Connected TV (CTV) Advertising: How It Works and What Makes It Worth It

Your ad plays on a 55-inch screen. Someone watches it all the way through. What happens next is much harder to track, especially when the next step happens on a different screen.

In the past, TV advertising involved a fair amount of guesswork. Brands could reach millions of viewers, but knowing exactly who saw an ad or what they did afterward was another story. Now, Connected TV (CTV) brings audience targeting, programmatic buying and more detailed reporting to the biggest screen in the house.

That extra control sounds appealing, but how much control does CTV really give advertisers? This guide looks at how the technology works, what makes it worth considering and where campaigns can run into trouble.

What Is Connected TV (CTV) Advertising?

A connected TV can be a smart TV with built-in streaming apps or a regular television connected to a device such as Roku, Apple TV or Amazon Fire TV. Gaming consoles can also serve as streaming devices. In each case, the content reaches the television over the internet rather than through a traditional broadcast or cable connection.

As an example, let’s imagine a viewer is watching a cooking show on a free streaming service. Before the next episode starts, a 30-second ad for a grocery delivery app appears. It looks much like a traditional TV commercial, except the advertiser may have selected that household based on location, audience data or other available targeting signals.

The viewer doesn't need to know anything about the technology behind the ad. For the advertiser, however, the difference can affect which households see the commercial, where it runs and how its delivery is measured.

CTV vs. OTT vs. Linear TV: What's the Difference?

CTV and OTT are often used interchangeably, but in reality, they describe different parts of the streaming experience. Linear TV adds another term to the mix, especially now that traditional broadcasters also offer streaming services.

Here's how to tell them apart:

• CTV (Connected TV) refers to television screens and internet-connected devices used to stream content.
• OTT (Over-the-Top) describes content delivered over the internet rather than through traditional cable or satellite distribution. It can be watched on a TV, phone, tablet or laptop.
• Linear TV refers to scheduled programming that viewers watch as it airs, traditionally through broadcast or pay-TV services.

For advertisers, the differences become even clearer when comparing where ads run and how they're bought and measured.

CTV and OTT aren't competing categories. Their distinction matters when planning campaigns. Buying OTT inventory doesn't necessarily mean reaching television screens, so advertisers need to check which devices and environments are included.

How Does CTV Advertising Work?

A commercial appears halfway through a streaming show, but how did that particular ad end up on that particular screen? Behind the ad break is a series of decisions about audiences, available inventory and which advertiser gets the placement.

The process involves a few moving parts:

1. The advertiser sets up a campaign: This includes the target audience, budget, geographic settings, video creative and campaign objective.
2. The campaign gets access to ad inventory: Placements can be purchased directly from streaming publishers or through programmatic platforms and private marketplace (PMP) deals.
3. An ad opportunity becomes available: When a viewer reaches an ad break, the streaming platform may send an ad request with available information about the device, content and audience.
4. An ad is selected and delivered: Depending on the buying arrangement, an automated auction or another decision process determines which eligible commercial appears.
5. The advertiser reviews performance: Reporting can include impressions, reach, frequency and video completion rates. Some platforms also support measurement of website visits or conversions associated with CTV exposure.

Much of this happens in the time it takes a streaming service to load a commercial break. While this is just another TV ad for viewers, for advertisers, this allows for more options in deciding where ads appear and how their delivery is tracked.

How Are CTV Ads Bought?

Advertisers generally have three ways to access CTV inventory:

• Direct buying: Negotiating placements and pricing with a streaming publisher or media owner — useful when a campaign needs access to specific content or inventory
• Programmatic buying: Using automated technology to purchase eligible impressions across participating inventory sources, which is great for managing campaigns across multiple publishers
• Private marketplace deals: Accessing selected inventory through invitation-only programmatic arrangements, often with negotiated pricing or additional controls

The choice comes down to what the campaign needs most. If placement in a particular streaming environment is essential, a direct agreement may be worth exploring. If the priority is managing reach across several publishers, programmatic buying can offer more flexibility. PMP deals sit somewhere in between, combining automated buying with more selective inventory access.

What Types of CTV Ads Can Advertisers Run?

Most CTV ads resemble TV commercials; however, streaming platforms can offer more ways to present a message or interaction.

The main formats include:

• In-stream video ads: These are commercials that appear before content starts (pre-roll), during a show (mid-roll) or occasionally after it ends (post-roll). Depending on the platform, they may be skippable or non-skippable.
• Interactive ads: These creatives invite viewers to take an action, such as scanning a QR code, requesting more information or using their remote control to explore an offer.
• Pause ads: Typically static or lightly animated, Pause ads appear when someone (as the name suggests) pauses streaming content. They work best with a simple message that can be understood at a glance.
• Shoppable CTV ads: Through QR codes, on-screen product selections or remote-control interactions, Shoppable ads connect viewers with specific products or purchasing options.

