How Are AVOD Publishers Controlling Ad Loads?
Woman watching video advertising on a tablet while AVOD publisher controls the ad loads.
Ad-supported streaming services are increasingly popular and viewers don’t seem to mind the ads – as long as there aren’t too many. How does an AVOD publisher determine the right ad load that maximizes revenue without turning off viewers? It’s all about balancing ad load, ad rates, and viewer experience.
MVPDs bundle multiple linear channels for a single monthly subscription fee, via cable or satellite
vMVPDs bundle multiple linear channels over the Internet
SVOD services offer commercial-free streaming content for a monthly subscription
AVOD services offer ad-supported streaming content for free
Many MVPDs and vMVPDs are partnering with AVOD/SVOD services to bundle their content with the traditional linear subscription
What Is an MVPD?
Streaming viewers are embracing ad-supported video-on-demand (AVOD) platforms. eMarketer reported that domestic AVOD services had more than 127 million viewers in 2021. Some experts expect the audience for ad-supported streaming services to hit 164 million by 2025.
The top AVOD publishers generate hundreds of millions of dollars in ad revenue every year. The leading AVOD services today include:
● Pluto TV
● The Roku Channel
Both free AVOD services and those subscription services with lower-priced ad-supported tiers are experiencing rapid growth. For example, the percentage of free AVOD viewers increased by nine points in just two quarters – from Q4 2021 to Q2 2022. That’s a tremendous growth rate.
More than half of streaming viewers watch free AVOD services.
AVOD Services Have Lower Ad Loads
How much advertising should an AVOD service run?
Historically, AVOD services have delivered a lower ad load than traditional broadcast or cable TV, which appeals to many viewers. In a world where viewers grudgingly accept more than 12 minutes of ads per hour on broadcast TV, AVOD streaming services typically have ad loads of less than 10 minutes per hour, with some services delivering fewer than five minutes of advertising per hour.
What is the optimal ad load for streaming services? According to Hub Entertainment Research, while 47% of viewers say they prefer five ads or fewer in an hour, 41% say that 11 or more ads per hour is reasonable. Viewers just don’t want to see all those ads in a row, as witnessed by the 48% of viewers who say ad breaks lasting two minutes or more are unreasonable.
For many AVOD services, the problem isn’t having too many ads – it’s having too few ads to fill their available ad slots. Industry sources say that AVOD services have a fill rate of only 85%. That leaves a lot of space to fill – which explains why some AVOD services run the same ads over and over, often repeating back to back. This dearth of advertisers on some services leads to an artificially lower ad load – if they had more advertisers, their ad loads might be higher.
Still, for many viewers seeing fewer ads is one of the big appeals of AVOD services. A lower ad load leads to a more enjoyable viewing experience.
AVOD platforms provide broad reach with less ad load.
How to Optimize AVOD Ad Loads
Lower ad loads also let AVOD publishers charge more for a limited number of ad slots, especially with their most popular content. Profitably managing higher ad rates with fewer ads is challenging, however. AVOD services have to find the optimal balance between ad load and ad rates.
Here are some approaches most successful AVOD services use to manage their ad loads.
Lower the Ad Load But Charge Premium Rates
Some streaming services minimize ad loads but charge premium rates for their ad slots. Viewers who get fewer commercial interruptions find a lower ad load appealing. It’s also appealing to advertisers with less competition for those viewers’ attention. When there are only five or six minutes of ads per hour, the ads get more attention.
To make this model work, AVOD services charge higher rates for those fewer ads. Instead of the $15-$20 CPM charged by most ad-supported streaming services, a service with a lower ad load can charge $30-$40 CPM or more. When managed correctly, this approach can generate higher revenues than one depending on a higher ad load.
Settle On An Ad Load Lower Than Broadcast But Higher Than Higher-Priced Competitors
Most streaming video services use a middle approach. They set an ad load lower than broadcast TV but higher than their low-load competitors. This lets them charge more reasonable ad rates, in the $15-$20 range, and attract a broader variety of advertisers.
An ad load of between five and eight minutes per hour is still considerably less than what viewers are accustomed to with traditional linear TV, so they’re not turning off viewers. In addition, an ad load in that range enables a service to sell enough ads to optimize revenues and profits without turning off potential advertisers. Everybody wins.
Embrace Ad Podding
When fill rates are low, streaming services often are forced to repeat the same ad inventory over and over. Viewers, understandably, don’t like this.
One solution to this inventory problem is to embrace ad podding. With ad podding, ad services purchase a two-to-three-minute block of ad space and fill it with ads from multiple advertisers sequenced together. This lets publishers serve multiple ads from a single ad request and minimizes unnecessarily repetitive ads. Publishers can dictate the total length of an air pod and how long individual ads in the pod should be.
In addition to improving the viewing experience, publishers can realize up to 60% more ad revenue by using air podding. Air podding more effectively use ad inventory to increase revenues without increasing ad rates.
How air podding works.
Utilize Dynamic Ad Insertion
Another way AVOD streamers can maximize ad revenue without increasing ad load is through dynamic ad insertion (DAI). DAI enables AVOD services to insert different ads for different viewers in real-time.
With DAI, AVOD publishers let advertisers target specific viewers based on their own specific goals. DAI technology inserts these ads seamlessly, so viewers don’t know they’re being specifically targeted with a particular ad. All viewers know is that the ads they see are suddenly more relevant – and they respond in kind.
Not surprisingly, this type of microtargeting delivers higher response rates to advertisers. This lets AVOD servicers charge higher rates for those ads, increasing overall revenues without overburdening viewers with a higher number of ads.
Penthera Helps AVOD Publishers Optimize Ad Load and Maximize Revenues
For AVOD publishers, optimizing ad inventory is key to maximizing profits without unnecessarily increasing ad load. Many services use Penthera's 2nd Look to get the most from their dynamic ad inventory and deliver more targeted advertising to their viewers. 2nd Look helps streaming video services increase fill rates and revenues in real-time.
Contact Penthera today to learn more about improving streaming video quality.