AVOD has been steadily gaining momentum among a TV industry keen to look beyond SVOD as the primary streaming future of TV.
The industry rationale for AVOD enthusiasm is straightforward; in the pre-digital era, most revenue and attention was commanded by free-to-air TV. Since SVOD gained market traction with its contract-free, on-demand functionality backed up by zeitgeisty original scripted drama, traditional TV has seen a steady exodus towards streaming.
The incremental transition has snowballed under lockdown, with SVOD subscriptions and binge-viewing now dominating pay TV and linear TV viewing generally. SVOD is now synonymous with on-demand for the mainstream consumer, which presents an existential challenge for the media majors such as Fox Corp. and ViacomCBS, which depend upon a broadcast TV ad revenue model for the bulk of their revenues.
With WAU levels below 10%, the leading AVOD services have not benefited from the lockdown uplift enjoyed by broadcast TV and SVOD services such as Netflix.
Add to this the challenge of peak subscriptions raising its head as ‘in real life’ (IRL) alternatives start to kick in following mass vaccination rollouts, and an increasingly revenue-constrained digital market now requires new monetization levers to pull.
AVOD until now has been caught in a holding pattern with industry executives struggling to figure out why the streaming iteration of free-to-air TV has not enjoyed the same level of streaming engagement success achieved by SVOD.
In a 2019 report, US Streaming Video - How Ad Supported Will Reshape the Market,
MIDiA highlighted that AVOD has found itself pigeon-holed as a niche consumer activity, due to its early-adopter user base tolerating advertising through gritted teeth as they enjoyed the benefits saved on subscription fees.
In Q1 2021, 46% of all consumers skip online video ads, declining to 35% for silver streamers. Contrast this with the 25–34-year-olds who make up 30% of Pluto TV’s weekly active users (WAUs) and 31% of Tubi TV’s WAUs, in the U.S. in Q1 2021, according to a MIDiA Research Q1 2021 consumer survey.
With over half of 25–34-year-olds usually skipping video ads, this means that nearly a third of the user base of AVOD’s two leading services actively engage in video ad avoidance as part of their regular digital life.
These, young digital native consumers, over-indexed for digital savviness, and under-indexed for income and ad-responsiveness, both of which undermined the core AVOD competitive advantage of targeted and accountable ad ROI.
However, despite AVOD WAUs’ reluctance to engage with advertising generally, they do respond well to relevant advertising. This significantly changes the value proposition for advertisers looking to allocate ad budgets into the nascent sector and makes tailoring relevant and appropriate advertising crucial.
As IRL starts to peel TV audiences away from the home screen, the battle to create a compelling VOD proposition is now beginning. MIDiA will present further insights on this topic in an upcoming webinar on July 7th, featuring Jacinto Roca, CEO and founder at Rakuten TV; Colin Petrie-Norris, CEO at XUMO; and Olivier Jollet, senior vice president of strategy and business development, streaming, and head of mobile at ViacomCBS Networks International. Be sure to sign up.
Tim Mulligan is the research director and lead video analyst at MIDiA Research – the entertainment intelligence and consulting firm. MIDiA works with businesses in the space, from TV broadcasters and production companies to streaming services, tech companies and financial organizations. Tim’s research encompasses the entire online video economy, with a key focus on how streaming is transforming the video consumption landscape. Prior to joining MIDiA Research, Tim ran a number of technology starts-ups focused on the TV and film industries.MIDiA Follow MIDiA on Twitter and LinkedIn
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceVideo staff. They do not represent the opinions of FierceVideo.