This State of the Industry report, sponsored by PadSquad, explores how brands and agencies deploy interactive videos for more relevant and engaging advertising experiences.
The digital video advertising market surpassed $191 billion in 2024, yet brands face an increasingly difficult challenge: capturing and maintaining audience attention in an oversaturated media landscape. Traditional video formats are losing their effectiveness as consumers encounter hundreds of video ads daily across multiple platforms and devices.
Interactive video advertising has emerged as a solution, transforming passive viewers into active participants through shoppable elements, playable ads, polls and other engaging features. These capabilities not only have the potential to increase engagement rates but they can also provide advertisers with real-time data about audience preferences and behaviors.
In this new State of the Industry report, Digiday and PadSquad polled 90 brand and agency respondents to learn how they are currently leveraging interactive video, and the benefits they’ve seen. This report examines current usage patterns, performance metrics and the platforms where interactive video delivers the strongest results.
The findings reveal that while connected TV and social platforms currently lead the way for interactive video campaigns, significant opportunities remain untapped across the open web. As attention spans continue to shrink and competition for eyeballs intensifies, interactive video represents a critical evolution in how brands connect with their audiences.
“The traditional 30-second video spot is no longer sufficient in today’s fragmented attention economy,” said Lance Wolder, head of strategy and marketing at PadSquad. “Interactive video fundamentally changes the relationship between brand and consumer by creating participatory experiences that generate measurable engagement and actionable insights.”
This report explores how leading advertisers are leveraging interactive video features, which platforms deliver the strongest ROI and the strategies driving meaningful business outcomes in an increasingly competitive digital landscape.
Among our respondents, 7 in 10 (72%) are allocating at least 26% of their media budgets to video advertising in 2025.
The most popular video advertising format or platform is social video, where 93% of our respondents are currently spending. This is followed by CTV (83%) and in-stream video (76%), including pre-roll, mid-roll and post-roll ads. More than a third (36%) advertise on linear TV and outstream video.
Taking a closer look at the specific channels where brands and agencies are allocating dollars to, social video (64%) and CTV (61%) account for the bulk of budgets. Nearly 1 in 4 advertisers (39%) are spending on YouTube.
However, a significant monetization gap exists, with only 16% of respondents investing significantly in the open web, including premium publishers and programmatic — despite 76% of advertisers running pre-roll programmatically across the open web. This gap represents an opportunity for brands and agencies to leverage the open web for incremental reach, diverse environments and advanced targeting in addition to those offered through social and CTV, and indicates that the open web can offer more efficiency than CTV.
As brands and agencies navigate the disparate platforms and channels available for video advertising, reach and audience size (69%) are key differentiating factors.
On a similar note, respondents also pay close attention to incremental reach and frequency control (61%), as well as targeting and segmentation (61%). More than 4 in 10 (41%) consider a platform’s innovative ad formats and creative options, including interactive elements.
Their heavy investment in video advertising has already paid off for brands.
Eighty percent have seen increased brand awareness as a result of their video investments, as well as increased brand engagement (59%) and higher conversion rates (51%). Only 1% of respondents have seen decreased returns from video advertising.
When it comes to interactive features appearing in video ads, more than half (58%) of respondents use shoppable overlays and commerce integrations.
More than a third have implemented personalized and dynamic creative (38%) and clickable hotspots and interactive storytelling (37%). Less than 1 in 10 respondents (7%) do not use or plan to use interactive video features.
“Interactive elements transform standard video from being just a brand storytelling tool into a versatile asset capable of driving results throughout the funnel,” Wolder said. “The same core video can be enhanced with different interactive layers to support awareness, consideration and conversion goals.”
The growing emphasis on personalization has further fueled interest in interactive video capabilities, Wolder added. Brands are leveraging consumer insights to customize content and create multi-language versions of their core creative, enabling them to forge stronger connections with diverse audience segments without significantly increasing production costs, he said. This strategic approach allows marketers to extract maximum value from existing video assets while delivering more engaging and relevant experiences to their target audiences.
