The growth in video services based on advertising is outpacing all other business models as the power and capability of AI-driven Targeted TV Advertising helps to maximize revenues.
Without a doubt, one of the key trends in the media industry in 2023 has been the re-emergence of advertising as a driving force. A combination of rising costs and economic troubles have made ad-driven services such as AVOD and FAST look attractive to many broadcasters and operators — especially as part of a tiered offering that can be presented to a wide range of viewers.
We discussed this recently, and it’s worth reproducing the table we put together from the data that shows the projected growth in different streaming formats from 2023 to 2029.
| Overall OTT | 32.7% |
| Hybrid AVOD-SVOD | 233% |
| AVOD | 76.9% |
| SVOD | 18.7% |
| FAST | 112.5% |
These figures point strongly to advertising-based services representing the greatest opportunities for growth over the next five years. Understandably, as a result, after a decade where SVOD was the main topic of conversation with customers, we are seeing a renewed interest in advertising across the industry.
It is an exciting time. Today’s streaming and broadcast services are increasingly using new ad tech that opens up whole new opportunities for those that deploy them. And, as we shall see, the revenue they can generate is substantial.
The pivot towards AVOD & FAST
The growth in SVOD subscribers is decelerating under pressure from audiences and operators. A recent survey from Hub Entertainment Research found that almost six in 10 viewers preferred ad-supported subscriptions if it meant a lower monthly fee. And for TV operators, the limitations of the subscription model are becoming apparent. When a viewer subscribes to a service, the video content is offered at a fixed price with no additional upsell opportunities.
With advertising revenue bouncing back post-pandemic, many find that the ARPU of lower-priced AVOD services can be superior to even premium subscription offerings once ad revenue is factored in.
The key lies in maximizing those monetization opportunities, and that starts with Targeted TV Advertising. This is the cornerstone on which the majority of future opportunities are based, and worldwide, addressable TV revenue is expected to climb to $87 billion in 2027, accounting for one-fifth of all global video ad buying.
The key to successful targeted TV advertising is dynamic segmentation. Broadcasters and service providers can effectively isolate specific audience segments by leveraging AI and ML algorithms on first-party TV data, analyzing usage flows, and identifying consumption patterns. This allows for the replacement of ads aimed at specific audiences during linear primetime content. It also facilitates an increase in ad slots without an accompanying increase in ad load. As a result, broadcasters can charge premium rates while also reducing churn rates, as viewers tend to respond more positively to targeted ads.
Targeted advertising technology is used increasingly as the basis for services that rely on ad revenue, too. These range from traditional linear TV to AVOD and on to the new generation of FAST channels. Here, they can also interoperate with the tech stack deployed to help tailor the selection of FAST channels to reflect audience interests.
They also are an integral part of some of the new revenue models we see emerging as the industry evolves. These include Tailored Content Packages that are able to dynamically swap subscriptions to different services up to a user-defined budget ceiling, and Shoppable TV, which combines e-commerce with video content, enabling viewers to purchase items appearing on screen either via the UI on the TV or on a secondary screen via a QR code.
Assessing your potential revenue
But how much can you earn from Targeted TV Advertising? We have done some detailed work on the revenue opportunities it presents for different organizations with different business models and located in different geographies, which you can access via our Revenue Projection Simulator
This was created as a tool to allow operators and service providers to assess how much their current media business could benefit from Targeted Advertising. It takes into account many variables, such as geolocation, platform types, number of active users per day, and more, to provide a specific estimate of the revenue you could generate by implementing a TA solution.
The provided estimate is based on real-world industry data and complex modeling of critical variables, including CPM, fill rate, and more.
2024 - the Year of Advertising
As the price of subscription streaming services has risen to accommodate growing content costs and the expense of maintaining deep libraries, and as the number of services available has increased, audiences have decided to cut back on their monthly spending. As a result, a pivot towards AVOD and FAST services is underway as audiences seek to balance finite budgets with maximal choices.
Advertising has evolved dramatically in the past few years. It is more effective for the advertisers, generates more revenue for the broadcasters, and is less intrusive for the audiences. Either as a standalone service or as a component of a tiered offering, advanced TV advertising is definitely an essential part of any broadcaster or operator's toolbox for 2024 and beyond.
