Digital Transformation

How AVOD can get a seat at the premium ad sales table

By Matthew Deets | General manager

July 1, 2022 | 7 min read

Consumers ditched cable — but then, their streaming subscriptions began piling too high. Now, they’re reevaluating; they’re seeking new ways to enjoy premium content while cutting costs. It’s the perfect time for ad-supported video on-demand (AVOD) to gain a leg-up in the market, argues Smaato’s Matthew Deets — so long as providers and advertisers are able to overcome a few common challenges.

The media landscape is approaching an important inflection point that will forever shift the balance of power within the fragmented TV landscape. For ad-supported video on-demand (AVOD) players, this moment represents an unprecedented opportunity to elevate their place within the overall media planning and buying environment — provided they can deliver on the experiences that today’s consumers and advertisers demand.

For many AVOD players, doing so will require some strategic pivoting. Let’s take a deeper dive into why the TV landscape is shifting in favor of ad-supported models, and how AVOD publishers can best position themselves to be a part of the windfall.

Woman cheering while watching a hockey game on TV in her living room

/ Roberto Nickson

Why AVOD — and why now?

To understand the upheaval, most of us need look no further than our own experiences with subscription-based video on demand (SVOD) services.

For many consumers, what once may have been one or two monthly fees for Netflix and Hulu has quickly snowballed into seemingly countless subscriptions to juggle. The consumer experience is becoming frustrating and expensive, and many of those who turned to SVOD as a means of “cutting the cord” are finding that their monthly fees are adding up to as much — if not more — than they ever spent for cable.

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While both SVOD and AVOD have made a significant dent in the traditional linear TV market, SVOD players have been the frontrunners in terms of adoption. As costs pile up, however, consumers are beginning to take a critical look at their video subscriptions and make strategic cuts where they can. In fact, Deloitte predicts streaming services will see 150m cancellations this year as subscription churn rises. We’re already seeing this prediction play out, with Netflix forecasting a loss of 2m subscribers in Q2.

As consumers cancel, they look for other places to discover content they value. Increasingly, they are reconsidering ad-supported services that deliver premium content without the premium price tag. For specialty AVOD providers and ad-supported cable channel offerings, this represents a tremendous opportunity to boost viewership alongside ad revenue.

Barriers for AVOD to overcome

That said, to take advantage of this moment in time, AVOD providers need to ensure that their content and ad experiences are delivering what TV audiences have come to expect. Here are a handful of common reasons that audiences and advertisers have been tuning out of AVOD experiences to date — and how providers can solve these challenges:

1. An excess of fraudulent traffic

Ad fraud, particularly in connected TV (CTV) environments, has become a growing concern for advertisers and publishers alike. From the marketer’s perspective, CTV fraud represents a risk of paying for impressions that don’t go anywhere. From the publisher’s perspective, fraud poses the risk of bad ads, disruptive user experiences and damaged advertiser relationships; unfortunately, many AVOD providers have run up against all three. Luckily, this is a solvable problem.

For the most part, fraud risks originate from third-party server-side ad insertion (SSAI) services that sit between AVOD providers and their ad servers. By leveraging a platform that handles SSAI in house, it’s easy to eliminate the risk of fraud and thereby increase appeal to viewers and advertisers alike. As a bonus, in-house SSAI saves publishers the fees associated with using a third-party vendor.

2. Repetitive ads

When it comes to user experience, one of the most common complaints plaguing AVOD providers has to do with repetitive ads — quite simply, the same ad playing over and over again during commercial breaks. When this happens, not only do users tune out, but brand sentiment also takes a hit.

If AVOD providers want to offer an experience and ad opportunity on par with premium TV services, they need to work with platforms that offer creative deduplication services to ensure the same ad is not being played more than once in a given ad break.

3. Competitive messaging dilution

Beyond ad repetition, AVOD ad experiences are also prone to competitive messaging dilution, which occurs when ads for competitor brands run back-to-back — let’s say, four car commercials in a row. When this happens, viewers get conflicting messages about which product or solution is best, and advertisers’ impressions have little impact.

By leveraging a platform that enables competitor separation, AVOD providers can ensure they’re serving a balanced mix of ads to viewers, thereby preserving the impact of impressions for advertisers.

4. Jarring ad experiences

Finally, let’s talk about context. Today’s TV viewers don’t want ads that disrupt the mood that their favorite shows and movies create. Unfortunately, this is precisely what happens when ads don’t match the tone of the programming alongside which they’re being served — whether that’s funeral services being promoted during Saturday morning cartoons or cat litter being advertised during a Friday night horror flick. Today’s buyers want show- and episodic-level targeting, which is supported by the Interactive Advertising Bureau’s OpenRTB protocol. However, publishers typically don’t share this data to enable programmatic buys.

To avoid these scenarios, AVOD providers need to offer contextual targeting that can help create a more cohesive and seamless experience by matching the content and mood of an ad with the content the user is watching. On the publisher side, that means sharing the needed data to enable smarter programmatic buys in the open market.

As viewers continue to cut their subscriptions, today’s AVOD players have a chance to attract new viewers and ad dollars alike, provided they can avoid the above common pitfalls. By putting solutions for in-house SSAI, creative deduplication, competitor separation and contextual targeting in place today, AVOD providers can position themselves as the premium platforms of tomorrow.

Matthew Deets is general manager at Smaato, part of Verve Group.

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