How Advertising Can Enhance the Streaming Experience

Ad-supported streaming is taking off, and viewers, content providers and advertisers all have the opportunity to benefit.

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July 13, 2022

Subscription-based models dominated the early days of streaming television, but the space is gradually changing. Ad-supported streaming is taking off, and viewers, content providers and advertisers all have the opportunity to benefit.

According to a recently released Variety Intelligence Platform report, the number of FAST platforms has jumped from 8 to 22 since 2020, and more than 200 new FAST channels have launched in the past six months. Additionally, Tinuiti reports that total ad spend for OTT is expected to leap from $990 million in 2020 to a projected $2.4 billion in 2025.

As encouraging as growth in the AVOD and FAST space may be, however, much of the initial excitement around SVOD had to do with its lack of advertising. Rather than asking whether AVOD is “better” than SVOD – they both have their benefits – the better question is this: How can advertising be used to enhance the streaming experience?

What Already Works in AVOD

Advertising in OTT is still very much in its infancy, but we have some early insights into strategies that currently resonate. Viewers like quick, relevant and well-integrated advertisements – ads featuring strong connective tissue to the content itself. What users don’t like are repetitive, irrelevant or invasively targeted ads. Essentially, viewers don’t mind serving as an audience to smart advertising as a tradeoff for access to streamed content. They just don’t want to feel bombarded by indiscriminate sales pitches.

Advantages of FAST

All things being equal, most viewers would prefer to do without advertisements. All things, though, are not equal – and the data suggests that more viewers would rather watch ads than pay more for a subscription. FAST removes payment from the equation, as well as sign-up and certain data sharing, all of which ultimately increase viewer satisfaction.

Exploring New Ad Delivery Strategies

Certain FAST programming still lends itself to traditional linear-TV advertising strategies. A channel featuring only children’s cartoons, Kung Fu movies or continuous airings of The Andy Griffith Show may connect its targeted audience to interspersed blocks of advertising as well as any other method. But different types of streaming programming will require unique approaches.

The Future of Advertising in Streaming

When looking ahead to advertising strategies and tactics in the streaming space, almost nothing is off the table. Programmers are currently examining where and how ads appear on the screen and within a piece of content’s run time. They’re experimenting with levels of integration as technology allows for increasing flexibility and even incorporation with the content itself.

New companies are entering the space to help push the boundaries of traditional advertising, offering services such as VOD indexing and metadata collection that can be used to help power program recommendations and contextual advertising. Others are augmenting content with sponsorships in the form of embedded advertising or programmatic ad sales using dynamic overlays. Interactive quizzes and trivia are already being tied to the content itself. A future of a la carte product placement – or post-production content modification – may not be far off.

Also under scrutiny are the duration and frequency of ad breaks. The 16 minutes of advertising per hour of broadcasting typical of the traditional TV model have been roughly halved by Roku. Peacock may feature even less advertising. Once Netflix takes the AVOD plunge, it may go even lower. The idea: Improve the variation, targeting and quality of advertising, and you don’t have to show as much of it to achieve the same effect. Find a way to decrease the run time of ads, and you elevate the viewer experience thus increasing the likelihood of audience retention. That makes stickier, more relevant ads even more valuable.

We’re light years past the era of three networks on terrestrial TV. Anything resembling conventional wisdom in small-screen advertising is suspect at best, and possibly moot. As programmers continue to A/B test and experiment with elements like time, space and level of integration, we’ll see a refinement of tactics based on insights gleaned from user and content data. No single approach will work as a one-size-fits-all solution in such a fragmented, fast-moving space. But based on what we know, expect certain principles that elevate, rather than interrupt, the viewer experience – stickier ads, smarter integration, less is more – to win the day.

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