What is AVOD? 

Advertising supported Video on Demand (AVOD as it’s commonly known in the media industry) is having a disruptive impact.  It’s a relatively simple model.  Audiences can access videos without paying money to the content owner, or to the platform owner in exchange for subjecting themselves to the advertisement(s) that run in front of, or alongside, or in the middle of, or at the end of the video.  These platforms are all digitally delivered over the internet giving advertisers new more target advertising options.  The most famous of all AVOD platforms is YouTube, but there are many more.

These platforms run on websites, apps, or both and are accessible on mobile devices, game consoles, smart TVs. Anywhere videos are played.  To be successful, these platforms must attract large audiences to make their advertising inventory appealing to media buyers.  This requires them to be available on the widest possible array of devices so they don’t miss any potential eyeballs.  While these services can be expensive to build, stock with content, advertise to the public, and maintain, the rewards are rich if you can get the right mix of content, and a compelling user experience, audiences will keep coming back for more and brands will love you for it.  Breaking any link in this chain will cost you though. Audiences have zero patience for services with broken user experiences.  Minutes of downtime can cost you big time. 

Brilliant Tech, Old Shows & New Media Stars: YouTube’s formula for success

AVOD services thrive by delivering as much content as possible to the widest possible audience.  Often, they focus on acquiring older content which has a built in following who are looking to engage with familiar content they enjoy.  Shows which were big hits in the ‘80s, or ‘90s like Law & Order, or CSI: Miami, Murder She Wrote, Matlock etc are often made available by studios on a non-exlcusive basis. 

YouTube stands out from the crowd as a unique platform.  Not only does YouTube exhibit a considerable amount of older shows on its platform (I actually just wrapped up an episode of Matlock) it has become the home of user generated content – content that YouTube didn’t have to pay a nickel to source. YouTube has built in business agreements with it’s Creators, permitting YouTube to monetize their content on their behalf.  The incredible popularity of YouTube’s self-made stars could not have been predicted, but it’s been great news for the ad sales team.  The platform has amassed a massive audience of young people – many advertiser’s favourite target.

YouTube is also famous for being available on every device, anytime, anywhere.  New hardware platforms court YouTube all the time.  The availability of YouTube’s massive library of videos, and its massive audience give new hardware platforms credibility to consumers, essential for market adoption.  Today, there are few global entertainment brands that can match YouTube’s brand recognition amongst the public.

We have so many ads to sell we need to automate the process

YouTube’s ad sales team are a busy bunch.  Forget the Mad-Men of the 1960s taking media buyers out for boozy dinners to seduce them into making a bigger buy…  These modern advertising sales people have so much inventory to sell, and so much demand for ads that they invented technology to automate media buys.  Buyers can submit bids for the audiences they want to target, pay online, and wait for their new customers to click on through.

Facebook and Instagram have similarly built massive audiences with their own stars who provide content at no cost.  These platforms are also pushing their way into the ad-supported video on demand business hoping to give YouTube a run for their money. 

AVOD platforms have close to an infinite pool of inventory available for media buyers to chomp on, and have created powerful tracking tools which allow the media buyer to get very particular about who sees their advertising, when, and how often.  Media agencies have come to love the sophisticated tracking capabilities ad-supported video on demand platforms offer them so much that a number of independent digital advertising delivery services have been created and deployed across a wide number of ad-supported platforms.  These will be the subject of another blog coming soon.

A Winning Model…  Broadcast Television vs AVOD

To win, AVOD services need to attract a large audience; keep them on the platform consuming content for as long as possible, and keep them coming back for more.  From a technology standpoint the platform needs to be: easy to use, available on as many devices as possible, provide a robust experience without crashes, and able to handle many users at once.  Platforms compete for audience attention by leveraging the content available on their platforms.

This can be tricky.  The good news is there is a massive world of available video content out there.  The major studios have been producing television for ages, and have built up vast libraries of content over the decades.  But as any content owner would tell you: If you own content, but it’s not being watched, it’s not making you any money. Unlike fine wine, TV shows don’t make money in the cellar.

