Networks pitched their ad-supported streaming companies at this yr’s NewFronts and Upfronts as a strategy to proceed to succeed in audiences. Their efforts construct upon a large shift in viewing habits fueled by the COVID-19 pandemic.

However for ad-based video on demand (AVOD) to succeed, suppliers must ship higher advert experiences that embrace related focusing on in addition to personalised content material that’s simply discoverable.

Sixty-two p.c of customers reported watching subscriber-supported video-on-demand in 2020 in comparison with the 32% that watched AVOD companies, in accordance with a brand new report by PricewaterhouseCoopers that surveyed 1,000 customers.

The breadth of content material continues to be a significant factor amongst customers in selecting a streaming service, and most don’t desire their viewing experiences interrupted by advertisements, resulting in their choice for SVOD over AVOD.

However as customers max out on content material in SVOD companies, they might search selection via AVOD.

“Whereas customers favor ad-free content material, the buyer urge for food for extra selection in content material will make AVOD a viable possibility,” mentioned Seraj Bharwani, CSO of AcuityAds.

There’s some information suggesting this growth into AVOD is occurring. In response to eMarketer, ad-supported viewership elevated 6% from January 2020 to 34% in January 2021, although ad-free streaming companies like Netflix and Disney Plus proceed to dominate the market.

Advertisers need content material the place they will place advertisements: Advert spend in CTV/OTT is anticipated to increase from $8 billion in 2020 to greater than $11 billion this yr, whereas SVOD revenues are anticipated to leap 10% to $81 billion by 2025, in accordance with PwC.

“AVOD positively has a job that is persevering with to enhance and carve out a portion of the market, however I nonetheless suppose you are going to see SVOD dominate the panorama,” mentioned Gregory Boyer, know-how, media and telecommunications associate at PwC US. Whereas AVOD viewership has room to develop, “subscriber fashions [will] have heavier numbers,” he mentioned.

Personalization is essential

The worth change between advertisements and content material is evident to customers in streaming: The report discovered that 63% of respondents mentioned they’d be keen to see extra advertisements if it meant paying much less for a subscription.

And in accordance with a report final month by Verizon Media and Publicis Media, three-in-five of the three,000 viewers surveyed mentioned they would like extra ad-supported subscription tiers. AVOD companies that match that mildew embrace Hulu, Peacock, Paramount Plus and Roku.

Nevertheless, dangerous advert experiences similar to lengthy business breaks and repetitive advertisements can drive viewers away, and 23% of AVOD subscribers mentioned that they switched to SVOD companies because of this.

In response to PwC, 72% of viewers mentioned they’d favor to see fewer advertisements that aren’t attention-grabbing to them, and slightly greater than half of the respondents mentioned that they had been keen to share private information if it meant seeing related advertisements.

Boyer mentioned that personalised advertisements are crucial for AVOD platforms in addition to SVOD suppliers seeking to supply cost-conscious customers alternate options via hybrid fashions.

PwC recommends suppliers use superior algorithms to focus on advertisements, measure viewer engagement and supply a suggestions loop to manufacturers. Along with demographic and behavioral information, the report additionally referred to as for exploring algorithms to current advertisements primarily based on time of day, system getting used and size of desired content material.

Creators, in the meantime, can use viewer information to craft extra interesting advert codecs.

Streaming companies have been touting modern advert tech capabilities to draw each advertisers and viewers. Final month’s NewFronts and Upfronts displays emphasised high quality programming above all, but additionally a slew of recent advert merchandise and different options round focusing on, measurement and frequency administration, in addition to curated content material choices.

“Suppliers are going to need to tweak AVOD so customers can have a very good expertise, with advertisements which can be extra related,” Boyer mentioned, including that it’s nonetheless early to optimize that have for streaming. “All of them try. We are going to see extra developments in using information and analytics as a result of that’s the important thing in personalization.”

Subscription fatigue?

Personalization may make it much less daunting to search out which content material to look at.

With a slew of streaming companies on the market – 5 new streaming companies, together with Paramount Plus, Discovery Plus and PrendeTV launched prior to now yr ­– 29% of respondents mentioned they had been usually “pissed off” or “overwhelmed” by the array of selections supplied.

Moreover, 31% mentioned that straightforward, personalised content material suggestions could be a motive for staying with a selected platform.

PwC mentioned suppliers want to consider how their prospects will seek for — and simply entry — the content material, both via higher consumer interfaces and discovery capabilities, or by providing suggestions past their very own platforms as extra content material is moved into walled gardens.

Shoppers used a mean of eight streaming companies in 2020, up from six the earlier yr, accessed via units and apps similar to Amazon Prime, Apple TV, Roku, and others. However subscribers’ pockets aren’t bottomless.

“You’re going to see subscription fatigue in all probability popping out of the pandemic, as customers grow to be extra inclined to go outdoors and do issues,” Boyer mentioned. “Individuals are going to search out that they don’t use all of these streaming companies.”

That may lead extra pure-play SVOD companies to roll out AVOD choices – similar to HBO Max, which launched its $9.99 ad-supported service on Wednesday and claims to have the lightest advert load in streaming – and increase their revenues.

“Streaming remains to be going to be an enormous development space and the way forward for TV,” mentioned Boyer, who added that media consolidation might additionally change the panorama. “You’ll see extra AVOD choices.”