Connected TV (CTV) Advertising: What It Is, How It Works, and Why It Matters

The living room has gone digital, and advertisers are following viewers there. Connected TV advertising represents the convergence of television's visual impact with digital marketing's surgical precision. No longer do brands need to accept the waste and guesswork of traditional TV buys. Today's CTV campaigns can target specific households based on viewing habits, shopping behavior, and demographic data while measuring results in real time.

Why does this shift matter? Just look at the numbers. In 2024, 233.9 million Americans watched CTV content, with the average adult spending over two hours daily streaming on their television screens. More telling: 2023 marked the first year cord-cutting households outnumbered pay TV subscribers. For marketers, this migration creates both an opportunity and an imperative.

CTV advertising delivers what traditional television never could: accountability. Brands can track viewer engagement, measure conversions across devices, and adjust campaigns on the fly. A furniture store can target only households within their service area who recently searched for sofas. A software company can reach decision-makers at Fortune 500 companies during their evening Netflix sessions. This granular control, paired with completion rates exceeding 90%, makes connected TV ads a powerful tool for businesses of all sizes.

Meaning of CTV

Connected TV (CTV) refers to any television set that connects to the internet and streams digital video content. Think of it as the bridge between traditional television and the streaming world: maintaining the lean-back viewing experience of TV while adding the targeting capabilities of digital media.

Smart TVs with built-in internet connectivity qualify as CTV, as do regular televisions connected through external streaming devices like Roku, Apple TV, or gaming consoles. The key distinction lies in the internet connection that enables viewers to access streaming services and, crucially for advertisers, allows for data collection and targeted ad delivery.

💡 For a comprehensive overview of the technical aspects, Google's CTV guide provides additional insights into how these systems operate.

What is CTV advertising?

CTV advertising delivers targeted video ads to viewers through internet-connected television devices while they stream content. Unlike traditional broadcast commercials that play to whoever happens to be watching, connected TV ads can be customized based on household data, viewing patterns, and even cross-device behavior. 

👉 For instance, two neighbors watching the same show at the same time might see completely different commercials — one for a luxury car, the other for a local pizza shop — based on their respective profiles and interests.

The process works through dynamic ad insertion, where streaming platforms and apps serve different ads to different households in real-time. Advertisers purchase this inventory either programmatically through automated bidding systems or directly from publishers like Hulu or Peacock.

What makes connected television advertising particularly powerful is its marriage of television's emotional impact with digital's measurement capabilities. Advertisers know not just how many households saw their ad, but can track subsequent actions like website visits or purchases.

Connected TV has the best features of online and offline, it is a powerful hybrid for brands that make the best strategic use of this channel and in the near future it will be the greatest digital hub in homes around the world. — Joel Cox, Co-Founder, Strategus

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

These terms often create confusion, but the distinctions are straightforward once you understand the hierarchy:

• Linear TV is traditional television—the kind where everyone watches the same content and ads at scheduled times through cable, satellite, or antenna.
• Over-the-Top (OTT) encompasses all video content delivered over the internet, bypassing traditional distribution methods. This broad category includes everything from watching YouTube on your phone to streaming Netflix on your laptop to catching up on Hulu through your smart TV. OTT is device-agnostic—if video streams over the internet, it's OTT.
• Connected TV sits within the OTT universe but specifically refers to internet-delivered content viewed on television screens. All CTV is OTT, but not all OTT is CTV. Watching Disney+ on your smartphone? That's OTT but not CTV. Watching the same show on your smart TV? Now it's both OTT and CTV. This distinction matters because the television environment creates different viewer behaviors and advertising opportunities—people are more engaged, less likely to skip ads, and often watching with others.

Devices that support Connected TV

The connected TV ecosystem runs on several types of hardware:

• Smart TVs from manufacturers like Samsung, LG, and Vizio build internet connectivity directly into their sets, requiring no additional hardware. 
• Streaming devices like Roku (with over 89 million active accounts), Amazon Fire TV Stick, Apple TV, and Google Chromecast bring CTV capabilities to any television with an HDMI port. 
• Gaming consoles serve double duty as entertainment hubs, with PlayStation and Xbox users spending significant time streaming video content. 
• Modern cable and satellite boxes from providers like Comcast and AT&T now include streaming apps, blurring the lines between traditional and connected TV.