Availability varies by streaming service, device and advertising platform. Even within the same campaign, different publishers may support different creative formats and specifications.

Which CTV Ad Format Should You Choose?

Start with the action the campaign is supposed to encourage. A 15- or 30-second video can introduce a product or tell a short brand story. Pause ads are better suited to a message that doesn't need a full narrative. Interactive and shoppable formats make more sense when viewers have a compelling reason to take the next step.

There's also a practical limit to how much effort people will put into interacting with a TV commercial. Scanning a code means reaching for a phone and interrupting whatever they were watching. A useful offer or relevant product might justify that effort. A generic homepage probably won't. The format should make the message easier to understand or act on rather than adding interaction for the sake of it.

What Are the Benefits of CTV Advertising?

CTV gives advertisers access to audiences watching streaming television, along with targeting and campaign management options that traditional TV buying may not offer. So what can brands actually do with that flexibility?

Reach Audiences Beyond Traditional TV

Not everyone who watches television today follows a broadcast schedule. Some viewers spend most of their TV time on streaming services, which means traditional TV placements alone may miss them.

CTV lets advertisers reach audiences across ad-supported streaming apps, free streaming channels and other connected TV environments. For brands already investing in linear TV, it can help extend reach into households their existing campaigns aren't reaching.

The important word here is extend. Adding CTV impressions doesn't automatically mean finding new viewers. Advertisers still need to check audience overlap to understand how much additional reach they're getting.

Target Households More Precisely

Traditional TV campaigns often rely on broad audience estimates based on programming, time slots and geography. CTV can add more specific targeting options, including location, household characteristics, interests and first-party audience data where supported.

For example, a furniture retailer promoting a new showroom in Chicago could focus its CTV campaign on eligible households within its service area rather than buying regional TV exposure with limited geographic precision.

However, notice that household targeting isn't individual targeting. An ad selected for one household might be watched by a parent, a teenager or several people together. The audience data helps narrow the opportunity, but it doesn't identify who is sitting in front of the screen.

Adapt TV Creatives to Different Audiences

A single commercial doesn't always need to carry the same message everywhere. Depending on the platform, CTV advertisers can serve different creative versions to different audiences or locations.

A travel brand might promote beach holidays in colder markets and weekend city breaks in regions closer to its hotels. The core campaign stays the same, while the message changes to reflect what may be more relevant to each audience. This also creates opportunities to test creative approaches rather than relying on one version throughout the campaign.

Make Campaign Adjustments While Ads Are Running

Traditional TV buying often involves advance commitments to particular schedules and placements. Many CTV buying setups allow advertisers to adjust budgets, targeting, creatives and inventory sources during a campaign.

That flexibility is useful when an offer changes or delivery starts drifting away from the original plan. A retailer can update a promotion, pause an underperforming creative or shift spending toward inventory that's adding more reach.

The available controls depend on the buying arrangement. Direct deals may still involve fixed commitments, so advertisers should check what can actually be changed before signing.

See More of What Happens During Delivery

CTV reporting can provide a more detailed view of ad delivery than traditional TV ratings alone. Depending on the platform, advertisers may be able to review impressions, reach, frequency, video completion rates and performance across different inventory sources.

That visibility makes it easier to spot problems while there's still time to act. For example, if impressions keep rising but unique reach barely moves, the campaign may need a frequency adjustment or access to additional inventory.

CTV doesn't make every result measurable, but it gives advertisers more opportunities to investigate what's happening instead of waiting until the campaign ends.

What Are the Biggest Challenges of CTV Advertising?

CTV campaigns can get complicated once they start running across multiple streaming services. Each platform has its own inventory, audience data and reporting methods. A campaign might look perfectly organized in the media plan, only to reveal gaps in frequency control, attribution or inventory visibility once impressions start coming in.

Here's where advertisers are most likely to run into trouble:

Frequency overlap is a good example of how quickly things can get out of hand. A cap of three impressions per household sounds reasonable, but what happens when that same household uses three streaming services? If each platform applies its own cap without sharing exposure data, the household could see the ad nine times. The campaign delivers its impressions, but it may not be finding new viewers.

Inventory transparency brings a different problem. A campaign might buy what appears to be premium streaming inventory, only to discover that reporting groups several apps under a single supply source. Without placement-level visibility, it's difficult to tell which environments are worth the price or whether the inventory matches the original media plan.

How Much Does CTV Advertising Cost?

CTV advertising is typically priced using cost per thousand impressions (CPM). Advertisers pay for every 1,000 ad impressions delivered, regardless of whether viewers later visit a website or make a purchase.

There's no single CTV CPM that applies to every campaign. Premium streaming inventory, narrow audience segments and high-demand periods can all push prices higher. Broader targeting and more flexible placement requirements may open up less expensive inventory.

