BLOG

Ad-supported video a boon for marketers?

June 17, 2021

Greg Sigel

VP – Partnerships

Soon after AT&T’s announcement of merging Time Warner and Discovery media assets came HBO Max’s introduction of the ad-supported subscription in the US at $9.99 per month, compared with the $14.99 per month for the service without ads. Subscribers can save 15% on their subscription, no matter which version they choose, if they pre-pay for an entire year. HBO Max follows in the footsteps of Hulu, which also offers a discounted subscription with ads for $5.99 per month, as opposed to $11.99 per month.

In January 2021, just over a third (34%) of US households that had video streaming capability used ad-supported streaming services, up 6 percentage points from January 2020, according to Nielsen. That 34% can be split into the 26% who used ad-supported video-on-demand (AVOD) platforms, and 8% who opted for linear streaming. And this comes at a time when the average spent time daily on digital video consumption has grown at 25.4% compared with last year. The total number of online video subscriptions jumping to 1.1 billion at the end of 2020, according to the Motion Picture Association’s annual THEME report[i].

While Netflix has stayed away from the ad-supported model, NBC Peacock, Paramount+ and Discovery+ services view AVOD streaming as a growth catalyst in the hypercompetitive space amidst unprecedented “cord-cutting” as consumers embrace streaming over cable tv. The only other streaming behemoth that can afford to stay away from an ad-supported model perhaps is Disney+, with a service that starts at $7.99 with attractive bundles with Verizon in the US and other carriers elsewhere. Disney arguably has one of the most compelling libraries to go with that enticing price which other services would envy.

There may be more to the ad-supported model being more affordable for consumers though. With recent announcements by Apple and Google regarding increasing privacy protocols, targeted digital advertising is undergoing an upheaval with advertisers scampering to find the most relevant channels for their digital marketing dollars. With so many eyeballs moving into streaming, networks want advertisers to flock to their ad-supported streaming offerings. The Trade Desk, a leading ad-tech company, helps brands and agencies reach targeted audiences across video streaming services. The Trade Desk views AVOD services as the fastest growing digital advertising channel in the post-cookie world[ii]. Upfront digital video ad spending is expected to reach $6.88 billion in 2021, a 42.5% year-over-year bump, according to eMarketer’s recent report[iii]. It also estimates that advertisers will spend $19.9 billion during the upfronts, near pre-pandemic highs.

Deloitte in a recent survey found that 40% of US consumers who use streaming video services would pay US$12 a month for a service with no ads, while 39% preferred a free service with 12 minutes of ads per hour. However, the desire for no ads was markedly stronger amongst the younger Gen Z (48%) and Millennial (46%) age group.  It is important for entertainment providers, digital platforms, and advertisers to understand the nuances between consumer segments and how much advertising is acceptable across different demographics.

This space is likely to see a lot of innovation in ad formats that work for advertisers without putting-off consumers. Getting accurate statistics on how many people visited a product page after seeing an ad on a video stream is extremely useful for brands building targeted campaigns, for example, and something much harder to produce on traditional tv. Amazon has already trialled 10-30 second video ads during its recent NFL broadcasts and is looking at other ways of fine-tuning them to fit around its coverage of live sports events.

AVOD services also present an opportunity for providers to expand in emerging markets more quickly as the consumers tend to be much more price sensitive. Subscription bundling with mobile carriers is the quickest way for AVOD services to test and launch in new markets. And solving for payments continues to remain pivotal to growth.


[1] https://www.motionpictures.org/wp-content/uploads/2021/03/MPA-2020-THEME-Report.pdf

[2] https://www.cnbc.com/2021/05/22/ad-supported-streaming-steals-the-show-at-tv-upfronts.html

[3] https://www.emarketer.com/content/upfront-tv-digital-video-2021

Related Posts