Pat Fitzell, director of digital investment at NOVUS Media, agrees. “As more clients look for media dollars to achieve awareness and performance goals simultaneously, we see interactive videos becoming more of a staple in the tactical mix in addition to, not replacing or taking away from, other video placements like CTV and standard OLV,” Fitzell said.
Overall, brands and agencies expect to increase their use of interactive features in video campaigns in 2025. More than half of respondents (52%) expect to include interactive features in at least 26% of their video ads in 2025, up from 12% in 2024.
Interactive video ads have even appeared as part of post-Super Bowl activations, with Hellman’s Big Game spot running with shoppable CTV ad units this spring.
“The investment in enhancing existing video assets continues to grow because it delivers measurable results. These enhanced formats deliver an emotional impact 3.5x greater than standard ads and consistently outperform traditional video across key metrics like engagement, view time and attention,” Wolder said. “Campaigns frequently achieve up to 190% higher engagement rates, translating to stronger media performance and measurable business outcomes, including increased brand recall and purchase consideration.”
Wolder pointed out an additional opportunity for advertisers to consider: the open web. While social video and CTV dominate advertiser spending, capturing 64% and 61% of digital advertising allocations, respectively, the open web represents a significantly underutilized opportunity. Despite only 16% of advertisers making substantial investments in the open web environment, this channel offers compelling advantages for video advertising campaigns, he said.
Scale and reach: The open web provides vast scale across thousands of websites, he said, enabling incremental reach that complements CTV and social platforms. This breadth helps advertisers access audiences across diverse content environments and consumption moments.
Cost efficiency: Seventy-six percent of survey respondents said they spend on in-stream video, including pre-roll ads, but only 16% said the open web is one of the two channels to which they allocate most of their digital advertising. Therefore, the open web often presents more favorable cost dynamics, Wolder explained. This market opportunity can translate to efficient CPMs and strong advertising value for brands seeking to maximize their media investments.
Advanced targeting: Programmatic open web advertising offers sophisticated targeting through first-party data, contextual signals and advanced audience segmentation, Wolder added. These signals offer a unique opportunity to personalize video ads in ways that are not possible in other channels.
Enhanced reporting: Open web advertising typically provides comprehensive measurement capabilities with granular data on viewability, completion rates, brand lift and conversion tracking, according to Wolder. This transparency gives advertisers more detailed insights into the customer journey and data-driven campaign optimization.
Strategic complement: The open web serves as a valuable complement to CTV and social investments, Wolder said, because it provides frequency management across channels and allows advertisers to reach audiences in diverse consumption contexts. As brands seek to diversify their media mix and maximize reach, the open web presents scalable opportunities for cost-effective video advertising strategies.
While brands and agencies have reported improved brand awareness due to their video advertising campaigns, audience engagement (64%) is our respondents’ primary focus with interactive video ads in particular.
Among respondents already using interactive video ads, more than half are prioritizing brand awareness (60%) and direct response and conversions (51%). This similarly echoes how respondents reported increased ROAS as a result of video investment.
The ability to personalize interactive video — whether it’s based on audience segments, interests, language preferences or other factors — further increases relevance and viewer engagement, supporting goals like driving attention or brand recall and creating meaningful connections with consumers (both at 44%).
“Different formats and devices naturally lend themselves to different goals, and this versatility is what makes interactive video so powerful,” Wolder said. “A single core asset can be adapted with different interactive layers depending on where it sits in the funnel and who it’s reaching. When content feels tailored, viewers are more likely to engage and respond.”
As PadSquad’s Wolder explained, features like product carousels, interactive maps and gamified content transform standard awareness campaigns into memorable experiences — regardless of device or platform. These interactive elements give viewers compelling reasons to spend more time with a brand, increasing message retention and emotional connection.
For building brand awareness, Wolder recommended full-screen vertical on mobile, interactive video experiences and premium in-article placements because these command attention and align with how viewers are already consuming content. For lower-funnel goals like conversions, frictionless interactive units with embedded calls-to-action, shoppable feeds and tap-to-buy elements are highly effective, particularly on mobile, where consumers are more likely to take immediate action.