Several factors influence the price:

• Inventory and publisher: Premium streaming services and exclusive content may command higher rates.
• Audience targeting: Narrow geographic areas or specialized segments can limit available inventory and increase CPMs.
• Buying method: Direct deals, private marketplaces and open programmatic buying can come with different pricing structures and fees.
• Seasonality: Competition for inventory may increase around major sporting events, holidays and other high-demand periods.

What Does a CTV Campaign Budget Look Like?

The basic calculation is straightforward:

Now, say you wanted to estimate reach and impression for a campaign with a $5,000 media budget and an average CPM of $25.

Mind you, that's not 200,000 unique viewers, but 200,000 ad impressions. If the campaign reaches each household four times on average, it would represent approximately 50,000 reached households, assuming the reach and frequency figures are measured consistently. The $25 CPM is illustrative. Actual rates depend on the inventory, market and buying conditions.

Media spend is only part of the cost. Depending on the campaign setup, advertisers may also need to pay for platform access, audience data, measurement services and video production. Some platforms include certain fees in their quoted CPM, while others charge them separately.

Before setting a test budget, check three things:

1. The expected number of unique households reached
2. The estimated frequency
3. Which additional fees are included in the quoted price

A campaign that looks affordable on a CPM basis may be considerably more expensive once the full setup is accounted for.

How Do You Measure CTV Advertising Performance?

A CTV dashboard can show dozens of metrics, from impressions and video completion rates to website visits and attributed conversions. The challenge is choosing the numbers that match what the campaign was supposed to achieve.

A useful starting point is to separate measurement into three levels:

For a brand awareness campaign, unique reach and brand lift may matter more than immediate conversions. An online retailer, meanwhile, may want to know whether CTV contributed to additional visits and purchases.

The difficulty is connecting what happens on TV with what happens elsewhere, like a viewer seeing a travel ad while streaming, researching the destination on their phone and booking a trip on their laptop. CTV measurement providers may use household graphs, device relationships and other permitted signals to connect those interactions. However, matching devices doesn't establish whether the ad actually influenced the purchase.

That brings us to two approaches advertisers should understand: view-through attribution and incrementality testing.

The difference between the two can be significant. Say a campaign reports 500 attributed purchases. An incrementality test might estimate that the campaign generated only 120 additional purchases. Although illustrative figures, they show why attribution and incrementality can tell very different stories.

Not every campaign has the budget or scale for a controlled experiment. Brand lift surveys and geographic tests can provide additional evidence, while broader business trends offer useful context without proving causation.

CTV Advertising Best Practices: From Planning to Optimization

A good CTV campaign starts with a few decisions that are surprisingly easy to overlook: what the channel is supposed to achieve, where the ads will run and how you'll know whether the investment paid off. These six practices can help keep the campaign on track.

1. Give CTV One Primary Goal

Choose the main result before setting up targeting or buying inventory. Trying to optimize for reach, video completion and conversions simultaneously makes it difficult to know which trade-offs are worth making.

Match the campaign goal to a primary KPI:

Turn that objective into a measurable target that reflects the available inventory, audience size and campaign budget.

2. Audit the Inventory Before Buying

Two CTV providers may offer similar CPMs while giving advertisers very different levels of visibility into placements.

Before committing the budget, ask for:

• Publisher and app lists: Where can the ads actually appear?
• Supply-path information: Is the inventory coming directly from publishers or through intermediaries?
• Placement-level reporting: Will you be able to identify which apps delivered the impressions?
• Verification capabilities: What invalid-traffic detection and inventory verification measures are supported?
• Exclusion controls: Can unsuitable inventory sources be blocked?

Create an approved inventory list for the initial test. If a provider can't explain where impressions will come from or how they'll be verified, consider excluding that inventory until there's enough information to assess its quality.

3. Set Frequency Limits and Watch Unique Reach

Start by confirming what the frequency cap actually controls. Is it applied per device, household, publisher or buying platform? A cap that works within one streaming service may not prevent repeated exposure elsewhere. Once the campaign is running, review impressions, unique reach and frequency together.

Suppose the campaign delivers another 100,000 impressions in its second week, but unique reach grows by only 5,000 households. Assuming reach is deduplicated across the reporting period, most of those additional impressions went to households already reached. That's a reason to investigate frequency before increasing the budget.

Review reach and frequency by publisher at least weekly. If impressions keep growing while unique reach slows, test reducing spending on saturated inventory sources or expanding into additional eligible audiences.

4. Test Creatives Designed for the TV Experience

A video that works on social media may need adjustments before it works on a television screen. Viewers sit farther away, may watch with other people and aren't necessarily ready to interact with an ad.

