Advertising-Based Video on Demand (AVOD)
What is AVOD?
Advertising Video on Demand (AVOD) is an OTT media distribution model where users access video content for free, and OTT platform service providers monetize content by presenting users with advertisements before, during, and after the viewing experience.
Why is AVOD Important?
YouTube first launched as a social video sharing website in 2005, but following its acquisition by Google in 2006, the platform began monetizing content with advertising and became one of the first (and now the largest) AVOD service providers.
AVOD now represents a fast-growing segment of the OTT marketplace with a mix of established platforms and new market entrants. Analysts project that more than 140 million Americans will view AVOD content in 2022, with that number growing to more than 170 million by 2026.
As AVOD services differentiate themselves and expand their content catalogs with new offerings, consumers are increasingly shifting their attention to AVOD and reducing or eliminating their subscription-based MVPD or SVOD services. To avoid losing market share, some SVOD platforms have begun offering ad-supported versions of their flagship SVOD platforms, either at a lower price point, or for free.
AVOD platforms can leverage user behavior analytics to provide targeted advertising that drives increased conversion rates and ROI for advertisers. As a result, in industries like car insurance, telecommunications, and consumer credit are pouring millions of dollars every year into advertising on AVOD platforms.
With global AVOD revenues (ad expenses attributed to OTT television and movies) expected to reach $56 billion by 2024, content owners and distributors must factor AVOD into their content distribution strategies to maximize return on their content assets.
How Does AVOD Work?
AVOD Content Goes “Over The Top”
AVOD platforms, as with all over-the-top (OTT) media services, stream content to users via the Internet on an on-demand basis. Users access AVOD content by visiting the provider’s website or downloading the provider’s app on their preferred device (e.g. mobile, Smart TV, etc.).
AVOD Platforms are Funded by Ads
AVOD platforms allow users free access to their platforms, but monetize their content with advertisements. Advertisements may be presented as part of the platform interface, or before, during, or after a video. Some platforms allow users to provide feedback on the ads they see, press a button to skip an unwanted advertisement, or answer a multiple-choice survey question instead.
AVOD Platforms License, Produce, and Crowdsourced Content
To effectively compete for viewers, AVOD platforms need to deliver high-quality and compelling content that drives engagement.
Most AVOD content comes from three sources:
- Original Content – The largest OTT media services have the resources to develop their own content and monetize it with the AVOD distribution model.
- Content Licensing – AVOD platforms can acquire content by licensing it from content owners and production companies. In these content licensing agreements, content owners typically receive a share of the total ad revenue generated by the content.
- Crowdsourced Content – AVOD platforms like Twitch and YouTube depend on a community of live streamers and content creators to provide content that engages their viewers.
AVOD Platforms Depend on Data Intelligence
As the AVOD market segment grows and competition increases, the most successful service providers will increasingly depend on data analytics to support business decision-making and optimize revenue.
AVOD service providers can capture data from everything that happens on their platforms, including audience reach, preferences, and demographics, user behavior and engagement metrics, and revenue. Analyzing AVOD data with the right software tools can help service providers improve user recommendations and ad targeting, drive engagement, and optimize revenue generation.
3 AVOD Examples You Should Know
YouTube was founded as a video sharing site and grew into an ad-supported video on demand (AVOD) media service. Content creators can upload original content to YouTube’s servers and monetize their content with advertisements via the YouTube Partner Program. YouTube is the world’s most popular video streaming website, with a total reach of 1.7 billion unique monthly visitors.
Facebook Watch is Facebook’s integrated video streaming service. Facebook Watch features live streaming channels, serialized shows, and short-form videos with a mix of user-generated and professional content. Content on Facebook Watch is free to access and eligible creators can monetize their videos with instream ads.
Launched in 2008 and acquired by Disney in 2019, Hulu combines SVOD and AVOD distribution in a hybrid model. Hulu offers two versions of its platforms for users: an ad-supported version, and an ad-free version. Users who choose the ad-supported platform benefit from a lower monthly subscription fee, while the ad-free version is slightly more costly.
AVOD Content Licensing Explained
AVOD platforms license content from both amateur and professional creators to expand their libraries and attract users onto their platforms.
A content licensing agreement grants a VOD service provider rights to stream the specified film, video, or television series on their platform, and to monetize the content by advertising to viewers. Content licensing agreements for AVOD are usually revenue sharing agreements, where the content owner’s contractual fees are a percentage of the total advertising revenue generated by the content.
3 AVOD Content Distribution Challenges
Maximizing User Engagement
AVOD services are often free services, providing the lowest barrier to entry for video streaming content. AVOD services are constantly searching for new, data-backed strategies to keep users engaged with their platforms. These strategies include everything from UI improvements to content recommendation engines and strategic licensing decisions.
AVOD platforms win new customers and mitigate customer churn by continuously adding fresh content that keeps users entertained. AVOD platforms can use data analytics software to forecast the potential impact of content licensing decisions and make acquisition decisions that drive overall viewership and platform engagement.
Managing Complex Licensing Agreements
As OTT platforms grow in complexity and experiment with innovative distribution models, content licensing agreements have become increasingly complex and time-consuming for both licensors and licensees to manage.
To cope with the changing environment, a growing number of content owners and distributors are adopting AI-driven software solutions to streamline the licensing revenue management process, from performance validation to payment recognition and reporting.
Optimize AVOD Licensing Revenue with Revedia
SymphonyAI Media provides AI software for AVOD platforms and content owners to help them efficiently track distributor and content performance, forecast future revenue, and manage even the most complex content licensing agreements.
Our Revedia Digital platform combines data analytics with AI-driven capabilities providing data-backed insights that help content owners and distributors accurately measure content performance, drive user engagement, detect and resolve payment errors, and maximize the value of their content libraries throughout the licensing revenue lifecycle.