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InContext / An inside look at the business of digital content

Ad-supported streaming offers opportunities for media brands

December 5, 2022 | By Jay Kulkarni, CEO – Theorem Inc. @theoreminc

As the fight for attention and viewership intensifies, more media companies have diversified their strategies to include ad-supported models. This allows them to scale their advertising offerings and capabilities within the OTT streaming category.

What’s up with OTT?

OTT, short for “over-the-top”, refers to the streaming of media over the internet. According to a study by eMarketer, 1.88 billion people around the world will use sub OTT services like Netflix, Disney+, and Amazon Prime Video. However, that same report also mentions that fewer than 50% of internet users worldwide are watching programs via OTT, which proves that there is much opportunity for growth in the category.

Historically, OTT and streaming companies primarily focused on subscription-based models. However, as subscriptions plateaued, ad-supported revenue models have gained traction and become more mainstream. This broadens the reach of streaming to the many consumers who are unwilling to subscribe to content, but still want to view it.

OTT’s impact on advertising trends

OTT streaming models are impacting advertising trends in several ways. First, given the proliferation of offerings, there is increasing competition for ad dollars. We are starting to see this competition now, particularly as ad spend and targeting costs increase across the market. 

As the market evolves, inventory quality is also quickly becoming a hot topic. From a pure supply basis, do providers have enough inventory to reach targeted audiences at scale? The irony of targeting is that as targeting specifications increase, addressable inventory starts to decrease.

Additionally, when it comes to scaling, it happens in two ways: one is through actual ad sales based on inventory and that inventory being sold directly by the OTT platform. The other way is though parent companies and alternate organizations selling premium inventory on behalf of the media or streaming platform. When this occurs, all that remains to be sold are the remnants, thus raising the question: what does one do with the remaining inventory? With this comes a deeper discussion of fragmentation of inventory and data, which will impact omnichannel planning and overall scalability for many teams. 

Advertisers are leaning into OTT streaming as a critical part of their digital media mix to extend their marketing reach and increase ROI. As competition for ad space elevates across streaming and OTT channels, we will see agile media brands continue to develop new, unique ad products that will be sought out by advertisers to bolster their omnichannel strategies.

Opportunities for OTT advertising success 

While all streaming media companies have their own content and audiences, not all can come up with new, innovative ways to appeal to advertisers. To succeed in an ever-evolving ad monetization market, media brands must develop new ways to package their content and reach audiences based on unique user data points like content consumption preferences, to avoid becoming commoditized.

Additionally, top OTT streaming companies are working to elevate their ad models to create non-intrusive and enhanced user experiences while also keeping their ability to scale advertising models and targeting capabilities, which helps ensure success for their advertisers. 

Advertisers that want to target niche audiences at scale, when and where they spend their time, will be looking to streaming and OTT companies to fulfill their needs. Ad-supported OTT streaming models are becoming increasingly more mainstream as consumers take advantage of the lower-priced option. This results in a larger user base, which in turn provides a better opportunity for advertisers to reach their target audiences at scale.  

Therefore, media executives need to remain agile and prepare to accommodate these shifting strategies of advertisers that will include an increased ad spend within the OTT streaming category. By implementing an ad-supported streaming model and developing new ways to reach segmented audiences and engaging content packaging, media companies will be able to do just this. And the result will be increased ad inventory and diversified revenue.

As OTT streaming media platforms enhance their capabilities with AI and automation of their workflows, their targeting and success rates will increase. This will make OTT the ideal platform for advertisers to leverage when expanding their omnichannel strategies. Ultimately OTT streaming ad-supported models present a prime opportunity for media brands to expand product offerings and diversify revenue through niche audience targeting, premiere ad space packages, and scalability for their advertisers.

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