Before launch:

• Test the video on an actual TV rather than relying on a laptop preview.
• Make sure the message is understandable without reading small text.
• Show the brand and product early enough to be recognized.
• Check that dialogue is clear and doesn't depend on subtitles.
• Give QR codes enough screen time to scan and link them to a relevant mobile landing page.

For the first creative test, compare two distinct approaches rather than changing everything at once. A product demonstration and a problem-led story, for example, can run against comparable audiences and inventory.

Judge the results against the campaign's primary KPI. The version with the highest completion rate isn't automatically the one worth scaling.

5. Build Measurement into the Campaign Setup

Before launch, document the primary KPI, how it will be measured and the main limitation of that measurement method.

For campaigns focused on website activity, confirm which conversion events are supported, how CTV exposure is connected to other devices and what attribution window applies. For awareness campaigns, consider brand lift measurement. Larger campaigns may have enough scale for holdout groups or geographic experiments.

Also, we recommend establishing a baseline before the campaign begins. Without one, it becomes much harder to tell whether changes in sales, traffic or brand searches are meaningful.

6. Optimize Based on What Each Source Actually Adds

Once enough data has accumulated, compare publishers, audience segments and creatives against the original campaign objective.

Three patterns are worth investigating:

• Low CPM, weak reach growth: Cheap impressions may be going to households you've already reached. Test shifting budget toward sources that add unique reach.
• Strong completion rates, weak business outcomes: Review the audience, creative message and measurement setup before increasing spending.
• High CPM, strong incremental results: More expensive inventory may still be worthwhile if it delivers additional customers or brand impact efficiently.

Avoid changing several major campaign settings at once. Otherwise, even an improvement can be difficult to explain.

Keep a simple optimization log: What changed? Why? What happened to the primary KPI? After several rounds, that history will help distinguish meaningful improvements from ordinary performance fluctuations.

Where Does CTV Fit in an Omnichannel Advertising Strategy?

CTV rarely works in a vacuum. People may discover a brand on television, research it on their phones and make a purchase days later. Other advertising channels can help keep the brand visible throughout that process, each contributing something different.

Different advertising channels can support different stages of the customer journey:

The channels don't have to follow a fixed sequence. A person might encounter a native ad before seeing the TV commercial, or search for a product without ever interacting with either.

A home improvement brand launching a new kitchen collection offers another useful example of how these channels can complement one another:

1. CTV builds familiarity: A 30-second video shows the kitchen collection in a real home, giving viewers a clear picture of the products.
2. Native advertising adds context: Through a platform like MGID, the brand promotes a guide to planning a kitchen renovation, using contextual targeting to reach readers exploring related topics.
3. Search captures active demand: Ads appear when potential customers start comparing cabinets, materials or local showrooms.
4. Social supports continued discovery: Short videos and product-focused creatives give interested audiences more opportunities to explore the collection.

Each channel has a job, but the results shouldn't be added together without checking for overlap. The same purchase might appear in several platforms' attribution reports, making the combined performance look better than it really is.

To understand whether CTV adds value to the existing media mix, advertisers can compare overall business outcomes and, where feasible, test the combined approach in selected markets against comparable markets without the additional CTV investment.

The goal is to find out what CTV contributes that the other channels aren't already delivering. More touchpoints are beneficial only when they create additional value.

FAQ on CTV Advertising

Is CTV advertising worth it for small businesses?

CTV may be worth testing if a business serves a defined geographic area, has a suitable video creative and can afford enough impressions to evaluate the results. For businesses with limited budgets and an immediate need for leads, search or other intent-driven channels may be a more practical starting point.

Can CTV advertising drive conversions?

Yes. CTV can encourage website visits, brand searches and purchases on other devices. QR codes and interactive formats can also give viewers a more direct route to an offer. The strongest results often depend on having a clear next step and coordinating CTV with other channels that can capture purchase intent.

Are CTV ads skippable?

Some are, although many streaming services use non-skippable video ads. It depends on the publisher, subscription tier and available inventory. Check whether ads can be skipped before buying placements, particularly when comparing video completion rates across platforms.

Can CTV advertising work without third-party cookies?

Yes. CTV platforms can use first-party data, device identifiers, household-level information and contextual signals where available and permitted. However, these methods still come with privacy requirements and measurement limitations. Advertisers should check which identifiers, consent mechanisms and data protection practices their partners use.

Beyond the Big Screen: What Makes CTV Worth It?

A 55-inch screen is a great place to get noticed, but it's a much harder place to prove that someone cared enough to do anything afterward.

CTV gives advertisers more control over TV campaigns, from choosing audiences to adjusting delivery and reviewing results. Still, the most useful decisions often happen outside the streaming platform: which households are worth reaching, how much repetition is enough and whether the campaign adds value to the channels already running.

A successful CTV campaign doesn't need to take credit for every purchase. It needs to earn its share of the advertising budget. And that starts with knowing what it contributes that the rest of the media plan doesn't.