For Ad VOD Players, Success Is Blend of Linear, Digital Models

Streaming services that rely on advertising make their case to brands looking to recoup lost television viewers

Why This Matters

WHY THIS MATTERS
Advertising-based video-on-demand services are increasingly becoming an option for brands used to advertising on traditional linear television.

As viewer habits continue to shift toward digital, the over-the-top space has gotten awfully crowded in the past few years. But when it comes to long-form, premium content, advertisers have been largely shut out. Most streaming players have focused more on subscription models, with viewers getting accustomed to an ad-free experience.

“There’s only a few players out there that do long-form premium content on an ad-supported basis,” said Farhad Massoudi, founder and CEO of Tubi TV, one of the newer players in the advertising-based video-on-demand (AVOD) space. Tubi TV launched two-and-a-half-years ago and has content from big wig studios such as Paramount and Lionsgate. “AVOD is going to play a much bigger role in the coming year than it has in the past,” Massoudi noted, adding that there are some 130 difference subscription-based streamers in the market. And unless you’re a Netflix or Amazon, it can be hard to entice viewers to fork over dollars in a world filled with seemingly limitless options. “[Subscription video-on-demand] services are struggling for the most part, except for a few players.”

But for brands used to advertising on traditional TV, the small but growing AVOD space gives them a chance to reach those viewers that have migrated toward a more digital viewing experience. “They’re all understanding they can start to experiment here,” said Peter Naylor, Hulu head of sales. “A lot of the rules can be pushed and you pressure-test a lot of the rules.”

Blending TV and Digital

Google and Facebook take up the lion’s share of ad dollars when it comes to digital video, though how an advertiser buys media on YouTube is still vastly different than it is on traditional television.

The premium AVOD space at least helps bridge that gap by giving advertisers a TV-like table to place their bets. Massoudi says that helps them sell advertisers on Tubi TV, since they don’t have to spend too much to lure marketers to newer ad models that can be harder to quantify return on investment. “Advertisers don’t know how that would compare to traditional TV buys,” said Massoudi.

One of the biggest players in the AVOD space, Hulu, turned heads last week when it announced it would be dropping their free version, while still offering content through a licensing deal with Yahoo. Despite Hulu putting its eggs solely in the subscription-based basket, Naylor makes it clear they still see advertisers as a major part of their business model.

“Most of our viewers are viewing us with a subscription in place anyway,” he said, noting that it was a natural evolution to move away from a purely ad-reliant business. Naylor admitted it was a bit of a contradiction to give viewers content for free while simultaneously trying to get them to sign up for a subscription: “Advertising is a huge part of our business.”

In the early days of ad-supported streaming, advertisers would often run the same ads that viewers would see on TV. And for a while that made sense, as viewers were still predominantly in a traditional TV world. But as younger consumers shift their eyeballs toward an on-demand world, those traditional ads—viewers would often be exposed to the same 30-second spot multiple times during the same show—become less effective.

Naylor notes that one goal of Hulu’s has been to break away from the normal 15- or 30-second spots that populate television. “We’re not a slave to the clock,” he said. In recent months, Hulu has run a five-second spot for Tic-Tac, and Bank of America ran three 30-second spots in a row that told a single story. “That’s very easy to do in our environment.”

Brand storytelling is what Crackle had in mind when the Sony-owned streamer unveiled its new “Break Free” ad product during its upfront earlier this year. Playing on the rise of binge-viewing, which can make those ads that appear multiple times during a single episode even more annoying for viewers, Crackle will only allow five brands to advertise across a single season of shows such as the drama The Art of More.

“When you binge-watch a 10-episode series, the ads kill the experience,” said Crackle’s general manager and executive VP Eric Berger in April. “Those advertisers will be able to tell a story across multiple episodes with only four other advertisers competing for attention.” As Hulu did with Bank of America, this also allows brands—Infinity was one of the earliest brands to sign off for Crackle’s new offering—to tell a story that looks closer to the shows the viewer is watching instead of a traditional advertisement.

Naylor said the majority of Hulu’s viewing now comes on connected TVs; desktop and mobile viewing only take up about 30% of Hulu’s streams, with the living room getting the rest. Which is why Hulu partnered with BrightLine to bring interactive ads to connected TVs. “We’re really doubling down on interactive ads in the living room.”

Taking Cues From Digital

One of the tenets of digital video advertising has been that, while the experience has closely mimicked traditional television, the number of ads that run during a program is significantly smaller. Massoudi, for example, notes that Tubi TV sometimes runs half the ad load of a linear network. And it appears some legacy media companies are starting to take digital’s lead, as networks such as Turner and Viacom have discussed lightening their ad loads.

“Because their ratings have dropped, they’re trying to justify significantly higher prices to maintain their revenue,” said Massoudi. “I think the question is, can they continue doing this over the coming years.”

Mark Lieberman, president & CEO of Viamedia, an independent cable TV ad management company for local, regional and national advertising, and chairman of its programmatic-subsidiary placemedia, has noticed how TV has been working to infuse some of the ideals of the digital advertising ecosystem.

“The internet has been working, in the last couple of years, programmatically…to find the right consumers, and TV is moving in that very same direction,” he said. “I think this is where you combine that with some of the OTT-and AVOD-type solutions and you combine that with a programmatic solution and targetability solution, and you end up with a win-win-win.”