/ An inside look at the business of digital content
A new hybrid revenue model for OTTJanuary 14, 2019 | By Dana Ghavami, CEO—Spotible @Spotible
New times call for new hybrids. In the fragmented, highly competitive, and fast-paced world of content, publishers cannot rely on a single source for anything. Social media and network monetization are barely bearing their weight as one of the three legs on the revenue stool. Subscriptions are gathering steam and have serious potential as a second leg (given the emergence of OTT). But this leg is still a bit wobbly. Remember that there’s only one content company that rhymes with Get Trix that relies solely on subscription revenue. Advertising in all its forms, especially sold direct, sponsored and native, is the third leg. Right now it bears 20%, 40% or more of the revenue load for top tier subscription-based content companies.
Ad Experiments Emerge
As advertising is coupled with subscription in the business of content, it will become increasingly important to identify and maximize what I refer to as the consumer tolerable revenue threshold (CTRT). This requires entirely new ways of thinking and advertising. A total ad payload optimizing revenue needs to be defined and delivered across total content consumption time that is tolerable to each type of viewer (subscriber or free viewer).
Today, the predominate form of video advertising is instream. This takes the form of programmed commercial breaks during live streams or pre/mid/post rolls in video on-demand (VOD) content. Compare this to the traditional TV ad model, which averages 8 minutes of commercials for every 30 minutes of content watched.
Viewer’s attention dwindles as content and screens proliferate. Going forward, the digital model will need to adapt and evolve. As a result, new ad models and formats are being invented to maximize CTRT beyond instream. In order to create a new hybrid in OTT, CTRT requires more flexibility in ad load and controls for ad exposure for a viewer’s content journey in the totality of their time spent with subscribed content. The methods of optimizing CTRT today will need to evolve beyond ad selection and rotation instream to managing user experience across different ad forms and sponsors throughout the interaction with content.
Adapt to Survive
As new formats emerge, content companies will need to be flexible in order to experiment and manage CTRT to maximize ad revenue with subscription revenue. Every moment a viewer spends with content needs to be seen as an opportunity, including when the content is paused. For example, displaying commercial messaging in between viewers pausing streams for their own breaks while an increasing amount of video content is being watched on demand (VOD).
Every ad a viewer sees needs to be seen as a prospect to create engagement with a brand, including interactive ads that drive user action. For example, content providers need to come up with ways to input data from interested viewers or distribute information / coupons to the personal devices of the viewer.
Every member of a household and targetable data parameter needs to be factored in each ad experience, including viewer sentiments. Essentially, every exposure and interaction with an ad needs to be managed as part of the total user experience to formulate a new hybrid for success.
In the prevailing world order, it is not the biggest or the smartest who will prevail but those that are most able to adapt. In the emerging opportunity of OTT, along with diversifying revenue sources with subscription and advertising, the publishers that prevail will be the best and most nimble in experimenting and adapting new models with viewer experience in mind. The optimal CTRT will create the most profitability, for all.