CSI
cover story p8 https://www.csimagazine.com/eblast/Digital_Editions/April2020/CSI-April2020-DigitalEdition.pdf
The future of TV looks a lot like the TV of old. Ad-supported, premium content reconfigured with the measurement and targeting capacities of the digital world.
Many analysts predict that 2020 will be the year of ad supported VOD as ad funded models start to build scale and roll-out internationally. DTV Research says AVOD will grow at 17% through 2024, from revenues of $36 billion in 2018 to $87 billion in 2024.
“AVOD is coming, and it’s going to make its mark on the VOD landscape rapidly,” declares Ampere Analysis director Guy Bisson. “AVOD services are following a well-trodden path with an early reliance on older content, but as their market position grows we can expect them to begin acquiring newer content and even move into original production activity as they battle for eyeballs in an increasingly crowded market.”
Facebook and YouTube are expected to continue leading the market in the US, followed by Hulu, Roku and Lionsgate-backed Tubi, all which will carve a greater slice of market share, according to IHS Markit. Content from UK indie All3Media will soon being offered through a new AVOD from Cinedigm.
In Europe, key services include ITV Hub (UK), Joyn (run by Discovery and ProSieben.Sat.1) in Germany with territory expansion planned and Spain’s Rakuten TV. ViacomCBS has landed Pluto TV across Europe on Android and IoS devices. Tubi, which records 25 million monthly active users, has an imminent UK launch, part of an international push which includes a kids service.
Other notable international AVODs include Sony Crackle and Amazon’s IMDb-affiliated Freedive but it is NBC Universal’s Peacock that is expected to supercharge the AVOD market. Launching in April, the hybrid SVOD/AVOD service, will prompt a surge in online video add.
To date, [online ads] have remained relatively small, even in developed markets like the U.S. where 27.2% of online ad spend is on video, states Ampere. Now, IHS Markit predicts AVOD opportunities will lift U.S. online video ad revenues to $27 billion by 2023.
Why AVOD now?
It’s the proverbial perfect storm which is giving AVOD wings. One reason is market saturation with SVOD which is not only pushing content prices sky high but maxing out consumer wallets. A recent The Trade Desk study [http://videoadnews.com/2019/11/14/the-uk-is-quickly-reaching-its-svod-saturation-point/] revealed that Brits are willing to pay around £20 a month for streaming subscriptions. An amount that’s easily covered when more than two services are used.
“There is a very high market potential even if in Europe it is still at an early stage,” says Olivier Jollet, MD Europe at Pluto TV. “Part of the reason is, that in Europe, free to air television is common – unlike in the U.S. – which is why an ad-supported model with no subscription fees or registration is more familiar than a SVOD one. Consumers are more and more willing to look into easy access AVODs and are likely to stick if they find an appealing, unique offering.”
According to The Trade Desk, 59% of consumers in the UK are willing to accept ads in exchange for no subscription fees.
“Consumer openness to AVOD is growing exponentially as they weigh the cost-to-benefit ratio of either sticking with ads or subscribing to a platform,” says Antonio Corrado, CEO at video delivery network, Mainstreaming.
The race for premium exclusive content is also exhausting SVOD contenders. Netflix may have over 167 million subs worldwide but is billions of dollars in debt. “The cost of content acquisition cannot be subsidised by subscription models,” says Ralf Jacob, President, Verizon Media Platform. “Consequently, we will see more AVOD services and models blending free with pay.”
At the same time, broadcasters want to maximise return on investment in their archives to reach as wide an audience as possible. In this sense, removing the financial barrier to entry of a subscription from audiences has the potential to increase viewership, making AVOD an attractive model. Often associated with low quality or even UGC content, one key in the success of AVOD models is quality content.
Ampere Analysis observes that as SVOD services shift towards originals and new content acquisitions this has created an opportunity for AVOD providers to focus on older catalogue titles. Tubi, for example, boasts 12,000 movies and TV shows, “more than double in size to Netflix.”