How does CTV advertising work?

CTV advertising operates through a sophisticated ecosystem that dynamically matches ads with viewers in real-time. When someone streams content on their connected TV, multiple systems communicate within milliseconds to determine which ad to show. The streaming app sends a request containing anonymous household information to ad servers, which then auction the opportunity to show an ad. The winning advertiser's video plays during the commercial break, and performance data flows back for analysis and optimization.

This process happens thousands of times per second across millions of households. The technology stack involves demand-side platforms (DSPs) where advertisers manage campaigns, supply-side platforms (SSPs) that publishers use to sell inventory, and data management platforms (DMPs) that organize audience information. 

💡Sounds complicated? Don’t go it alone—CTV success takes know-how. The right partners turn complexity into measurable wins.

Programmatic buying in CTV

Programmatic buying automates the purchase and placement of CTV ads through real-time bidding systems. Instead of negotiating rates manually with each publisher, advertisers use DSPs to set parameters—target audience, budget, frequency caps, and performance goals. The platform then bids on available inventory across multiple streaming services simultaneously.

The process unfolds in under 100 milliseconds. A viewer clicks play, triggering an ad request that hits the programmatic marketplace where algorithms evaluate whether this viewer matches target criteria. The highest bidder wins and their ad plays. 

In 2025, an estimated 75% of all connected TV advertising transactions occur programmatically, democratizing television advertising while improving results for advertisers of all sizes.

CTV ad formats

Connected TV ads come in several formats:

• Pre-roll ads play before content begins, typically running 15 or 30 seconds with 95%+ completion rates. 
• Mid-roll ads interrupt content at natural breaks, mimicking traditional TV commercial pods but with lighter ad loads (2-4 minutes versus 8 minutes on linear TV). ‍
• Interactive ads represent the cutting edge—QR codes let viewers instantly connect their phones, while shoppable overlays display product information without interrupting the video. These formats blur the line between watching and shopping, with engagement rates running 10x higher than standard video ads.

Targeting & personalization capabilities

The targeting precision in connected television advertising surpasses anything possible with traditional TV: 

• Demographic targeting goes beyond basic age and gender to include household income, education level, and life stage. 
• Behavioral targeting leverages viewing habits to identify relevant audiences (sports enthusiasts see different ads than cooking show fans).
• Geographic targeting enables hyperlocal campaigns down to ZIP code level. 
• First-party data integration lets advertisers upload customer lists for direct targeting or lookalike modeling. ‍
• Contextual targeting matches ads to content themes without using personal data, delivering up to 25% higher engagement rates compared to traditional demographic targeting alone.

CTV metrics and measurement

Measuring connected TV advertising performance requires rethinking traditional TV metrics while embracing digital attribution capabilities. 

• Video completion rates serve as the foundational metric, with CTV consistently delivering rates of 90% or higher.
• Reach and frequency gain new precision—instead of panel-based estimates, advertisers see exactly how many unique households viewed their ads. 
• Attribution and conversion tracking follow viewers from TV exposure through website visits and purchases. Return on Ad Spend (ROAS) is more transparent than ever, with some campaigns boasting 67% jumps in ROAS compared to their old-school methods.
• Brand lift studies measure the impact on perception and purchase intent through survey-based research. These studies consistently show CTV driving 2-3x higher awareness lift compared to linear TV.‍
• Incrementality testing reveals CTV's true contribution by comparing results in test and control markets. Geographic holdouts or audience splits isolate the impact of connected TV ads from other marketing activities.

Benefits of Connected TV advertising

The convergence of television's emotional impact with digital's precision targeting creates unique advantages for advertisers. Connected TV advertising delivers measurable results while maintaining the prestige and engagement of traditional TV.

Advanced targeting and audience segmentation

CTV advertising turns the spray-and-pray approach of traditional TV into a precision instrument. Where linear TV might reach 60% waste, connected TV campaigns regularly achieve 80-90% on-target delivery. 

👉 One analysis of a diaper brand's advertising spend on linear TV estimated that approximately $60 million out of a $75 million campaign was wasted on households that do not purchase diapers.

