Ad-supported video-on-demand (AVOD) is definitely on the rise. As the streaming world becomes more and more crowded, ad-supported streaming is an increasingly popular way for media companies to increase revenues, and for subscribers to lower their subscription costs.
A new report from market intelligence firm Parks Associates is shedding light on why such services are adding so many new users, and the answer should come as no surprise: Cost. Forty-nine percent of users of ad-supported services said that they chose to use that type of streamer because it was free. The next-highest reported reason was that the service was that it had content that the viewers liked, with 31% of respondents citing it as their primary reason.
The news got even better for providers of AVOD services in Parks’ report. The numbers show that given the choice between AVOD viewing and live/linear TV content, users preferred AVOD viewing at a rate of 65%, versus just 21% of those who said they would rather watch linear TV.
The preference for AVOD versus live TV is not all that surprising. Many AVOD services offer a variety of free ad-supported TV (FAST) channels that mimic the live TV viewing experience while offering a much lighter ad-load, as well as a better variety of ads. These services also offer an on-demand aspect that live TV often lacks, so users can stop and start their programs at will instead of being beholden to a broadcaster’s schedule.
The question for AVOD providers is how to keep users on their service once they’ve managed to convince them to sign up. The best answer is to continue providing content users will return for. Not having the right content or running out of content to watch are both among the top-five reasons people gave for leaving or churning away from a service. Of those who reported ditching an over-the-top (OTT) platform, 27% reported they did so because the service was out of shows they wanted to see. Content-driven motives were two of the top-five triggers for subscribing to a service overall, the report found.
The report from Parks also suggests a solution that providers may want to turn to in the future to further reduce churn: Personalized virtual channels. These channels help customers think of an AVOD platform as a one-stop destination for all of the content that they want, keeping them from flipping from service to service while offering a true “lean back” experience.
Such personalized channels are also key for advertisers, because they can personalize ad experiences for users. That way, users will feel they are seeing more relevant ads, and will be less likely to grow frustrated with their ad experience. It will also help maximize the number of users who actually click on ads and buy the product that’s offered, which boosts revenues for ad providers and media companies.
A report from Deloitte Global Insights suggests that every major streaming service will have an AVOD tier by the end of 2023, showing just how strong that segment of the streaming market is becoming. To keep customers engaged with ad-supported tiers, streamers will have to use tools such as personalized channels to maximize their value.