Streaming video has long been dominated by subscription video services (SVOD) giants like Netflix and Disney+, but ad-supported services like YouTube, Pluto TV and Tubi are gaining share fast. Ad-supported video-on-demand (AVOD) has seen huge Year over Year growth. In February 2020, 34% of consumers were using AVOD. In February 2021, that number was up to 58% of consumers used AVOD.
The expectation is that AVOD will continue to grow well through 2021 and beyond. Why? The growth can be attributed to many reasons, including the change of consumer behaviors and media consumption during the pandemic, but the main drivers seem to be consistently the same:
Price-consciousness. Users are fatigued over so many streaming options. The costs add up, and those who thought they were saving money by cord-cutting end up paying just as much, if not more than they were before. There’s tons of content people want to see, but they are willing to sign up for free or at a lower price point in exchange for seeing ads.
The continuous launch of new ad-supported streamers. Streaming options like Peacock and The Roku Channel give users the opportunity to watch high-quality content at no cost to them. The model is working so well that other services like HBO Max, discovery+ and Paramount+ have announced plans to release ad-supported tiers. Many more hats will likely be thrown into the ring. Consumers do not mind signing up for free services to watch content, but they will limit how many subscription streaming services they pay for.
As consumers start migrating to AVOD, marketers will find plenty of inventory. Currently, inventory may exceed demand. But as more marketers make the move to follow consumers, the inventory space will begin to shrink. AVOD offers marketers the precise targeting of digital in a TV-like video environment without the use of third-party cookies, which will soon be depreciated. As marketers reckon with what the depreciation of the cookie will do to their other media channels, AVOD could be a good place to reallocate spend.