Whether it’s cinema, broadcast TV, YouTube, or TikTok, these services wouldn’t exist at the scale they are today without advertising. But as video services, tech, and video consumption evolve, the role of advertising is changing as well.
This article explores market trends as whilst some push for more ads, others move away. A unifying theme is empowering viewers with choice, a positive direction amid evolving video landscapes.
The appeal of free or discounted video
For professionals in the video industry, terms like FAST (Free Ad-Supported Streaming TV) and AVOD (Advertising-based Video on Demand) are likely familiar.
AVOD refers to video services supported by advertising, allowing viewers to watch content for free. A great example of that is YouTube. However, AVOD is also associated with Subscription VoD (SVOD) services. Due to the highly competitive landscape, SVOD services are exploring ways to increase revenues via discounted, ad-supported subscriptions. A prime example of this is Netflix which has launched an ad-based tier.
The benefits are twofold: it allows services to target markets where consumers can’t afford a full premium subscription, and it can help prevent customer churn by offering a more affordable alternative for those who would otherwise terminate their subscription. Interestingly enough, the services may even generate more total revenue per subscriber with ad-supported tiers, as Hulu demonstrated back in 2018.
Free ad-supported streaming TV (FAST) services like Pluto.TV, Roku, FreeVee, and more recently, GoogleTV, offer free access to a wide range of TV channels. These channels cover a wide range of content, including movies, news, series, documentaries, sports, and more. FAST services present channels in a similar way to traditional cable TV, aggregating channels from multiple content owners and providing a programming guide to help viewers navigate content. But the broadband and app-based approach allows for access to more content, a better viewing experience, and new advertising opportunities, often with a lower ad load than on broadcast TV channels.
Although a user interface centered around the program guide may seem like a step back from the graphics-heavy row-based catalogs used by many SVOD services, Pluto.TV reports that younger audiences who didn’t grow up with cable TV also appreciate the EPG-type approach to content discovery.
The perception of FAST as solely featuring old, non-exclusive TV show reruns is changing with the inclusion of exclusives, live sports, and premium HBO shows such as Westworld. As a result, FAST has emerged as a serious PayTV and SVOD contender with significant growth expected in the coming years. Moreover, for content owners, it provides an opportunity to reach international audiences without the need to create and maintain their own video app or service. However, being easily discoverable can be a challenge if your content is part of a lineup of 1500+ channels.
The appeal of ad-free video
On the other end of the spectrum, several ad-supported video services now offer viewers the option to skip ads or enjoy ad-free viewing.
While catch-up and replay TV services often allow viewers to scroll through content, they typically do not allow skipping ads, which can be frustrating for some viewers. In December, Sky UK announced a package that allows viewers to skip ads in catch-up, time-shifted, or replay TV for an additional 5 pounds per month, providing a better viewing experience for consumers while generating additional revenue for the service.
Belgian streaming service VTM.Go recently launched an ad-free service called VTM.GO+, providing viewers with the opportunity to watch VTM’s programs without any ads for €4.95 per month. This marks the first time in the network’s 34 year history that its content is available without advertisements.
At Media Distillery, we frequently get requests from video services that want to support new use cases and ad-related monetisation options but can’t due to the unavailability of ad markers. This is something we resolve for them with our recently launched Ad Break Distillery, whose AI-based ad break detection can power use cases such as ad replacement, removal, or enabling or disabling skipping ads.
The Role of AI in video advertising
Alongside the previously mentioned market developments, we’re witnessing the increasing influence of AI and technology in the video industry. At Media Distillery, we leverage AI to extract more value from existing content on a daily basis, including video advertising. Here are a few examples:
- Optimal Ad Placement: FAST and AVOD services typically prefer ads to be seamlessly integrated into content, akin to commercial breaks in broadcast videos. Determining where to insert these ads without disrupting the content can be challenging for content owners. Automating ad break detection, as opposed to relying on manual annotation, allows TV operators to save resources.
- Contextual Advertising. Given our deep understanding of the content, we ensure that advertisements match the themes of the program. This can be on a program level, and on shorter video segments (chapters). More relevant ad placements allow advertisers to wield the greatest impact, considering that viewers tend to recall ad content when the content resonates with them. Another benefit is that, by concentrating on content rather than the viewer, advertising can embrace privacy-friendliness without requiring exhaustive user tracking.
- AI-generated ads and trailers. Recent advancements in generative AI and large language models have facilitated the automation of ad and trailer generation. An excellent example of that would be the generation of audio ads: using a textual product description or podcast transcript, AI can produce an ad script, which is then complemented by AI-generated voiceovers and images. The next step involves producing complete (contextual) video ads or video trailers. With the progress of text-to-video models like Gen2 and the pace of technological innovation, it’s highly likely that we will witness numerous compelling instances of AI in advertising within a year.