With Subscription Fatigue Setting In, Will AVOD Take Over The Streaming Market?

In the last couple of decades, digital media has seen a massive revolution. The rise of connected TV (CTV) is one of the advancements witnessed in digital media, with a significant rise in popularity over the last two years.

CTV offers a variety of video-on-demand (VOD) forms, which include subscription video on demand (SVOD), transactional video on demand (TVOD), and advertising-based video on demand (AVOD). Currently, statistics show that revenues in the VOD segment in the United States alone are expected to reach US$85.887 million in 2021, with $32 million of that coming from subscriptions. This indicates that SVOD dominates the industry, with Netflix and Amazon Prime Video as the giants and newer industry players like Disney+ following closely.

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However, it is not all doom and gloom for the other VOD models. The ad-based model particularly has shown steady growth in the last few years. Its popularity saw a massive surge during the coronavirus pandemic, as stay-at-home directives led to an increase in the number of people engaging with video streaming services.

Additionally, the financial difficulties some consumers may be experiencing have pushed many in search of cheaper options. Marketers, seeing the trend, have leveraged the opportunity and veered more towards ad-supported video streaming services.

Ignore AVOD at your own peril!

For the longest time, subscription video on demand was the go-to option. However, the current trends in the market show a clear picture of Ad-based VOD growing at breakneck speeds. This is supported by a report from IAB that shows that 62% of viewers do not mind watching content with ads as long as it is free. For example, Roku, which uses an ad-based model, revealed there were 14 million new accounts opened In their 2020 Roku annual report.

Viewers are not the only ones flocking to ad-based video services – top brands are too. Marketers are realizing that AVOD viewers are direct brand consumers. According to the same IAB study, a quarter of these viewers purchase online, directly from the brands, as opposed to doing so in traditional brick-and-mortar stores. The report also shows how they spend more ($119.19 per month vs. $94.46 for the general population) on direct-to-consumer subscriptions.

SVOD still holds a strong market share and is a favorite of many when you set it side by side with other video-on-demand models. However, Ad-based Video On Demand is the future and is quickly zeroing in on the subscription market share for two main reasons:

Consumer fatigue over multiple subscription services

Subscription VOD services have been proliferating in the market due to the allure of VOD as a whole. However, for a choice-rich streaming experience, an avid viewer may need to subscribe to multiple platforms. Considering the rise of other non-media subscription businesses, consumers are beginning to feel overwhelmed and are becoming unwilling to sign up for more subscriptions.

Ad-based VOD can be a relief for consumers who want to enjoy a variety of online videos and shows without the need to dig deep into their already ‘exhausted’ pockets. Ad-supported videos also offer high-quality content, sometimes on par with the subscription services – but all for free.

A win-win situation for all major players

Subscriptions offer ad-free video streaming services. This particular feature has locked out many advertisers and marketers. Ad-based Video on Demand, on the other hand, provides a win-win situation for consumers, advertisers, and publishers. Consumers can enjoy free content while advertisers and publishers monetize on the ads displayed. As such, it comes as no surprise that major players such as Amazon and Warner Media are launching Ad-based services – joining giants like YouTube, Pluto TV, and Tubi Tv.

AVOD is inevitable

Thanks to AVOD’s ability to draw together viewers, advertisers, and content creators, it’s highly likely that monetization will continue to gain popularity with new video streaming services.

The high user acquisition rate showcased by AVOD services has automatically translated to an increase in the number of marketers interested in CTV advertising. It also presents a variety of advertising methods that marketers can employ to boost brand awareness.

Of course, we cannot forget the promise of quality digital targeting. Unlike other monetization models, advertisers can take full advantage of personalized advertising, allowing them to reach their target audience. And with the phase-out of cookie-based targeting, CTV advertising in the VOD-model offers a variety of non-cookie-based metrics for data-driven marketers.

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Advertising video on demand is driving growth in the CTV market, thanks to its feature of offering high-quality content for free. With the explosion in subscription-based services, subscription fatigue is beginning to settle in among consumers, positioning AVOD to take a bigger share of the VOD market. While AVOD is unlikely to replace ‘prestige-quality’ content turned out by major streaming platforms, its greater accessibility will no doubt continue to draw both viewers and creators, while providing an expansive platform for advertisers.