“We’ve seen campaigns that significantly increased exposure time and shifted brand preference among target audiences,” Wolder said. “For example, a major automotive campaign that implemented interactive in-stream video drove a 33-point lift in consideration and an 85% lift in new vehicle registrations by allowing viewers to explore different features and functionality of the vehicle.”
The automotive campaign, led by Davis Elen Advertising on behalf of the Southern California Toyota Dealers Association, drew interest for a new all-electric vehicle in a crowded market through a first-to-market interactive video format. The format featured interactive product cards that were overlaid over a video asset. Consumers could swipe through the product cards, giving them an immersive experience.
It’s an effective strategy for advertisers to consider, Wolder said. Enhancing existing video assets with different interactive elements that pinpoint the stages of the buying journey is a way for brands to maximize their creative investments. “A single core video can be transformed with different interactive overlays to appeal to awareness, consideration and decision-stage consumers,” he added.
To measure the effectiveness of video advertising, including interactive video, our respondents are leaning mostly on sales lift attribution and conversions (68%) and viewability and video completion rates (67%). Attention and engagement metrics and incremental reach validation are significant KPIs for 44% of our respondents.
“We’re encouraging brands to shift their focus to also look at attention, engagement, interaction rates, and total/earned view time. These metrics paint a clearer picture of attention and intent,” Wolder said. “For example, we’ve seen users willingly engage with interactive elements like product swipes and polling, which say a lot more about brand interest than a single click could.”
Fitzell said NOVUS Media looks at interactive video as an area of innovation with the potential to take data beyond views and clicks. “Interactive elements like hotspots and video skins with more prominent branding and CTAs help drive higher rates of engagement than standalone video assets in OLV and CTV environments,” Fitzell said. “A user’s interaction with the video can indicate higher levels of interest or intent measured by lift studies and adds context to inform future creative development.”
However, there is a confidence gap, with only 19% of respondents feeling very confident in measuring video campaign performance to make actionable decisions.
Given the increasingly complex nature of video advertising, brands and agencies are also turning to external measurement partners to ensure independent, credible and standardized insights into campaign performance. The leading third-party measurement partners our respondents use for video include Nielsen (54%), VideoAmp (42%), Realeyes (36%) and TVision (31%).
“Measurement partners like Comscore, VideoAmp, Lumen Research, Real Eyes and Attain can help connect these signals to brand lift or purchase intent,” Wolder said. “We recommend experimenting with different formats, various calls-to-action, and overlays or end frames to discover what truly connects to your audience.”
In the Southern California Toyota Dealers Association automotive campaign mentioned by Wolder, for example, the intention was to build awareness and consideration for the bZ4X electric vehicle, so it leveraged an original video asset featuring an Asian influencer and featured cards overlaid on the video asset highlighting different vehicle features and active promotions. This strategy was particularly impactful as the campaign targeted Asian audiences, and it made a real difference in brand awareness and consideration, according to John Papadopoulos, partner and head of media at Davis Elen.
In the end, the campaign resulted in a 33-point increase in purchase consideration among consumers who ranked Toyota as their top-choice auto brand, in addition to an 85% increase in the number of bZ4X electric vehicles registered in the area during the campaign’s run, compared with the months before the campaign.
“The ability to test different interactive elements layered onto the same core video asset provides valuable insights into what messaging and features drive the strongest response without requiring multiple production investments,” Wolder said.
Regarding overall video investments, including interactive video, our respondents rank social video as the platform that delivers the strongest ROI/ROAS, with three-quarters placing it first (39%) or second (36%). CTV platforms and YouTube also ranked as significant drivers of video ad performance among our respondents.
For interactive video campaigns in particular, CTV (47%) edged out mobile (42%) as the device that delivers the strongest ROI/ROAS. Desktop came in third among our respondents with 11%.
Platforms like Hulu and YouTube helped establish the foundation for interactive advertising by introducing early interactive formats in environments where viewers were already highly engaged. These digital spaces proved ideal for immersive advertising because audiences were actively consuming content and were therefore naturally more receptive to interactive experiences.
