For decades, free TV has coexisted alongside premium programming that requires a subscription to a cable or satellite service. Now that traditional TV content is shifting to the internet, a similar dynamic is taking shape. Subscription streaming platforms like Netflix and Amazon Prime Video are jockeying with a growing crop of free, ad-supported video-on-demand (AVOD) services for consumer eyeballs.
With these services come opportunities for advertisers to reach elusive younger consumers who are either cutting the cord or have never subscribed to a pay-TV package. AVOD is part of the larger over-the-top (OTT) category, which also includes subscription programming. Ad spending on OTT—so called because the content is delivered over the internet via connected TVs or devices like Roku—is expected to increase 40 percent to $2 billion by the end of 2018, according to the Video Advertising Bureau. The VAB also found that consumers want free content: 73 percent of adults who stream video say they watch ad-supported content.
That said, advertising in AVOD is not as easy as repurposing pre-existing TV or video commercials. Brands need to think of AVOD as an entirely new medium, according to industry leaders. To help, here's a look at the key players, best practices and how to avoid potential AVOD pitfalls.
Why buy AVOD
AVOD is attractive to advertisers because of its premium content. The ads are not skippable, are 100 percent viewable and there's no fraud, says Tal Chalozin, chief technology officer and co-founder at Innovid, a video ad-tech platform. Marketers can use AVOD in the same way they use traditional TV—to build brand awareness. Much of the viewing takes place on the living-room screen, which makes it feel similar to traditional TV, but it has the added benefit of targeting consumers on a one-to-one basis like digital.
The interest in AVOD has surged in part thanks to reports that Amazon is readying its own free, ad-supported service, in addition to its subscription-based Prime Video. It's reportedly building an AVOD platform through its IMDB division, which could make it the largest player in the space once it launches. Currently, though, Roku's library of movies and TV shows on the Roku Channel is considered to be one of the most robust AVOD offerings. In recent months, Roku has added news content to the channel and plans to expand into other genres.
Walmart is growing its ad-supported TV and movie service Vudu with original programming. It'll also debut shoppable ads in its Movies on Us service later this year that will enable viewers to purchase items they see in movies and TV shows from Walmart.com. YouTube announced last week that it will make all of its original programming free and ad-supported by 2020. YouTube Originals previously lived behind a paywall.
Sony's Crackle was an early AVOD entrant, making a name for itself with original programming like Jerry Seinfeld's "Comedians in Cars Getting Coffee." It's currently seeking a strategic partner to help bulk up the service.
Other players include Pluto TV, a live-streaming TV service akin to Dish's Sling TV, but free; Tubi TV, which boasts 8,000 movies and TV series; and Xumo, a combination of live and on-demand content.
With so many AVOD services, the marketplace is extremely fractured, making it hard to build critical mass. There's also a lack of consistent measurement across players, making it difficult to compare viewership. And duplication of audiences across these platforms is hard to identify, meaning it's unclear if a marketer advertising on Roku Channel and Pluto TV, say, is reaching two different audiences or the same people.
And while OTT promises more targeted and efficient ad formats than traditional TV, the ad model isn't yet different enough. One head of an AVOD service says it's been a challenge to get brands thinking differently about OTT, especially as it relates to paying more for consumer-friendly experiences, like sponsoring an ad break. "They make those 30-second spots and want them delivered," the executive says.
"It's not TV, and it's not digital video," says Innovid's Chalozin. Many marketers get into the OTT space and treat it as though it's digital video, adopting the same tactics and creative. But Chalozin says most of the time a campaign on OTT will fall flat if you apply the same principles: "It's a new channel that you can apply a lot of takeaways from TV and digital video, but it's not exactly either one."
Sausage-maker Johnsonville this year took a data-driven approach and developed over 1,000 pieces of creative that used weather data to send personalized forecasts to viewers. The background images, city name and forecast were different depending on where the user viewed the ad.
"You need to think about the creative canvas in a different way," says David Cohen, president, North America at Magna, a division of IPG MediaBrands. "There's not a one-size-fits-all proposition." While these services offer traditional ad formats like pre- and midroll ads, for the most part "the sky is the limit," he says.
Cohen points to opportunities for brands to sponsor a movie night or unlock content for viewers that would otherwise cost them money to watch, as an example. Cohen suggests marketers look to create ads that are shorter, get to the punch line quicker and are more contextually relevant.