This article was contributed by Setplex, a leading provider of highly-scalable, low latency IPTV/OTT solutions.
OTT advertising is more than just a trend in today’s entertainment world. It is a powerful channel for marketing. As the right customers can be targeted through better segmentation, it’s less expensive than traditional TV advertising and much more effective. That being said, if you know your customer, you can spend your marketing dollars with confidence.
Let’s take a look at where OTT monetization is heading in 2022.
#1: Emergence of AVOD Will Surpass SVOD
The increasing transition towards OTT content is fundamentally changing how video is sold, produced, and consumed. Among the many OTT business models, the pandemic has supercharged SVOD echoing the strong demand for couch-based entertainment. As a result, every major entertainment company made streaming a priority, creating a deluge of content and programming.
According to Lightshed Partners, SVOD subscribers will nearly double from roughly 650 million worldwide at the end of 2020 to 1.25 billion by the end of 2024 - roughly 16% of the human population.
Primary players such as Netflix, HBO, Amazon Prime Video and Disney+ are largely competing for first-generation streaming viewers - both younger cord cutters and older, higher-income households. Then there are those that have yet to cut the cord, relying on traditional television.
The SVOD market is nearing saturation, creating an opportunity for AVOD - advertising-based programming. Unlike SVOD and TVOD services, AVOD is free to consumers. However, much like broadcast television, advertisements are threaded into the programming experience to offset production and hosting costs.
Compared to SVOD and TVOD, premium content owners rarely use AVOD as it generates lower amounts of revenue. However, AVOD is beginning to emerge, with YouTube transitioning its subscription-based Premium content to an ad-based model.
Of course, the question on top of everyone’s mind is - will ads turn consumers away? The answer is no. YouTube has built a multi-billion-dollar business with ad supported content. The key is to make the commercials more relevant to consumers based on data such as interests and location.
Consumers have been watching ads since the inception of broadcast TV and those that want to watch content without paying a subscription fee are not opposed to commercials. AVOD also allows consumers to “try before they buy” and invest only time, not additional money, into a new show.
Overall, AVOD is a low barrier to building an audience. As AVOD continues to grow, more money from advertisers will enter the market, therefore driving higher CPMs and providing publishers with stronger revenue streams.
#2: Custom CRMs Build Brand Loyalty
Social media, mobile apps, live streaming, and OTT video services have significantly changed consumerism and created new marketing opportunities. To connect with this new generation of customers, advertisers must adopt a more personalized and engaging marketing strategy.
According to Gartner, 80% of U.S. viewers use at least one streaming TV service overall, and 64% watch at least one ad-supported service. As linear TV usage decreases and streaming services continue to rise in popularity, service providers must integrate customer relationship management (CRM) capabilities into their OTT platform to deliver personalized content experiences.
Leveraging CRM capabilities such as self-service billing and analytics provides additional revenue generation opportunities and greater insights on consumer behavior to deliver personalized, data-driven content. Netflix has already achieved success with this by using customer data such as age and viewing preferences to develop new content and market it to subscribers that are most likely to watch.
While legacy CRM technology is designed to serve sales management, new tools put the customer first. Today, CRMs powered by big data can track and measure every customer interaction – which is crucial to meeting customer demands and building brand loyalty.
Amazon Fire TV is a great example of OTT advertising powered by a custom CRM platform. Unlike TV ads, Amazon’s OTT advertising interjects short ads in the right places, at the right times, between movies and shows for which audiences are more inclined to sit through. Users can interact with the ads more effectively and even be taken directly to the product and services page by clicking on the relevant links.
Overall, CRM purpose-built for the OTT stack solves one of the biggest challenges for service providers - keeping viewers engaged. By offering compelling content, personalized recommendations, and a comprehensive user experience, service providers will not only retain subscribers, but also attract new customers. In 2022 and beyond, the ease of use of self-service CRM capabilities built into OTT platforms will play a key role for service providers that want to stay ahead of the competition.
