Over the Top Advertising: What It Is and Why It’s Reshaping TV Budgets

Over the top advertising, commonly called OTT advertising, refers to video ad delivery through internet-connected streaming services rather than traditional broadcast or cable television. Viewers watch content through platforms like Hulu, Peacock, Paramount+, and connected TV devices, and advertisers reach them with targeted, data-informed placements that linear TV simply cannot replicate.

The shift matters commercially because OTT combines the emotional weight of television-quality video with the targeting precision of digital. That combination is genuinely rare, and it is forcing a rethink of how budgets get allocated across the funnel.

What Exactly Is Over the Top Advertising?

The “over the top” label comes from the idea of delivering content over the top of traditional cable and satellite infrastructure. You do not need a cable box or a broadcast antenna. You need an internet connection and a streaming platform, and the content arrives directly.

For advertisers, OTT means buying ad inventory on those streaming platforms. That inventory might appear as pre-roll before a show starts, mid-roll during it, or as pause ads when a viewer hits stop. The formats vary by platform, but the underlying logic is consistent: a viewer is watching long-form video content, and the advertiser is buying access to that attention.

The distinction between OTT and connected TV (CTV) trips up a lot of planning conversations. CTV refers to the device, specifically a television set with internet connectivity, whether that is a smart TV, a Roku, an Amazon Fire Stick, or an Apple TV. OTT refers to the delivery method. A viewer watching Hulu on a laptop is consuming OTT content but not CTV. A viewer watching the same show on a smart TV is consuming both. The terms get used interchangeably in most agency briefings, which creates genuine confusion when it comes to measurement and attribution.

I have sat in enough planning meetings where the media team and the client were using the same words to mean different things. Getting that definition clear at the start of a conversation saves a significant amount of wasted time later.

Why OTT Has Moved from Experimental to Essential

Linear television viewership has been declining for years. The audiences that remain skew older. Younger demographics, particularly the 18-to-44 cohort that most brand advertisers want to reach, have migrated to streaming in significant numbers. If your media plan still allocates the majority of video budget to linear TV, you are paying premium rates to reach an audience that does not reflect your growth market.

That is not a criticism of linear. It still has a role, particularly for live sport and tentpole events. But the structural shift is real, and brands that have not adjusted their video strategy are effectively running the same playbook on a shrinking pitch.

OTT platforms have also matured significantly on the advertising side. The early years of streaming were dominated by subscription-only, ad-free tiers. That model has shifted. Most major platforms now offer ad-supported tiers at lower price points, which has expanded the addressable inventory considerably. Netflix, Disney+, and Amazon Prime Video all have ad-supported options now. The inventory pool is genuinely large.

For brands thinking about where OTT sits within a broader growth strategy, the Go-To-Market and Growth Strategy hub covers the full picture of how channel decisions connect to commercial outcomes.

How OTT Targeting Actually Works

This is where OTT genuinely earns its place in a modern media plan. Linear television targeting is largely demographic, broad, and inferred from panel data. OTT targeting is built on actual viewing behaviour, device data, and in many cases, first-party data from the platforms themselves.

The targeting parameters available on most OTT platforms include household income, geographic precision down to zip code or postcode level, content genre and viewing behaviour, device type, and time of day. Some platforms allow advertisers to match their own CRM data against the platform’s audience graph, which opens up suppression and lookalike targeting that was previously only available in social or search environments.

That precision is valuable. But it comes with a temptation that I have seen cause real problems: over-segmentation. When you can target a 34-year-old homeowner in a specific postcode who watches cooking content on Tuesday evenings, the instinct is to do exactly that. The problem is that the audience becomes so narrow that you either run out of inventory, pay punishing CPMs, or accumulate frequency against a tiny group rather than building genuine reach.

The brands getting the most from OTT are using targeting to exclude the wrong audiences, not to define the perfect one. They set sensible parameters, let the platforms do the work, and focus their creative energy on making the ad itself worth watching. That is a meaningfully different approach from how most performance teams think about targeting.

Where OTT Sits in the Funnel

For most of my career, the pressure in agency life was to show performance in the lower funnel. Clicks, conversions, cost per acquisition. I understand why. Those numbers are clean, attributable, and easy to put in a slide. Earlier in my career I was as guilty as anyone of over-indexing on that part of the picture.

