What’s happening in the Video Advertising Space?

Advertising has played a pivotal role in the video industry for decades, and continues to do so in the future. Whether it’s cinema, broadcast TV, YouTube, or Tiktok, without advertising these services wouldn’t exist at the scale they are today. But as video services, tech, and video consumption evolve, the role of advertising is changing as well.

In this article, we dive into some market developments, where we see opposite trends towards having ads, as well as moves in the opposite direction. What they have in common is offering viewers more choice, which is always a positive thing.

The appeal of free or discounted video

For people working in the video industry, FAST (Free Ad-Supported Streaming TV) and AVOD (Advertising-based Video on Demand) are probably familiar words.

AVOD refers to video services that are supported by advertising, where viewers can 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.

An ad-supported plan offers more choices for consumers. Source: Disney+

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 Electronic Program Guide grid takes a prominent role in many FAST services. Source: Pluto.tv

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 by AI-based detection of ad breaks with the recently launched Ad Break Distillery, whether it is ad replacement, removal, or enabling or disabling skipping ads.

The Role of AI in video advertising

Besides the market developments above, we are also observing the impact of innovation in AI and technology. At Media Distillery, we use AI to get new value out of video on a daily basis. Our use cases also include deriving more value from video advertising. Here are some great examples:

  1. Optimal Ad Placement. FAST and AVOD services typically want ads to be placed inside the content, similar to commercial breaks in broadcast video. So content owners need to determine where to put these ads. This is typically a labor-intensive editorial task: annotators need to scroll through video, identifying spots where ads are placed in a way they don’t interfere with the content. With our in-house developed tools we can determine these spots automatically
  2. Contextual Advertising. Because we know what the content is about, we can make sure that advertising matches the contents of a program. This can be on a program level, but as we already identify topics and chapters with our Topic Distillery product, we can make ads relevant to specific parts of a show, which allows advertisers to have their ads placed where they have the most effect, as research shows that viewers have higher ad recall when they relate to the content. Another advantage is that, by focusing on the content instead of the viewer, advertising can be made privacy-friendly where exhaustive user-tracking is not needed.
  3. AI-generated ads and trailers. Recent advancements in generative AI and large language models have facilitated the automation of ad and trailer generation. One great existing example is the generation of audio ads: based on a textual product description or podcast transcript, AI can generate an ad script, which can then be added by the AI voice over and AI-generated images. The next step is to complete (contextual) video ads or video trailers. With the advances of text-to-video models like Gen2 and the overall speed of technological innovation, in a year from now we are likely to see many more great and convincing examples of AI in advertising.

      May 11, 2023

      Published by:

      Martin Prins