Advertisers can build custom audiences by combining demographic, psychographic, and behavioral attributes. 

First-party data integration takes targeting further—brands upload customer lists to create lookalike audiences or retarget existing customers. This CRM-level targeting on the TV screen creates powerful opportunities for upselling and cross-selling.

High completion rates and viewer engagement

Connected TV ads achieve 90%+ completion rates on average, compared to YouTube's 31% for skippable ads. This captive audience translates into exceptional engagement—brand recall averages 46% (as compared to 9% for website ads).

The full-screen, sound-on environment commands attention in ways smaller screens cannot match. Unlike interruption-based mobile ads, connected television advertising fits naturally into the viewing experience.

Cross-device measurement and attribution

Modern identity resolution technology links the living room TV to smartphones, tablets, and laptops in the same household. This connection enables closed-loop measurement previously impossible with traditional television. 

👉 Consider a typical customer journey: A viewer spots a CTV ad for vacation deals on Sunday night. By Wednesday, they’ve booked a trip, hopping from TV to work computer to tablet to smartphone. Traditional TV would miss this journey. CTV tracks every step.

Conversion tracking extends beyond digital actions: 

• Store visit attribution uses mobile location data to connect TV exposure with physical retail trips. 
• Multi-touch attribution models properly credit CTV's role in complex purchase paths.

Rather than giving all credit to the last click, these models recognize how connected TV ads build awareness and consideration that other channels later convert.

Automated campaign optimization

Connected television advertising brings programmatic efficiency to the big screen:

• Real-time bidding algorithms adjust strategy thousands of times per day, shifting budgets toward best-performing placements. 
• Creative optimization adds another layer of intelligence. Dynamic creative optimization (DCO) automatically tests different messages, calls-to-action, and visual elements to find winning combinations.‍
• Budget pacing ensures smooth delivery throughout the campaign period. Instead of burning through budgets early or scrambling to spend at month's end, automated systems distribute impressions evenly while capitalizing on high-performance opportunities.

Brand safety and ad fraud protection

CTV ads run in premium, brand-safe environments, not next to random or risky content. Major streaming platforms and networks vet all programming, while walled-garden CTV apps and strict approval processes keep out fraud. 

Industry standards like app-ads.txt and advanced fraud detection add extra layers of protection. The result? CTV fraud rates stay below 11%, far safer than most digital channels.

Challenges in CTV advertising

CTV offers major advantages, but marketers must overcome some real challenges to maximize performance.

Fragmentation of platforms and measurement

The CTV landscape resembles a complex puzzle with pieces that don't quite fit together:

• Platform fragmentation stems from hundreds of different streaming services, apps, and content providers across various CTV devices. Each platform may have different advertising policies, creative requirements, targeting capabilities, and reporting standards, making unified campaign management complex.
• Measurement inconsistencies arise when different platforms use varying metrics, attribution models, and reporting timeframes, making cross-platform performance comparison challenging for advertisers seeking unified insights.

The walled garden problem compounds these issues. Major platforms guard their user data closely, preventing the holistic audience view that advertisers expect from digital channels.

It is really the lack of cross-platform, cross-programmer, cross-publisher measurement. We're not just talking about stitching together linear and CTV and linear and digital, but this is how, as a buyer, I need to understand the ecosystem as a whole. — Mariel Estrada, Head of Video Currency, Omnicom Media Group

Frequency capping and ad repetition issues

Ad repetition is a top CTV viewer complaint, thanks to platform fragmentation and lack of unified identity management. 

The same household can be bombarded with the same ad across multiple services, far exceeding optimal frequency (3–7 exposures/week). Too many repeats hurt brand perception and efficiency. 

While some advertisers try single-platform exclusives or identity resolution tools, true universal frequency capping remains a work in progress.

Ad fraud in the CTV ecosystem

While CTV's closed ecosystem offers more protection than the open web, sophisticated fraudsters have found ways to exploit vulnerabilities. The high CPMs of connected TV ads (often $25-65 per thousand impressions) create lucrative targets for criminal operations.

Techniques like SSAI spoofing and device spoofing let bad actors generate fake CTV impressions—tricking advertisers into paying premium prices for ads that never reach real viewers. 

