April 17, 2024

Emergence of Ad-Supported Video on Demand (AVOD) Services

 

The Rise of Free Streaming Platforms

Over the past few years, the landscape of online video streaming has transformed tremendously. While subscription video on demand (SVOD) services like Netflix, Hulu, and Amazon Prime Video were the early dominators, ad-supported video on demand (AVOD) platforms have risen rapidly in popularity. Let’s examine the key factors behind the emergence of these free streaming services.

Evolving Consumer Preferences

With growing affordability concerns over multiplying subscription services, many viewers prefer free or low-cost options. The proliferation of AVOD services and cord-cutting have further driven this change. Streaming research shows that over 50% of viewers in the US prefer a combination of paid and free video platforms rather than relying solely on subscriptions. Younger audiences, in particular, expect ubiquitous access to content across different devices without significant costs. Understanding these evolving preferences, media companies rushed to fill this growing demand for zero-dollar entertainment.

Competition from Tech Giants

The explosive growth of YouTube only validated the latent potential of advertising-based video services. Seeing the opportunity, other tech titans like Facebook launched their own AVOD platforms. As their userbases and data analytics capabilities expanded, these platforms became magnets for premium long-form video. Media networks realized partnering with digital powerhouses provide unmatched reach to audiences worldwide. For tech companies as well, exclusive video content strengthened user stickiness and platform value. The competitive pressure incentivized traditional cable firms to launch free streaming alternatives.

New Business Models Emerge

While SVOD relies heavily on monthly subscription profits, AVOD flourishes through alternative revenue streams. Digital advertising, sponsorship deals, promotion of linear TV content, premium channel upgrades provide multiple monetization points. Data-driven targeting enables compelling ROI for brand partners. Moreover, free access lowers customer acquisition costs, facilitating scale. Over time, as viewership and data assets grow, AVOD platforms can explore new profit pools like e-commerce and live events. The flexibility of this business model attracts diverse stakeholders from media, tech to even telecom majors.

Mainstream AVOD Services Lead the Growth

Among the major AVOD players, Pluto TV has seen phenomenal expansion going from niche to mainstream. Recently acquired by ViacomCBS, Pluto TV delivers highly personalized live and on-demand programming to over 30 million monthly active users across devices. Meanwhile, Peacock has gained traction after launching as the exclusive streaming home for NBC content. The Roku Channel also emerged as one of the most popular platforms on its platform. YouTube still leads by a wide margin across global AVOD volumes. However, with rising competition, networks are differentiating themselves by ramping original video production for AVOD platforms.

Content Strategies of Top Players

Pluto TV relies on a robust lineup of branded channels organized by genres for mass appeal. Besides acquired and public domain shows, turning linear channels like Comedy Central and Nickelodeon into 24/7 streaming destinations boosts viewer engagement. On the other hand, Peacock focuses more on franchises with big fan followings and current NBC/Universal output. It also monetizes popular sports and reality shows highly consumed on free platforms. Roku, meanwhile, has become a leading free aggregator, leveraging content partnerships that include The Roku Channel. Going forward, more targeted programming, formatting content as per each platform’s unique strengths will define the top AVOD services.

Segmentation, Personalization, Localization Key Growth Drivers

To thrive amid intensifying competition, AVOD platforms must build deep audience understanding. Granular data on content preferences and device/time-of-day usage enables precision segmentation of viewers into micro-communities. Personalized recommendation engines can then ensure the right mix of evergreen and current shows surface for each profile. Moreover, localization of content through subtitles and language dubs expands the total available market. India represents a massive potential with low cable penetration and rising smartphone adoption. If executed well, such strategies can significantly boost viewing durations and deliver enhanced monetization over time.

Long-form Video, Live Events Fuel Next Phase

As availability of short-form internet video saturates, demand is tilting towards premium long-form fare. Top digital brands hence focus on original movies, prestige dramas, comedy specials exclusive for their platforms. Meanwhile live, interactive experiences around sports, music, and award shows keep viewers engaged for hours. Successful AVOD properties allocate more commissioning budgets and enter output deals for such high-intensity events. The proliferation of over-the-top devices and broadband connectivity will further accelerate this pivot towards fresh marquee content, raising the bar for free streaming services.

In Conclusion

The rapid ascendancy of ad-supported streaming platforms underlines viewers’ need for video choices beyond subscriptions. Backed by evolving media consumption habits and business models, major tech and media groups compete aggressively through their free services. While innovation and differentiation continue powering new growth frontiers, understanding local sensibilities through deep personalization will determine the leading AVOD service of the future. As digital technologies converge video experiences across environments, ad-based streaming platforms are well poised for sustained leadership in the evolving entertainment landscape.

*Note:

  1. Source: Coherent Market Insights, Public sources, Desk research
  2. We have leveraged AI tools to mine information and compile it