Broadcast TV networks have enjoyed being at the top of the pyramid of the content business for a long time. Their brands have a significant awareness amongst the public, and their services are mature and widely available.  Owners of the largest national audiences, they have traditionally had the first crack at new shows produced by studios – competing with each other for the biggest hits.  Broadcast networks have not been interested in buying rights to older library shows.  

AVOD platforms have become the home for these older libraries.  Platforms owners rely on these established brands to bring in audiences.  Furthermore, their content inventories are not limited by the number of broadcast hours in a day – if anything, they compete with each other on claims of the size of their catalogue of available content.

Broadcast television on the other hand is limited to the number of broadcast hours in a day.  As a result, they have to be very choosy and focus on chasing down the biggest hits they can find to keep the audiences and advertisers happy.  As a result, broadcasters find themselves bidding up the costs of attractive new shows, each looking for exclusive rights to that big new hit.  After winning the bidding war for the rights, they must then get audiences excited about the new shows which means producing compelling ads for those shows, and using up valuable advertising inventory to promote those shows to existing and new audiences.

On demand platforms on the other hand have a very, very large capacity and appetite for content.  They want to take more risks on older shows so long as the costs of picking them up are low so they can market the size of the available catalogue of content to potential audiences.  These older shows have built in audiences who enjoy repeats, the shows are inexpensive, and advertising expenses are focussed on attracting audiences based on the overall offering.

Studios, keen to monetize their older libraries, have supported up and coming AVOD services.  In many cases, AVOD buyers have been able to acquire this library content on ad-share deals; where the rights owner would forgo an upfront license fee in exchange for a cut of the advertising earned by selling the inventory around that show.  The better the show performs with audiences, the richer the ad spend around the show.  Everybody’s happy.

This was a great win for AVOD platform owners, who wanted to keep content acquisition budgets low, and hold onto their cash for marketing and technical updates to their platforms to keep audiences coming back, excited to spend time on their platforms.  It worked for the studios too as they had no alternative buyers for this content.  

AVOD and the “Streaming Wars”

NBC, CBS, and ABC are all working with their larger parent companies to release direct to consumer streaming services in an effort to monetize their content directly with consumers.  No middle-men.

This is not, by any means the sign of the end of the ad supported video on demand service.  Roku, Tubi, YouTube, Hulu, Facebook, Instagram continue to attract large audiences willing to sit through advertisements in exchange for receiving video entertainment.  Niche offerings have emerged as well.  If the niche is big enough (say Kids content, or Religious content) ad-supported services can operate very profitably. New entrants can still source and deliver large amounts of content from massive reserves of independently produced content available globally. 

Video advertising remains a powerful medium for brands looking to differentiate themselves from the competition.  The diversity of platforms available to advertisers has resulted in shallower spending across more platforms.  This will deepen as more advertising dollars leave broadcast television behind.  

If you’re keen to learn more about digital advertising on the internet generally, or specifically on ad-supported video platforms, let me know in the comments below.  Digital advertising has become very sophisticated and I’ve glossed over a lot of detail in this blog today which we could absolutely come back to and hone in on.

We are all winners!

AVOD’s disruptive force is a winner for consumers, advertisers, content owners, and entrepreneurs.  There is a seemingly endless appetite for video entertainment and a desire to pay as close to nothing for content as possible. As we stock our homes, offices, and cars with more and more internet capable screens, we will see larger and larger audiences available for AVOD platforms to recruit.  

Globally as access to high speed internet improves, more and more potential viewers are coming online and will be hungry for entertainment content they can consume in exchange for sitting through an ad. The market potential for ad-supported video on demand is global in scale. Many users will look to multiple platforms to enjoy their favourite shows (just like they used to do on TV!)

Transactional Video on Demand, Premium Video on Demand, Subscription Video on Demand, and new AVOD/SVOD hybrid platforms are engaged in a street fight these days for online audiences.