The fragmented CTV landscape makes detection difficult, as fraud can slip through smaller platforms even if larger ones have strong defenses. 

Industry standards like ads.cert 2.0 and advanced fraud detection tools are making progress, but fraudsters constantly adapt.

Connected TV trends to watch in 2025

The connected TV advertising landscape continues rapid evolution. According to Statista's latest projections, U.S. CTV ad revenues will reach $42.4 billion by 2027, representing growth that outpaces every other digital advertising channel.

Rise of interactive and shoppable ads

Television commercials no longer end when the video stops playing. Interactive CTV ads create two-way conversations between brands and viewers, breaking the passive viewing paradigm that defined television for decades. 

• QR codes in ads now see scan rates as high as 70% when linked to familiar retailers, and voice-activated spots let viewers request info instantly. 
• Shoppable TV takes this further: viewers can buy products directly from their screens, with formats like Walmart’s shoppable ads generating 3x higher sales. 
• Features such as dynamic product overlays, AR previews, and even one-click purchases via facial recognition are streamlining the path from ad to purchase. 

Early adopters report longer engagement and higher conversion rates, especially among digital-first audiences who expect instant shopping experiences.

From a performance and creative perspective, when you leverage advanced creative formats (in CTV), interactive creative performs much better than standard creative or just repurposing a broadcast spot in that connected space... We're seeing 192 seconds of additional time earned. — Dan Mouradian, VP-Global Client Solutions, Innovid

AI and contextual targeting in CTV

AI is transforming CTV advertising by predicting which viewers will respond to specific messages, significantly improving campaign efficiency: 

• Instead of just using demographics, AI-driven contextual targeting analyzes content (like dialogue, visuals, and themes) to align ads with the moment, boosting relevance and engagement. 
• Machine learning continuously adapts targeting based on real-time performance, often doubling campaign effectiveness within months. 

With advanced AI tools such as a conversational planning assistant and dynamic KPI optimization, platforms like Elevate make media planning faster, cross-platform optimization smarter, and campaign analytics simple and actionable, ensuring maximum efficiency and ease of use.

👉 Discover how AI is reshaping CTV and learn how to get ahead—read “The Rise of AI in CTV.”

CTV for performance marketing

Connected TV ads have evolved from pure branding to real performance drivers. In 2025, over half of CTV advertisers prioritize sales, store visits, and leads over awareness, thanks to better measurement and proven results. 

Direct-to-consumer brands report higher conversions and customer value from CTV, while pixels and attribution models link TV exposure to digital actions—showing CTV-exposed households convert 45% higher than others. 

To maximize performance, marketers use shorter, CTA-focused ads, strong offers, and post-TV retargeting, blending digital tactics with TV’s reach.

Having a full-funnel mindset is paramount—not only measurement but your channel strategy. CTV drives users down the funnel, and they will convert via other channels. There's no other way to see if your CTV campaign is working or not. — Gijsbert Pols, Ph.D., Director of Connected TV and New Channels, Adjust

Growth of local and regional CTV campaigns

Geographic precision in CTV makes TV advertising affordable for local businesses. A plumber can target just local households, while restaurants customize ads by region—all at the ZIP code level. 

Success stories abound: 

• A convenience store chain used targeted CTV to launch two locations, boosting smoothie sales by 930% and pizza deals by 77%. 
• A local theater’s CTV campaign sold out subscriptions and drove 502 website visits in one week.

By eliminating wasted impressions, CTV slashes local business acquisition costs by 40% versus traditional TV. 

User-friendly tools and real-time dashboards further empower small advertisers, breaking down barriers that once kept TV out of reach.

Best practices for successful CTV campaigns

Success in connected TV advertising requires adapting traditional TV wisdom to digital realities while avoiding common pitfalls. These proven strategies help advertisers maximize their CTV investments.

Define clear KPIs before launch

Clarity on success metrics shapes every campaign decision. Establish primary and secondary KPIs aligned with business objectives. Smart KPIs account for CTV's assist effect by tracking influenced conversions with 7-14 day view-through windows.

