FreeWheel has released a new report titled “The Power of OTT: Audiences and Engagement,” which highlights data on OTT devices’ (which I’ve typically called connected TVs) soaring popularity, but also acknowledges ongoing challenges. The report is part of new semi-annual research series from FreeWheel called Signature Insights, which incorporates research from its own Video Monetization Report (VMR), as well as 3rd party sources such as Nielsen, eMarketer, Hulu and Millward Brown.

In its Q1 ’17 VMR, which was released at our June 14th Video Ad Summit, FreeWheel found that 32% of ad views occurred on OTT devices, up 16x from a 2% share just 4 years ago. Clearly OTT devices have been on a stunning run, driven mainly by “attached devices” (e.g. Roku, Fire TV, Apple TV and Chromecast), which the new report says account for 84% of all OTT device ad views. In contrast, gaming consoles (e.g. PlayStation, Wii and Xbox) together account for 11% with Smart TVs lagging at just 5%.

The proliferation of attached devices has been driven by their relatively low cost, easy setup and access to popular SVOD services as well as hundreds of other video apps. Research from a variety of firms indicates that at least 65%-75% of U.S. homes now have at least 1 TV connected to the Internet, with many homes (yours?!) having multiple TVs connected.

The new FreeWheel report observes that advertisers have been drawn to OTT because viewing combines “the power of digital advertising with the engaging, lean-back user experience of traditional television.”

In particular, FreeWheel’s analysis of Nielsen data found that the median age of OTT viewers is just 31 years-old, as compared with 54 years-old for traditional TV viewers, with median household income of $61,200 vs. $51,500 for traditional viewers. 56% of ad views were by millennials (age 18-34) with another 27% by Gen X (age 35-54).

It’s not just the age and income of OTT viewers that’s attracting advertisers however. FreeWheel’s own research has found OTT devices have the highest ad completion rate (98%) and the highest percentage of 60+ minute viewership (36%) of any viewing device.

Last but not least, the new report cites Hulu and Millward Brown research showing that ads in a living room setting resulted in the highest lift for aided awareness and brand favorability - something TV advertisers have known for a long time.

Although there are clearly many advantages to advertising on OTT devices, the report explains 3 key challenges that still must be resolved for OTT to realize its full potential: viewability and fraud (part of brand safety issue that overhangs the entire industry), incremental reach to linear viewing (i.e. not saturating the same viewers, just on a different set of devices than traditional TV) and measurement (lack of a standard for evaluating campaign reach/performance).

FreeWheel explains how each of these challenges is being met by the industry though it’s clear more time is needed for full resolution to all. Wrapping up, the FreeWheel report makes 3 recommendations for how content providers can accelerate OTT device advertising: properly educating sales teams with relevant knowledge and tools, ensuring all ad and video delivery systems are optimized and aligned, and leveraging data to optimally package/price OTT inventory.

There’s no question that OTT devices have already firmly established themselves in the living room and will only continue to grow in importance as cord-cutting accelerates and viewers shift their consumption. As such it is critical that the industry as a whole learn how to monetize these views as well or better than traditional TV.