“But while CTV and social video platforms often take the spotlight, the open web and mobile environments offer equally valuable opportunities that should not be overlooked,” said Wolder. “By complementing CTV investments with interactive video across the open web, brands can expand their reach, improve frequency control and connect with audiences in different viewing contexts. It is a practical and scalable way to strengthen a media strategy while meeting consumer expectations for more engaging and responsive ad experiences.”
While brands and agencies have already found success with interactive video elements, they still face challenges in this space.
The most significant challenges among those already using interactive video are difficulty in proving impact or ROI (52%), scalability (51%) and production costs and complexity (49%). However, Wolder offered suggestions for tackling these concerns.
“Building video ads from existing assets, even non-video assets, makes the production process more streamlined, efficient and cost-effective,” Wolder said. “By layering on enhancements or interactive features on top of core creative, brands can develop multiple ad variations tailored to different objectives without starting from scratch each time.”
Other significant concerns among interactive video viewers include the cost of media and CPM inflation (38%), technical limitations (35%), attribution and measurement (30%) and creative fatigue and ad saturation (30%).
“For scale and measurement, today’s interactive formats are generally VAST-compliant and optimized for cross-screen performance,” Wolder said. “Integration with third-party measurement partners Lumen, Real Eyes and Attain helps connect engagement metrics to real outcomes like store visits or shifts in brand perception.
“Personalization capabilities also help combat these challenges by making each impression more valuable,” he said. “By tailoring interactive elements based on viewer characteristics, location or behavior, brands can improve relevance without increasing production complexity.”
However, among respondents not yet using interactive video, the primary roadblocks are attribution and measurement (33%) and premium inventory access (33%). The latter was only cited by 20% of those currently using interactive video features — perhaps indicative of a disconnect between expectations and reality.
Nearly 70% of the brand and agency respondents who are already using interactive video are seeking more robust engagement and attention data to increase their investments in interactive video.
Among the smaller sample of respondents that haven’t adopted interactive video yet, two-thirds (67%) cited lower CPMs with access to premium, high-quality inventory as keeping them from investing. Only 17% of that sample cited interactive, personalized and shoppable formats as offerings that would spur investment in interactive video, compared to 45% of respondents who are already using interactive video elements.
Despite challenges, savvy advertisers are poised to capitalize on the versatility and engagement that interactive video delivers to unlock stronger performance. For these advertisers, vendor partnerships are essential for unlocking the true value of these tools.
“It’s critical to work with solutions that scale across devices and platforms without compromising the viewer experience,” Wolder said. “Transparency and robust measurement capabilities are equally important; your partners should provide insights that help continuously improve performance and demonstrate ROI.
“The best partners simplify the process rather than adding complexity,” he said. “They should offer scale while avoiding manual touchpoints, enabling brands to execute sophisticated interactive experiences without creating operational burdens.
“However, excellence should remain non-negotiable. Interactive video is only effective if the underlying story engages viewers. Look for partners who build customized creative approaches rather than just applying templates, and who demonstrate a track record of innovation.”
Looking to the rest of the year, most respondents expect interactive CTV (70%) and AI-personalized video (69%) to be the emerging video formats with the highest adoption in 2025.
This is followed by shoppable video at 62%, which has already been implemented by a significant number of respondents. More than a quarter (27%) expect increased adoption of live commerce integrations.
As advertisers and platforms work to bring the interactive, participatory feel of social video into broader digital spaces, they’ll be able to better align creative strategies with their campaign goals, while giving consumers experiences that feel more intuitive and engaging.
“Interactive video will transition from a ‘nice to have’ to an expected component of video campaigns,” Wolder said. “AI will play an increasingly significant role, not just in creative personalization but in dynamic content assembly that responds to viewer signals and context.
“Consumers will become more receptive to interactive prompts, whether using their remotes or phones to learn more about products without requiring traditional clicks,” he said. “Creative innovation will achieve equal importance with media buying strategy, and brands that embrace this evolution will gain a competitive advantage.”
