High-tech and fast-paced living have individuals used to getting what they want, when they want it. From fast food and online banking to entertainment streaming, the most successful businesses are often those that understand the need for convenience. With SVOD, AVOD, and TVOD streaming models available, viewers have a world of on-demand entertainment at their fingertips. However, in a highly competitive market, it’s no easy feat for content owners and streaming platforms to navigate strategic monetization.
In this article, we’ll offer insights into the distinct features and revenue models behind SVOD, AVOD, and TVOD strategies. Additionally, we’ll explore the state of the industry and examine the role of user income demographics on the performance of popular streaming platforms. If you’re looking to optimize your content for maximum revenue generation, this guide is just for you.
Types of Monetization in OTT Advertising
First, let’s consider how SVOD, AVOD, and TVOD models each build revenue.
Subscription video on demand (SVOD) was largely popularized by Netflix. As other streaming networks came onto the scene, it was only natural that they would adopt the same successful strategy. SVOD is still one of the primary streaming business models for major OTT streaming networks, including Hulu, Disney+, and Amazon Prime Video.
With the SVOD model, viewers pay either a monthly or annual subscription fee for unlimited access to an extensive library of video content. Programming includes movies, series, documentaries, reality shows, kids’ entertainment, and a variety of other content. Subscribers have access to original content and videos produced by various media companies. The ad-free programming is available to subscribers at any time, from any connected device.
The increasingly competitive OTT streaming market drove distribution networks to use alternative ways to generate revenue and draw users. Offering free content has proved a winning strategy.
Advertising-based video on demand (AVOD) is a video monetization method that provides viewers with free video content. The catch? Viewers also have to put up with ad intervals during programming. This allows media companies to earn revenue through advertising rather than charging viewers directly. YouTube, Daily Motion, and FuboTV all employ this streaming revenue strategy.
Instead of paying a monthly subscription fee, transactional video on demand (TVOD) offers users a pay-per-view option. Here, consumers only pay for the content they watch. TVOD is commonly used for new movie releases or special event broadcasts; the video content is usually available for a limited amount of time, and viewers can only access it after payment.
One significant benefit of TVOD is that new movies are often available for rental or purchase before they are available on other streaming services. It’s also ideal for users who don’t want to be tied into contracts but want to watch significant sporting or other live events.
OTT Monetization: The State of the Industry
Netflix, Disney+, Amazon Prime Video, and HBO Max all now offer cheaper ad-supported tiers for price-conscious consumers. While one might initially think that this is due to consumers cutting their budgets in a tight economic landscape, that’s not exactly the case.
Consumers are looking for cheaper streaming models—but in many cases, this is because they are increasing the number of platforms they subscribe to. This means that the number of streaming services offering ad-supported content and the number of viewers who watch this content are both on the rise.
In addition, the emergence of CTV (Connected TV)—also known as Smart TV—has led advertisers to adapt their marketing approach, since they can reach target audiences more effectively through this channel. Connected TV viewers are particularly valuable consumers: one report by Amazon revealed that they average higher incomes (and thus hold greater purchasing power) than the general public.
This change in streaming monetization from primarily SVOD to incorporating ad-based models is having a significant impact on the spread of ad spend in the digital video industry. According to eMarketer, subscription OTT video ad spend in the US alone will reach almost $10 billion by the end of 2023. This accounts for 3.4% of all digital ad spend, and 10.2% of total video ad spend. What’s more, this figure accounts only for ads that appear in paid subscription OTT streaming services such as HBO Max, Hulu, Disney+, and Amazon Prime Video. It does not account for ad spend on free streaming services such as the Roku Channel, Pluto TV, and YouTube.
Customer Analytics: Driving Video Content to the Right Channels
The first step to optimizing content monetization is ensuring that the right type of content airs on the right channels, targeting the most appropriate audiences.
The granular measurement capabilities of CTV and OTT allow content owners and advertisers to reach target audiences with pinpoint accuracy. Real-time tracking and hyper-targeting place brands in front of already-interested viewers, creating more meaningful connections. Leveraging available data to tailor campaign messaging then enhances ad spend to drive performance.
Key Performance Metrics
The following key performance metrics are commonly used to gauge the success and effectiveness of OTT advertising and campaigns. These metrics are invaluable to optimizing ad placement and offer insights into user preferences and behavior.
Advertising impressions are a measure of how many viewers see an ad. OTT streaming platforms allow advertisers to track impressions, offering a window into the reach and potential visibility of ads. Tracking impressions enables advertisers to measure the scope of their campaign and its potential influence on the target audience.
Completion rates measure how many viewers watch an ad through to the end. It helps advertisers gauge how effectively their ads engage audiences. A higher rate means viewers are more likely to be paying attention to the ad’s message. To optimize campaigns, advertisers can use completion rates to inform changes to ad formats, lengths, and content.
Click-Through Rates (CTRs)
Devices such as laptops, tablets, and smartphones offer companies investing in OTT advertising an additional opportunity: interactivity. Touchscreens allow viewers to engage with ads, rather than simply watching them. Interactive OTT advertising features include call-to-action buttons, clickable hotspots, dynamic content, and gamification.
