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What is AVOD and what do I need to know if I am to make it work?

Dec. 17, 2020
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As the demand for content grows exponentially, there is much discussion about the method of delivery for video on demand (VOD) and which monetisation strategy will work best for operators. VOD is a service that offers viewers a way of watching videos online when and wherever they want. So what is AVOD and how does it differ from TVOD and SVOD?

AVOD stands for Advertising Video on Demand. It is a monetisation strategy where customers watch content for free but are shown ads in breaks in the content stream. It differs from SVOD (Subscription Video on Demand), which is a contractual monetised model where operators charge a monthly or annual subscription to customers. TVOD (Transactional Video on Demand) is where users pay to download a piece of content. Most people think of SVOD as the most common service and this can be used in conjunction with TVOD. AVOD traditionally is used more on mobile devices so is often found on social media channels, where video content is shown.

AVOD tends to be more prevalent in countries where the mobile network is key to transmission and SVOD is stronger in regions where users have more disposable income, as it requires the consumer to pay a monthly subscription. TVOD works as a standalone service on different devices alongside both SVOD and AVOD. 

What content is suitable for AVOD?

AVOD is particularly good for older and less professionally produced content. It is also extremely suitable for operators or content providers who have a wider variety of content such as catch up content, TV content and influencer content, such as vlogs from young celebrities. 

AVOD is very suitable for free to air TV channels and can provide a good revenue stream. Some content is more suitable for AVOD, such as longer content and older movies as there is enough time to show enough ads as part of the package to justify the cost. If AVOD is used for shorter content, such as a 3-4-minute video, there will only be time to show one or two ads. 

The operator needs to understand its target audience for AVOD to work well as a revenue stream  an in particular, whether a mobile or TV is likely to be the primary device to view the content. Other considerations include viewing habits, disposable income and device set up before making a decision on which VOD system is the right fit. Younger viewers are more likely to watch long-form content on a mobile, so AVOD particularly suits them. However, they tend not to have much disposable income. Older audiences, on the other hand, prefer to watch short form content on mobile devices, but watch longer content on a smart TV or via an IPTV/OTT service, which suits the SVOD model better.

Is it all about data?

With AVOD, you can find out more about the user. By combining data from the IP address and using a unique identifier for the device the video is being watched on, you can tell someone’s age, details about their household, the number of devices they have and sometimes even a person’s fitness levels and  weight. The IP data gives contextual history so can add more to the behavioural data available. The IP data is the same information that is used for remarketing campaigns where users have looked at a website and then ads appear for the subject or product for which they have been searching. Ad streaming is a mature industry but the video part of it is a little behind with its targeting algorithms. It is moving fast to catch up though. DTV Research says AVOD will grow at 17% through 2024, from revenues of $36 billion in 2018 to $87 billion in 2024.

Another tech challenge is that AVOD is cross platform and so operators need to ensure they can serve the ads and make them look good on different devices. In the past, this was a lot harder to do and although it is getting easier, it is still a consideration if you are considering the AVOD path.

As with the online advertising market a few years ago, the AVOD market is about to become more complex for scheduling ads available while maintaining a profitable CPM (cost per thousand impressions). In addition to complicated bidding systems or waterfalling, a method to sell the ads  being put in place, there are additional considerations when considering video. Plus, there could be a question of supply and demand, depending on where you are in the world as the demand for adverts outstretches the number of ads available. Managing schedules while maintaining a profit is a job in itself. 

AVOD’s biggest challenge is ad blockers, where 30% of revenue is blocked. To counter this, there are companies that offer technology to block the ad blockers. What this means for AVOD suppliers is the restriction of the data collected, which can be a huge concern.

AVOD systems may have to operate in a tightly regulated environment. Industry bodies, such as the IAB, may respond to complaints about the nature of adverts shown. Additionally, social channels that show content, such as the likes of Facebook and YouTube, have their own policies to ensure data collection and use is legal.

For operators that are in a space where Netflix, Disney +, Apple TV and Amazon Prime are grabbing market share, AVOD might be what you are looking for to provide an additional revenue stream. Running AVOD for older and catch up content and SVOD for new content is more likely to become the norm, where the tech infrastructure supports this. But it is crucial to get the content type and mix right at the outset.

If you are thinking AVOD could be one of your future options and you want to ensure you understand the market with its future opportunities and challenges, contact SmartLabs at sales@smartlabs.tv.

Ahmed Swidan, Pre-Sales Consultant, SmartLabs

Prior to SmartLabs, Ahmed has been involved in various roles around the IPTV and OTT field for over 15 years as a solutions architect, product manager and technical account manager as well as in project and program management. He has helped TV operators and TV channels around the world to build, upgrade and efficiently operate their TV platforms while working for Ericsson, Verimatrix and Imagine Communications as well as a couple of systems integrators. His expertise covers compression, ad insertion and middleware among others. He has a master’s degree in video compression algorithms from the University of Bath and an MBA from The European School for Science and Technology.

About SmartLabs

SmartLabs is the leading provider of multi-screen, multi-network solutions for the video streaming sector. SmartLabs’ solutions deliver content services to over 7 million subscribers around the globe on multiple devices from set-top boxes to mobile phones. Smartlabs' client base includes telcos (fixed and mobile), ISP's, cable operators, content and app service providers. SmartLabs partners with 25 IPTV market leaders including Widevine, Apple, Microsoft, Google, Samsung and LG.  Headquartered in Berlin, Germany, Smartlabs has offices in USA, Canada, UK, Cyprus and has been established for over 15 years, creating innovative solutions for the interactive TV market.