In doing so, providers are facing a perennial problem. “If you are working across different territories reaching different demographics then one size doesn’t work,” says Adam Davies, product manager for Synamedia. “You need flexibility to fit the service to the demographic and territory. Therefore, you need to make sure the ads fit.”
Sky AdSmart, which uses key capabilities from Synamedia to pinpoint audiences, revealed that addressable TV cuts channel switching by 48% and boosts ad recall by 49%.
“When ads are relevant users seem to accept it better,” says Davies. “AVOD will take off when advertising becomes relevant and focused. If you’re just banging out ads in front of content it won’t drive engagement. If you can be targeted, engagement goes up, the value of the ad goes up, you can charge more for it and you can reduce the ad load.”
The Trading Desk’s survey indicates a consumer willingness for streaming services supported by ads particularly if the format and pacing of commercial breaks differ from traditional TV content.
“Consumers are willing to view ads if it means their subscription costs go down, even more so if those ads are relevant to their interests and are just not the same ads repeated,” confirms Brian Stempeck, chief strategy officer. “This indicates that ads will fund the future of streaming TV, and that broadcasters and advertisers have an opportunity to improve the advertising experience in a way that simply is not possible with linear TV.”
Where TV sold itself on metrics such as the estimated size of its audience, AVOD is increasingly able to accurately quantify audiences, creating better ROI and greater accountability.
“While TV needs to fit into the mass market, AVOD models can go to special interest and offer a high value environment for advertisers and users alike,” says Jollet. “It is probably the biggest difference in the business model with traditional TV.”
Multi-tiered pricing models offer audiences the flexibility to choose which package works best for their viewing needs and cost limitations.
“By providing your audience with the power to decide how they want to pay for your content (and how much), you can make your OTT service engage more viewers—and optimise your revenue by leveraging more points along the demand curve,” says Lexie Knauer, Product Marketing Manager, Brightcove.
It’s all about data
Calling AVOD a “gold rush” IHS senior research analyst Sarah Henschel says, “ultimately, the winners and losers will be determined not only by content, but also by data strategies and user acquisition.”
“What’s really important in terms of data management is putting control in the right hands,” says Chris Gordon, VP, Global Sales, OTT & Targeted Delivery, Imagine Communications. “That means the ability to manage which data to send to which part of the ecosystem and which to obscure – to protect and safeguard. We all recognize that data is valuable, but it can’t be a data free-for-all. Using the data is important but it’s just as important to manage who gets access to that data.”
Ad-loading should be managed dynamically. “Not every piece of content is the same, not every user is the same, not every daypart is the same,” says Gordon. “You need the tools to manage ad loads dynamically so they are appropriate to the particular viewing session.”
Understanding audience demographic information as well as viewing preferences can drive up the demand and CPM value of the provider’s inventory while ensuring viewers are seeing the most relevant ads at the right frequency.
“The best strategy is to facilitate active consent to collect first-party subscriber data to target against for the viewer’s benefit,” says Knauer. “If that’s not available, there are still strategies to mitigate this challenge. In a GDPR restricted cookieless environment, a combination of IP address and user agents can be used to create a unique identifier (UID). Depending on the level of privacy restrictions, that identifier may need to be hashed. This can be accomplished client-side or server-side using a measurement SDK. Buying third party data from entities like Nielson, Barb or Kantar ratings is always an option as well.”
Jacob describes Verizon Media’s ad platform as a ‘Switzerland in the ad world’ whose momentum is gaining over that of Google and Facebook; “Ads will be contextual, based on factors like search keywords, not cookies or browsing history,” he says.
Pluto TV offers a TV-like inventory “with a focus on brand safety and awareness” and is additionally able to target viewers based on a combination of first, second and third party data as well as contextual and environmental targeting.
However, companies aiming to monetise online video content through advertising now face an extra layer of complexity due to the requirements for solid ad-tech sales and data strategies, along with content and user acquisition.
“Having a common measurement between the AVOD players, would help gaining trust from the advertisers and from the agencies,” Jollet says. “We know that some of our competitors are using different calculations, which are misleading for advertisers.”
