advanced TV and digital content streaming in the home. This includes all internet-enabled streaming devices connected to the television (not mobile phones or tablets):

• Streaming boxes (Apple TV, Amazon Fire TV, Android TV, Samsung Allshare Cast, etc.)
• HDMI "sticks" (small HDMI streaming devices like Chromecast, Roku, or Amazon Fire TV Stick)
• Smart TVs (TVs with built-in apps such as Netflix or HBO Go)
• Game consoles
• DVR set-top boxes
• Internet-enabled smart Blu-ray/DVD players

OTT devices deliver content and advertising to the television via streaming. The technology combines the targeting capabilities of programmatic ad-buying with the growing reach of streaming services — a powerful pairing for advertisers.

OTT ad revenue is projected to increase from 45% to 60% over the next decade, making early adoption of OTT advertising particularly valuable.

How TV Ads Are Delivered

Advanced TV enables advertisers to build campaigns using behavioural data collected at the household level. Advertisers can see which ad, channel, and programme a viewer is watching — and when, and for how long. This is a significant departure from how traditional TV advertising works.

In traditional TV ad-buying, Nielsen GRP data is used by marketers to purchase TV spots. The process is largely manual and requires direct contact with the broadcaster before airtime. Targeting is rough, based primarily on programming genre and time of day.

Programmatic TV refers to advanced TV inventory purchased through automated means. Advanced TV can be bought programmatically or non-programmatically — through an ad network, directly from a streaming content provider like Hulu, or through a cable TV company — using data from set-top boxes and specialized data providers.

Addressable TV takes targeting a step further. Different ads are displayed to different households watching the same live TV programme, with targeting driven by behavioural, demographic, or geographic data. This reduces wasted impressions considerably. Satellite and broadcast television companies typically deliver this capability through linear addressable TV systems.

Advanced TV Targeting

Targeting on OTT and advanced TV devices operates at the household level, rather than the individual level typical in digital advertising. The IAB identifies two primary methods for linking data to a viewing household:

High-Index Modeling: Viewership data is used to identify which shows have the highest likelihood of being watched by the desired audience or household type.

Cross-Device Graph: Data pulled from multiple devices within the same household is used to create shared identifiers and target viewers. The cross-device graph can associate all household devices using one of three approaches:

• The probabilistic method works by calculating the probability that two devices belong to the same household. This is done by analyzing large volumes of anonymous data points — device type, location data, and time of day — and benchmarking those signals to estimate accuracy. Advanced TV advertising platforms can dynamically balance accuracy against audience scale.

• The deterministic method uses login credentials when a consumer accesses the same account across multiple devices (for example, logging into Netflix on both a laptop and a gaming console). This method is more accurate than probabilistic matching but relies on data that is less broadly available.

• The modelling method (also called look-alike modelling) uses algorithms to identify new audiences that resemble an existing one — such as an advertiser's highest-value customers. A DMP or DSP analyzes a pre-defined sample of "best customers" and applies algorithms to known data to find profiles that best match that seed audience.

In practice, combining all three methods typically produces the most robust data set.

Protocols for Ad Delivery

Matching devices to a household is only part of the challenge. Actually communicating with those devices to display ads correctly — across different screen resolutions, ad formats, compression methods, and interaction capabilities — requires a separate layer of technology.

Video ad-serving protocols including VAST, VPAID, VMAP, and MRAID handle this communication. They specify which video ad to display, where it should be placed, how long it should run, whether it can be skipped, and what the destination URL should be. Here is an overview of each:

Video Ad-Serving Template (VAST)

VAST 1.0 (legacy), released in 2009, supported single media files — primarily MP4, 3GP, and MOV formats — and was designed exclusively for linear ads with basic event tracking.

VAST 2.0, released in July 2012, introduced support for media formats including Flash and JavaScript, and expanded ad format support to five types: linear ads (e.g. pre-rolls), non-linear ads (e.g. overlays), skippable linear ads, linear ads with companion ads, and sequenced groups of ads known as ad pods. It also added quartile and player event tracking. Despite newer versions being available, most publishers continue to use VAST 2.0.

VAST 3.0, released in January 2016, introduced several key additions: ad verification and viewability execution, ad categories, universal ad IDs, support for mezzanine files, and server-side ad stitching (which also helps circumvent ad blockers).

VAST 4.0 is available, though VAST 3.0 represented the meaningful functional leap for advanced TV use cases.

While VAST has gone a long way toward enabling video ad serving, it lacked user-interaction capabilities — a gap that VPAID was designed to address.

Video Player Ad Interface Definition (VPAID)

VPAID allows advertisers to serve rich, interactive ads and collect data about how users engage with them. For example, a VPAID ad might allow a viewer to click through tabs, fill in a subscription form, complete a survey, or interact with other on-screen elements during playback.

VPAID can be used independently, but it is most commonly embedded within VAST. VPAID 2.0 is the current version of the protocol.

The diagram above shows how a video ad unit and video player communicate using VPAID:

• Call: The video player sends an ad call to the video ad server.
• Response: The video ad server returns a VAST XML containing a VPAID-compliant executable ad unit.
• Ongoing Communication: While the ad is being served, the video player and the ad unit remain in constant communication — the player receives properties for the ad unit, and the ad unit sends events back to the player.
• Tracking Impressions and Activities: Both the ad unit and the video player can send impression and activity data to their respective ad servers.

The Future of VPAID

Publishers are generally reluctant to hand control over video playback and user experience to VPAID. Because VPAID uses wrappers, publishers cannot always determine where ads are actually originating. The IAB has acknowledged that while VPAID is valued for its flexibility and support for interactive formats, it introduces transparency and trust issues — and a replacement has been in development. Advanced TV ad serving is, in this respect, still a work in progress.

Video Multiple Ad Playlist (VMAP)

VMAP (current version 1.0.1) allows content owners to define the structure for ad-inventory insertion in cases where they don't control the video player themselves — as is the case with YouTube, for example.

Although VAST 3.0 supports ad pods for inserting ad slots into video content, it does not allow content owners to define when ad breaks occur or how they are timed. VMAP fills that gap.

Mobile Rich Media Ad Interface Definitions (MRAID)

MRAID allows advertisers to display rich-media video ads across all mobile devices and within all types of apps, without needing to build separate versions for each operating system or development environment.

Since mobile devices run on different operating systems and apps are built in different programming languages, MRAID standardizes the interface so that a single rich-media ad can run consistently across the mobile ecosystem.

Wrapping Up

Advanced TV advertising is still maturing, but its trajectory is clear. As more advertisers and agencies incorporate programmatic TV into their media strategies, the current technical and transparency challenges will be gradually resolved. The combination of television's broad reach with the targeting precision of digital advertising represents a significant opportunity — and the standards, protocols, and data methodologies described here form the foundation that makes it possible.