The problem is that lower-funnel performance largely captures demand that already exists. Someone who searches for your product, clicks your ad, and converts was probably going to find you anyway. You are not creating new demand, you are harvesting it. Real growth, the kind that compounds over time, comes from reaching people who were not already looking. That requires upper-funnel investment, and OTT is one of the most effective tools available for doing that at scale.

Think of it like the clothes shop analogy. Someone who tries on a jacket is far more likely to buy it than someone who walks past the window. OTT advertising is the equivalent of getting someone into the fitting room. It creates familiarity, builds brand salience, and primes audiences so that when they do enter a purchase mindset, your brand is already present in their consideration set. That is not a soft outcome. It is commercially significant, and it tends to show up in search volume, direct traffic, and conversion rates over time, even if the attribution models do not give OTT direct credit for it.

This is worth understanding clearly when you are setting expectations with clients or internal stakeholders. OTT is primarily an awareness and consideration channel. If you are measuring it purely on last-click attribution, you will consistently undervalue it and eventually cut it. That is a mistake.

The Fragmentation Problem and How to Approach It

Linear television had one significant advantage that is easy to forget: scale was automatic. You bought a spot on a major network during primetime and you reached a meaningful percentage of the population simultaneously. OTT does not work that way.

Audiences are fragmented across dozens of platforms. A viewer might watch sport on one service, drama on another, and reality content on a third. Reaching that viewer with meaningful frequency requires either buying across multiple platforms or working with a DSP (demand-side platform) that aggregates OTT inventory programmatically.

Programmatic OTT buying has improved considerably. Platforms like The Trade Desk, DV360, and Amazon DSP allow advertisers to buy across multiple streaming environments with unified frequency management and consistent reporting. The quality of that reporting varies, and the attribution challenges remain significant, but the infrastructure is more mature than it was even three years ago.

For brands with limited budgets, the fragmentation problem is real. You cannot be everywhere, and spreading budget thinly across every platform means insufficient frequency on any of them. A more disciplined approach is to identify where your audience concentrates, commit to one or two platforms with enough budget to build genuine reach and frequency, and expand from there once you have a baseline of what works.

Understanding market penetration strategy is useful context here. The decision about which platforms to prioritise is essentially a market penetration decision: where can you build meaningful presence before spreading resources too thin?

Creative Requirements for OTT

OTT advertising inherits the creative demands of television and adds a few of its own. Viewers on streaming platforms are engaged with content they actively chose. They are not passively watching what happens to be on. That means the tolerance for poor creative is lower, and the bar for earning attention is higher.

The first five seconds of an OTT ad carry most of the weight. On platforms where skip options exist, that is your entire window. On non-skippable formats, you still need those first five seconds to establish enough interest that the viewer does not mentally check out for the remaining twenty-five.

I was in a brainstorm early in my career, a session for a well-known drinks brand, where the brief was essentially: make something people want to watch. The creative director in the room said something I have never forgotten. He said the best ads do not feel like interruptions, they feel like a fair trade. You get thirty seconds of the viewer’s time, and in return you give them something, a feeling, a laugh, a moment of recognition. OTT demands that trade more explicitly than almost any other format because the viewer’s alternative is to skip or look at their phone.

Practically, this means your OTT creative should be built for the format from the start, not repurposed from a linear TV spot. Aspect ratios, sound design, pacing, and the placement of the brand within the first few seconds all need deliberate attention. Repurposed linear creative on OTT is one of the most common and most avoidable sources of wasted spend I see in media audits.

Measurement: What You Can and Cannot Know

OTT measurement is better than it used to be and worse than most vendors will admit. The honest position is that you can measure some things with reasonable confidence and others only approximately.

What you can measure with reasonable confidence: impressions delivered, completion rates, frequency per household, and reach against defined audience segments. These are platform-reported metrics and they are generally reliable, though discrepancies between platform reporting and third-party verification are common enough to warrant attention.

