The state of today’s AVOD services has intensified dramatically. Users are streaming more than ever before, dropping out of cable subscriptions and adopting a mix of SVOD and AVOD services to replace their needs. This is particularly the case with families feeling the long-lasting economic stress that 2020 has inevitably left in its wake.
With the stress comes the opportunity to streamline. Some users are already replacing SVOD with AVOD services. Since the pandemic, 35 percent of users now watch AVOD content, while Nielsen reports that overall, AVOD has grown 3x since the beginning of the pandemic. With limits to the number of SVOD services someone is willing to pay for longer-term, AVOD services are here to stay. They fill gaps for fractured audiences looking for niche content, where SVOD is without.
However, it’s clear market turbulence has been a driving force to make AVOD companies find their profitability. When the economy took hits in April, advertising revenue was down 35 percent. The profitability mark for AVOD services is coming sooner than we think. We first saw AVOD services primarily offered by larger organizations who could use this as a loss leader to attract new audiences or mine data before the service itself hit profitability. More recently, the independent AVOD services which have come to market and have been swallowed up by larger enterprises and conglomerates. But now that we’ve seen how quickly the economy can impact advertising budgets, fewer newcomers will likely enter the market without the backing of deep pockets and investment.
The challenge:
There’s an opportunity for AVOD services to be a key part of OTT and CTV streaming services, but first, we must address the value-recognition problem in ad-supported streaming.
The previous goals for launching an AVOD service was:
- Get to market
- Grow the audience quickly
- Push for profitability
The problem there is when we go into an economic freeze, advertising budgets tend to be the first thing to get cut. Today, there’s more pressure than ever to reach profitability; do more with less.
The solution:
Since AVOD revenue is subject to the swings of marketing and advertising budgets, we need to do a better job of matching supply and demand. Real-time bidding (RTB), which is a subset within programmatic advertising, enables advertisers to bid for an ad spot in real-time. Ultimately, the more bidders, the higher the price.
There’s an opportunity for “header bidding” within RTB to grow, but this will require more data collection, more data standardization, and more data sharing. The trade-off we make with moving to header bidding is reduced targeting capabilities and reduced control over the user experience than what you’d find using a primary ad server.
Focus on ad viewability
In comparison to an ad seen on linear television, a study by Unruly TV found that a user watching ad-supported Connected TV was 71 percent more likely to tell a friend about a brand, 53 percent more likely to search for a brand, and 48 percent more likely to have an improved opinion of the brand. Moreover, 52 percent were more likely to buy a product, and 45 percent more likely to visit a store or website.
Despite greater effectiveness, advertisers still prefer to advertise on broadcast television than digital advertising. Part of this could be due to the claims of CTV fraud and the inability to measure things the same way as linear television
Again, data is the only thing that can come to AVOD’s rescue. The ad viewability and verification are equally as important as understanding the audience. As a publisher, if you can differentiate your inventory by offering new metrics or providing direct access to real-time data, you’ll help your advertisers better measure their ad dollars’ reach. Placing a focus on providing more data for advertisers, which can, in turn, help them optimize their campaigns, can create a multiplying effect on CPM’s.
Using data to understand cost
The other half of the profitability is cost. Having the right data and using the right metrics is key to knowing why users stay and why they churn. It’s important to understand that you can add efficiency to costs. Asking questions like, “What percentage of leads from marketing watched the content?” Or, “What’s the cost of end-to-end delivery vs. CPM?” The need to connect attribution data to engagement data or content preparation and delivery data to users and sessions should take significant consideration.
In fact, granularly understanding of ad revenue needs to improve dramatically overall. You’ll want to understand how much money users earned you on X devices, watching Y content, in Z geography. What cohort of users earns you the most money and what about them is unique? If you can answer those questions, then you’ll want to learn how to optimize marketing, support, and operational budgets to protect those viewers.
If you’re detecting certain users, campaigns, or pieces of content are not delivering on the profitability targets, you could decide you may want to:
- Prioritize bug fixes or improvements on those platforms
- Make changes to your content library or content recommendations
- Change the available bit rates
- Optimize ad pod count, structure, and positioning
- Shift marketing spends towards those places with the most ROI and decrease the spend on other platforms.
Glimpse in the future: Data will provide AVOD’s Moneyball Moment
Unless you can take effective actions to improve profitability with the metrics, then they’ll have to change, and you’ll need data to do it. It’s the key to targeting and is a rising tide that floats all boats.
Moneyball was a movie about how the same data, analyzed differently, led the Oakland A’s to a historic performance and changed the game of baseball forever. Data isn’t just for reporting anymore. More companies are defaulting to wanting access to data versus metrics because granular insights are what will enable greater optimization for the user experience and create more efficiencies across this end to end network.
Lastly, advertising will always be an ecosystem endeavor. Therefore, optimizations likely need to happen within and between multiple parties. This means that the future of advertising will include new types of data and data exchanges between different systems. Investing in systems today that enable the capture, standardization, enrichment and delivery of data will help lead to the more efficient and profitable advertising landscape of tomorrow.
