Since early 2020, online video consumption has penetrated more households than before. At the same time, the average number of video subscriptions per household has also increased as viewers keep looking to meet their content needs. The growth of platforms like Netflix and Amazon Prime have made SVOD (Subscription Video-on-Demand) the most sought-after model. The collective wisdom in the industry also suggests that viewers are delighted to ditch advertisements for a monthly fee. But despite the huge popularity of paid subscriptions, viewers are turning to AVOD (Advertising Video on Demand) services.
There is a prediction that the vast majority of OTT platforms in growing economies like Asia will adopt the AVOD model. One reason may be that the viewers are feeling maxed out with subscription video-on-demand services. Furthermore, with the income of many affected due to the pandemic, the emerging market consumer is unable to pay for the dozens of streaming services available. But that’s just the tip of the iceberg.
It is important to note that there are many different market forces at work in the world. Each one operates with a diverse audience base which leads to diverse attitudes towards advertising. According to an APAC (Asia Pacific) survey “Most consumers generally had no strong objections about seeing ads as part of the SVOD programming.”
Source for the graphic is here
Coming to the US market, AVOD is making inroads where it was barely contemplated before. YouTube shifted its strategy for YouTube originals from its premium subscription feature to its free service last year. Amazon owned IMBD launched IMDB Freedrive giving viewers AVOD access to a wide-ranging list of shows and movies. Viacom reportedly shelled out $340 million for the LA-based AVOD service Pluto TV .
Data – AVOD’s Moneyball
Neilsen reports that 35% of all users have begun watching AVOD content since the pandemic. A study conducted by Unruly TV found that viewers watching ad-supported content were 71% more likely to tell a friend about a brand, 53% more likely to search for a brand and 48% more likely to have an improved opinion of the brand. Not to mention, 45% were more likely to visit a store or website. When advertisers look at such AVOD stats, they are inclined to pump in more cash for targeted campaigning of their brands.
But since AVOD revenue is dependent on uncertain marketing and advertising budgets, there needs to be a better way of matching supply and demand. The best approach to it is through the use of analytical data. An advertising manager who wants the assurance of reaching their focused audience will rely on the metrics generated to create a well-researched campaign. An AVOD broadcaster needs to be at the top of the metrics game to effectively take actions that improve overall profitability. Granular insights will enable greater optimization for the viewers which includes showing them targeted ads that will make advertisers happy.
Global online video advertising revenues are projected to touch $120 billion by 2024. This figure implies that revenue generation through advertising will be far beyond that of subscription video services. Looking at this, it may not be long that an OTT platform such as Netflix would turn to commercials to secure budgets for its multimillion-dollar content plans when subscriber growth projections are not met.
As per Adweek, large SVOD players have been focusing on original content which is likely to shrink their library of archives. Budgeting millions of dollars for original content spend is likely to eat a big chunk of their annual revenue budgets. So to refill these coffers, it may be interesting to see how the entire OTT broadcasting ecosystem makes room for advertising.
Need help in re-positioning your OTT platform to incorporate AVOD? Get in touch with Enveu right away.