He adds, “The worst thing for a user is to see the ‘traditional’ black screen between content and ads. This happens, when an ad break arrives, and the product is calling the ad servers. Even if those calls are taking place in milliseconds, you still see the loading wheel on a lot of platforms.
Pluto TV has developed its own server-side ad delivery solution allowing it to have no loading between content and ad breaks (ads are stitched into the stream). Also notable is its current ban on pre-rolls. “Being free is a massive plus but starting the experience with ads without having watched any content yet is way less appealing,” Jollet says.
Shoppable ads are currently booming in social media and with Walmart’s Vudu just one of a few services looking into ‘shoppable content’ allowing viewers to click and buy.
Brightcove for one supports clickable ad creatives for server-side ad insertion (SSAI), where interactivity historically hasn’t been available. “We’ve seen a great response from customers experimenting with in-content purchasing,” reports Knauer.
Advertisers may also be able to show different creatives to the same viewer over time. One example could be for a car advertiser. The first time you show the outside of the car, the second time you show the inside of the car, the third time you show the dashboard, the fourth time you show the price and the fifth you provide a call to action.
Other attributes of a successful AVOD
To ensure reach, availability of the service on all current OTT devices, as well as being present in app stores for streaming on mobile devices, is essential.
Nevertheless, video content is still mostly streamed on Connected TVs, while users relax on the couch in their living room. A March 2019 survey by Attest [https://www.emarketer.com/content/most-video-streaming-happens-on-tv-sets] confirms this. Non-skippable full-screen ads prove particularly profitable.
“Viewing is fragmenting but here’s what’s staying the same: the highest value inventory is on the living room TV,” says Gordon. “It’s a different level of engagement which translates to a different level of inventory value. The significance of the living room TV as the main AVOD platform is that it increases ad value.”
Corrado focuses on the need for services to prioritise quality of experience. “The AVOD business requires large amounts of users viewing content for free so capacity is a necessity to facilitate the stream request volume,” he says. “If viewers experience buffering or ads not starting quickly enough, it has been proven that they will leave the stream and eventually churn will increase on the platform. Infrastructure is the number one thing that needs to be focused on when looking to implement an AVOD offering as you need to ensure the quality of experience remains high.”
Video playback performance can be impacted by ads as well. In a live stream, the ad server needs to handle requests for each viewer in a relatively short amount of time.
“The best way to improve performance is to maximize direct-sold ads, allowing them to be filled directly from inventory,” says Knauer. “For programmatic ads, employing header bidding can ensure timely ad requests.”
Netflix and water coolers
Netflix CEO Reed Hastings may have ruled out running ads on Netflix any time soon but there won’t be one SVOD to rule them all. Instead, the SVOD market will fragment while less-impressive SVOD libraries (due to popular content being spread among different services) and subscription fatigue contribute to the point where AVOD and SVOD coexist, satisfying different consumer needs.
Once smaller, specialized AVOD services begin to capture a decent chunk of market share, Brightcove expects to see more content acquisitions and a return of the ‘skinny bundle’ as we’re starting to see with Disney+ packaging and bundling.
“Households will potentially settle on two or three SVODs and will look into AVODs as free add-ons more and more frequently,” Jollet predicts. “We don’t feel pressured by whatever decision Netflix might make in terms of ad-supported models and I don’t think other AVOD services do either. We are choosing to embrace an ad-funded model, choosing to explore niches, choosing to go with channels instead of on demand and that has paid off.”
Indeed, analyst WARC’s Global Ad Spend report estimates that ad spend on AVOD is set to double by 2023, reaching $47bn worldwide.
Even as dollars shift inexorably online, there may always be a space for traditional linear advertising to reach the mass market around marquee events.
A stark reminder of this occurred during Super Bowl LIV when Fox quickly sold out inventory for its TV broadcast with prices up to U$5.6 million for 30 secs. Buyers included Disney, pitching the arrival of a Marvel series on Disney+. Netflix paid for similar exposure in the three previous Super Bowl telecasts.
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