CTRs measure the proportion of viewers who click a given ad. This shows the extent to which the ad engages viewers and persuades them to take action, with higher CTRs demonstrating an ad’s success in persuading viewers. Advertisers can optimize CTRs and drive more visitors to their sites by experimenting with different ad formats, calls-to-action, and messaging.
Conversions refer to desired outcomes from viewers interacting with an ad—such as renting a movie, subscribing to a channel, or signing up for a free trial. Tracking conversions helps measure an ad campaign's success in driving tangible results. OTT streaming services and advertisers can attribute conversions to individual ads or cohorts, allowing them to optimize their targeting and messaging to maximize conversion rates.
“Viewability” measures the amount of an ad that can be seen on a viewer's screen. OTT platforms track this viewability, helping advertisers measure the visibility and performance of their campaigns. They can then increase margins by adjusting placement, duration, and creative elements.
Frequency is the average amount of times a viewer sees a specific ad in a given period. Advertisers want to ensure it is frequent enough to have an effect, yet not too often to cause viewer annoyance. By striking the right balance, advertisers can optimize ad delivery and viewer engagement.
How Data-Driven Analytics Aids Strategic Monetization
SVOD models rely largely on user analytics to optimize customer experience and retain customer loyalty to their channel or platform.
Analytics around popular content and viewer abandonment provides insights into viewer preferences and consumption patterns. This information enables providers to make accurate personalized content recommendations—enhancing viewer satisfaction and retention.
A recent report reveals that 79% of WiFi-enabled homes in the United States watch streaming content on CTV devices. Streaming services offer a significant advantage over traditional cable advertising: innovative retargeting. Retargeting technology identifies when a Connected-TV ad is watched in full, then serves targeted ads to other connected devices in that same household.
A key way to reinforce brand recognition is to focus on the target audience and layer the ad message across a user’s channels and devices. Engaging viewers with a brand is highly effective when the brand message is reinforced wherever the user browses and streams online.
Viewer analytics additionally refines ad targeting to consumers most likely to take an interest in the product, service, or programming. Although interactive ads are currently less common on CTV devices, some platforms and advertisers enable audience engagement with a QR code or coupon. This can improve revenue generation, streamline programming, and further contribute to optimizing behavioral analytics and on-point targeting.
Furthermore, by analyzing viewer demographics, consumption habits, and willingness to pay, SVOD platforms can strike the right balance between affordability and profitability, optimizing their subscription offerings and pricing strategies.
Since the success of AVOD OTT models relies heavily on advertising ROI, customer analytics plays a crucial role in platform performance. By leveraging viewer data, companies can gain insights into viewer preferences, allowing them to:
- Determine optimal ad placements within the streaming platform
- Identify the most opportune moments to deliver ads
- Maximize viewer attention and revenue generation with strategic ad design
- Tailor ads to align with viewer interests and preferences
- Target niche audiences
- Showcase the most strategic ad format in line with a user's specific device
It’s a no-brainer that popular content generates more revenue—but this is especially true with transactional video-on-demand models. Customer analytics is critical for understanding viewer preferences and consumption patterns for TVOD services. Data analysis reveals which videos are rented or purchased most often; this enables providers to prioritize the availability of popular content, genres, topics, and formats to cater to viewer interests and boost revenue potential.
In addition, analytics can help set optimal pricing strategies for videos or packages by considering viewer behavior, past purchase patterns, and market trends to ensure profitability.
While TVOD platforms may not have a significant amount of user data on first-time users, they can still integrate personalized program recommendations to repeat customers. By leveraging and analyzing repeat customer preferences and viewing patterns, TVOD platforms can offer tailored programming suggestions to retain viewer interest and keep them coming back.
There’s one more key area where data can significantly assist your OTT monetization strategy—predictive analytics. This type of analysis forecasts future opportunities and risks.
Demand analytics evaluates consumer demand over time, identifies patterns, and estimates how many items a consumer is likely to purchase and watch certain content. Predictive analytics, meanwhile, improves strategic decision-making regarding the most profitable OTT distribution and monetization strategies.
The best monetization model for profitable content distribution requires applying various key performance metrics to your OTT content strategy, customer strategy, and distribution strategy. Customer analytics can help you determine the “who, what, where, when, and how” for the best ROI.
SVOD, AVOD, and TVOD—Easily Optimize Multiple Monetization Tools
With an ever-increasing number of OTT streaming service providers, it's more important than ever to choose the right monetization model to ensure profitable content distribution. To do so, content providers and distributors need to leverage customer analytics. This allows you to gain insights into what viewers want, what they are willing to pay for, and how they prefer to consume video content.
In addition to leveraging customer analytics, your team’s technical knowledge, platform compatibility, and streaming quality—among other factors—all play a role in successful video content distribution and monetization. That’s where dotstudioPRO can help.
dotstudioPRO’s all-in-one OTT distribution and video management service equips content owners to reach a larger audience, employ multiple monetization tools, generate stable revenue, and broadcast to popular video streaming channels such as Amazon Fire TV, Vizio, Roku, and more. In addition, the platform gives you all the tools you need to manage video storage, quality, and delivery.
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