“On TV & Video” is a column exploring opportunities and challenges in advanced TV and video.
Today’s column is by Joel Cox, co-founder and SVP of strategy and innovation at Strategus.
For more than a decade, Netflix has served as the gold standard for the subscription economy. With a combination of licensed content and original material, it demonstrated that a compelling product could hold the attention – and wallet – of a major audience without the need for advertising.
But in the aftermath of some sobering subscriber and revenue numbers, Netflix announced it would join the advertising video-on-demand (AVOD) scene.
This shift may help Netflix breathe a sigh of relief, reducing the possible negative impact of churn and declining subscriber numbers. Yet the success and value of an AVOD platform depends on more than just the size and growth of the audience. How much time they spend streaming also matters.
More content viewed means more ads served, which ultimately spells greater revenue. But as the AVOD landscape becomes more competitive, platforms like Netflix will need to focus on user experience to keep viewers watching.
Addressing the “A” in AVOD
When AVOD platforms think about audience-building, they most often focus on content. But when it comes to managing churn, these providers would be well-served to think more about the “A” in AVOD – advertising.
Imagine creating your own TV program, investing years of effort and millions of dollars into its development. Would you be willing to turn over one out of every 12 minutes of your program time to a stranger without giving any consideration as to what is placed in those precious minutes?
Remarkably, this is the state of the relationship between content creators and advertisers. Content is often surrounded by advertising that is irrelevant at best and inappropriate at worst.
A negative ad experience can drive churn just as much as a poor content library. Those who watch ad-supported content often complain about frequency and duplication, irrelevance and bloat – seeing more ads now than before. With a growing number of services to choose from, users will begin to leave one app for another. And as an AVOD service’s audience begins to dwindle, so, too, do their revenues.
AX and UX
To keep viewers engaged, AVOD providers must focus on making the advertising experience (AX) a seamless and valuable part of the overall user experience (UX). The ultimate goal is to preserve the value exchange between advertising and content.
How can AVOD providers manage the AX in order to benefit the UX? By building responses to the most common (and obvious!) complaints around CTV advertising.
Relevance: Through targeting, measurement and programmatic ad activation, AVOD providers can improve the relevance of each spot on an individual, household-by-household level of granularity and ensure the viewer derives value from the advertisements themselves.
Consumers understand that the value exchange for free or reduced-cost streaming content is a few minutes of their attention. It’s on the advertisers and AVOD platforms to ensure the AX doesn’t cause the viewer to rethink their side of the bargain.
Appropriateness: AVOD appropriateness extends beyond relevance to ensure the values of a brand or advertisement align with the values displayed in the associated content. Just as a true crime series is a bad fit for an online dating service, a children’s program is likewise a poor fit for tobacco or alcohol advertisements.
Frequency: Nothing can cause an advertisement to lose effectiveness faster than out-of-control duplication. Modern marketers must work programmatically to measure and reduce frequency and duplication, regardless of how many apps or services they’re using to reach the intended audience.
One creative solution to the frequency problem is to increase investments in A/B testing. Not only does this approach vary the types of ads displayed to the end user, but it also helps to inform the advertiser regarding what resonates with their audience and what doesn’t.
A crucial moment for AVOD
In a fragmented CTV marketplace, the next few months will prove decisive. AVOD providers must optimize their operations – content, advertising and user experience – to maintain a viable segment of the audience.
Those who let ineffective advertising experiences intensify will soon find themselves without an audience.
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