Use first-party and contextual data for targeting

Layer multiple data sources for precise audience identification:

• First-party data provides the foundation with 3-5x higher engagement rates than broad demographic targeting. 
• Contextual targeting adds another dimension without relying on personal data, creating natural relevance viewers appreciate.

Combine CTV with other channels for omnichannel impact

CTV advertising multiplies impact when integrated with other channels. Use television to build awareness, then deploy digital channels to capture interest. 

Cross-device retargeting capitalizes on CTV's awareness-building power—just 7% of ad spend on CTV delivered a 30% boost in ROI, according to one study.

Optimize creative for the TV screen experience

Optimizing for the TV screen means adapting creative to its unique environment: 

• Use cinematic visuals, minimal large text, and bold logos that are clear from across the room. 
• Prioritize strong audio—the majority of CTV viewers have sound on, so use quality voiceovers and memorable music. 
• Tailor creatives for different times and contexts, like entertainment messages on Friday nights or info-focused spots on Sunday mornings. 
• Leverage CTV’s dynamic capabilities to deliver relevant, audience-friendly messages.

How to get started with CTV advertising

Launching your first connected TV campaign means making smart choices on platforms, budgets, and measurement. Here’s a roadmap:

Choosing the right DSP or platform

Your platform choice impacts inventory, targeting, and measurement. There are three main options:

• Self-serve DSPs (e.g., Amazon DSP, The Trade Desk, DV360): Offer full control and transparency, ideal for hands-on teams with programmatic experience. Minimum budgets often start at $10,000-25,000/month.
• Managed Service Providers (e.g., MNTN, Madhive): Handle execution and provide CTV expertise for a 10–20% fee over media costs, making them a fit for teams wanting expert support.‍
• Direct Publisher Buys (e.g., Hulu, Roku): Ensure premium placement and brand safety but are pricier and limit reach to one platform, best for advertisers seeking specific audiences.

Budget allocation tips

Experts suggest allocating 15–30% of your digital budget to CTV for statistically meaningful results, with $25,000–50,000/month enabling solid tests. 

CPMs range $15–65 depending on targeting and content quality, significantly higher than display or social media, but the premium is offset by 90%+ completion rates and a premium, engaged viewing environment.

When planning distribution, avoid concentrating spend on a single publisher. Instead, allocate 40-50% to major platforms like Roku or Amazon, 30-40% to broadcaster apps (Paramount+, Peacock, etc.), and 10-20% for testing emerging platforms. This diversification helps maximize reach while identifying the most efficient inventory sources.

Use pacing strategies—steady distribution, flighting for key periods, or dayparting to peak viewing hours (7–11 PM)—to maximize impact. 

Reserve 10–15% of your spend for testing creatives, audiences, and platforms to find what works.

Measuring performance and ROI

Measurement turns CTV into a data-driven investment. Set up pixels and control groups before launch for accurate tracking. Go beyond last-click attribution—use view-through windows (7–14 days) and multi-touch models to capture CTV’s full impact. Track metrics like reach, completion rate, conversions, attributed revenue, and incremental lift. Weekly and monthly reviews help optimize and balance short- and long-term goals.

Conclusion

CTV delivers what traditional TV can’t: 90%+ completion rates, laser-focused targeting, cross-device tracking, and automated optimization. Local businesses can finally afford TV ads. Marketers can prove ROI. Personalization is now possible at scale. No wonder 75% of CTV buys are programmatic and most advertisers focus on more than just awareness.

Still, CTV isn’t plug-and-play. Platform fragmentation, frequency issues, and ad fraud require smart planning and strong partners.

But the winners aren't waiting for CTV to get cleaner. They know that first-mover advantage beats perfect execution every time. While everyone else is paralyzed by analysis, they're making bold moves and claiming territory.

Want to steal a page from their CTV playbook? Start with these five moves:

1. Set sharp goals and a real budget to get actionable data.
2. Layer your targeting: Mix first-party and contextual data for impact without privacy headaches.
3. Blend CTV into your full marketing funnel for bigger results.
4. Make creative pop on the big screen with sound-on, full-screen experiences.
5. Track what matters: Use advanced attribution to connect CTV to real business growth.

CTV isn’t waiting, so why are you? Slide into our inbox at AI Digital and we’ll help you catch up fast.