What is harder to measure: the downstream impact on brand consideration, purchase intent, and incremental revenue. These require either brand lift studies (which most major platforms offer but which require minimum spend thresholds), matched market testing, or econometric modelling. None of those approaches are perfect, but they are more honest than trying to force OTT into a last-click attribution model that was never designed for it.

The measurement conversation is worth having explicitly with stakeholders before a campaign runs, not after. If the expectation is that OTT will show up in direct revenue attribution within the campaign window, that expectation needs to be reset. If the expectation is that OTT will contribute to brand health metrics and create conditions for better lower-funnel performance over time, that is a conversation the data can support.

Frameworks for thinking about intelligent growth models, including how to structure measurement across the funnel, are worth exploring through resources like Forrester’s intelligent growth model, which addresses how different channel investments connect to different stages of commercial outcomes.

Budget Allocation: How Much Should Go to OTT?

There is no universal answer, and anyone who gives you a precise percentage without knowing your category, audience, and commercial objectives is guessing. But there are principles that hold across most situations.

If you are currently spending heavily on linear TV and your audience skews under 50, shifting a meaningful portion of that budget to OTT is almost certainly the right direction. The audience is there, the inventory is available, and the targeting efficiency will likely improve your cost per relevant impression.

If you are a brand that has historically over-indexed on performance channels and under-invested in brand, OTT represents an accessible entry point into video advertising without the minimum commitments that linear TV networks historically required. Programmatic OTT can be activated at relatively modest budgets, which makes it accessible for mid-market brands that could not previously justify television production costs.

The ceiling on OTT investment is largely determined by your ability to generate creative that is worth the placement. Scaling spend without scaling creative quality is a reliable way to waste money. I have seen brands double their OTT budgets and see diminishing returns, not because the channel stopped working, but because the creative was not strong enough to sustain the frequency.

For brands working through how OTT fits within a broader go-to-market approach, including how it connects to channel sequencing and audience strategy, the Go-To-Market and Growth Strategy section covers those interconnections in more depth.

OTT in a Full-Funnel Growth Strategy

The brands using OTT most effectively are not treating it as a standalone channel. They are integrating it into a full-funnel architecture where upper-funnel video activity creates the conditions for mid-funnel engagement and lower-funnel conversion.

In practice, that means OTT audiences who have seen a brand’s video ad can be retargeted with display or social ads as they move through their consideration process. Search campaigns can be structured to capture the branded queries that OTT exposure tends to generate. Email sequences can be timed to coincide with OTT flight windows to reinforce messaging across touchpoints.

This kind of coordinated approach requires planning discipline and a media team that can work across channels without treating each one as a separate silo. It also requires clients and stakeholders who understand that the value of OTT is not always visible in the channel’s own metrics, but shows up in the performance of everything downstream.

When I was scaling an agency from a team of twenty to over a hundred people, one of the consistent challenges was getting channel specialists to think about how their work connected to the broader commercial outcome rather than optimising for their own metrics. OTT is a good test case for that kind of thinking. It demands a view of the whole picture, not just the numbers that sit within the channel’s own reporting.

Understanding how growth loops connect channels together is useful here. Hotjar’s work on growth loops and frameworks for growth strategy both offer useful mental models for thinking about how awareness channels feed the rest of the system.

What OTT Cannot Do

It is worth being direct about the limitations, because the vendor landscape around OTT is not always honest about them.

OTT cannot reliably drive immediate direct response at scale. If your primary objective is cost-per-acquisition within a short window, OTT is the wrong tool. It is too slow and too expensive relative to paid search or social for that purpose.

OTT cannot replace the reach efficiency of linear TV for audiences that still skew toward traditional viewing. If your product is primarily bought by people over 60, linear television still delivers better reach economics in most markets.

OTT cannot compensate for weak creative. The targeting and inventory quality of the best OTT platforms will not save an ad that viewers tune out in the first three seconds. The channel amplifies what you bring to it, in both directions.

And OTT cannot be measured the same way as performance channels. Trying to force it into that framework will consistently produce the wrong conclusions and, eventually, the wrong budget decisions.

About the Author

Keith Lacy is a marketing strategist and former agency CEO with 20+ years of experience across agency leadership, performance marketing, and commercial strategy. He writes The Marketing Juice to cut through the noise and share what works.

Frequently Asked Questions