Streaming Services Open New Avenues for OTT with Ad Tier Subscriptions

Why are streaming services becoming ad-supported?

With several streaming services opting to include advertisements, Disney+ and Netflix recently announced plans to do the same. Streaming platforms have been popular, with 55.1% of Americans cutting the cord this year. This is especially evident among young people, with 74% of 18-34-year-olds in the United States having never had cable, having already cut the cord, or intending to cut the cord. Despite the fact that OTT Video advertisements are still relatively new, advertisers have taken note. “While both ad-supported and subscription-based streaming services are growing in the U.S., we’re seeing that consumers are being more mindful of their budgets and leaning towards ad-supported services,” said James Muldrow, Vice President, Product Management at Comscore. “This makes sense as inflation continues to hit consumer’s wallets. The time is ripe for traditionally subscription-based streaming services like Netflix to consider launching an ad-supported tier to enhance their growth trajectory.”

What goes up, must come back down…

Streaming services initially enjoyed considerable success, particularly during the pandemic, but the expansion of many platforms has halted. With 87.6 million users, Disney+ falls short of its target of 230 million customers by the end of 2024. The same can be said for Netflix, which lost 200,000 long-term customers at the start of 2022, a figure not seen in over a decade. The goal of offering an ad-supported subscription plan to consumers is to eventually increase the dwindling number of subscribers and boost revenue.

The Numbers

In addition to their current plans, Netflix and Disney+ will provide their first lower-cost ad-support subscription option by the end of 2022. Netflix has partnered with Microsoft, which owns Xandr, while Disney+ has partnered with The Trade Desk. Premium ad inventory is provided and managed by demand-side platforms (DSPs) such as Xandr and The Trade Desk. Consumers will have more options as a result of these collaborations, and advertisers will benefit from a premium, better-than-linear TV brand experience. According to The Verge, Disney plans to launch a lower-cost, ad-supported tier later this year in order to achieve 230 million to 260 million users by 2024. It is, however, far from the only streaming service interested in ad-supported video-on-demand (AVOD).

Five benefits of streaming platforms for advertisers.

Advertising via streaming platforms has many benefits when compared to advertising through traditional, linear TV:

1. There’s no need to conform to broadcasting schedules. OTT Video ads go beyond traditional cable boxes and beats the hassle of ad placements having to conform to broadcasting schedules. 
2. Target with more precision with OTT Video ads. Streaming platforms allow you to target based on data-driven variables such as demographics and psychographics. This results in higher engagement rates as you serve ads to relevant viewers in real time.
3. Optimize your ROAS with higher levels of efficacy. With OTT campaign budgets being determined by Cost-per-Mille (CPM), your budget pays for actual views and impressions that your OTT Video ads receive. Contrary to traditional TV, where you are charged based on ratings and projections.
4. Streaming platforms are more accessible to smaller brands. Larger brands have long controlled traditional TV advertising, but digital advertising services such as Drivonic make it even easier for small to medium brands to order and deploy TV-ready OTT Video ads.

To learn more about how your OTT Video ads can make noise in the streaming platform industry, reach out to our team today.

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