OTT’s ad supported future

06/21 By Amy Shriber

Subscription model is breaking. Even as a growing number of digital publishers and broadcasters race into the OTT space, it’s becoming increasingly clear that a subscription-based business, similar to the one that has served incumbents like Netflix and Hulu, won’t be able to sustain newcomers. Increasingly, ad supported streaming models are gaining traction with publishers and broadcasters looking to make their mark and bulwark their revenue. That means there will soon be a wave of fresh, highly viewable, and highly addressable, OTT and video inventory available to marketers. But why, at a time when many print media outlets are racing to throw up paywalls, is digital video once again embracing advertising (with a few notable exceptions).

The single biggest factor adding drag to this full-sailed approach to subscription-based OTT is subscriber churn. While incumbent platforms with massive libraries can afford to constantly update their library with pricey new streaming rights or even original productions, newcomers are forced to recon with the possibility that a smaller roster of content may mean a base of subscribers that turns over every few months once they feel that they’ve seen enough, making subscription revenue difficult to predict and challenging to grow. Remember SeeSo? Even with a lineup of original comedy programming and a healthy chunk of NBC Universal’s programming library the comedy-focused streamer came and went in under two years, failing to reach a critical mass of subscribers.

Given how hard it’s become to break into the already-crowded OTT space with a subscription model, it’s looking increasingly like newcomers–and there will be many–will need to rely on ad-supported streaming models similar to the ones employed by Hulu and YouTube, rather than the pure subscription revenue of Netflix. That’s going to present a tremendous opportunity for advertisers as viewers continue to shift their viewing habits to digital and even premium broadcasters are forced to bring their programming to the small(er) screen, creating new ad placements that combine the attention-grabbing quality of television content with the highly-measurable impressions of digital.

This shift is also going to present a challenge for media buyers who were raised on linear television deals. By 2020, an estimated $40 billion in ad spend will have shifted from traditional television to OTT platforms. Traditional models for buying television inventory will become increasingly irrelevant thanks to changes in viewing habits like the rise of time-shifted viewing, recording live programming to watch it later. Buyers will need to think holistically about buying space in programs that could be consumed on any number of devices, and screens at any time. OTT inventory won’t be sold by device so buyers will need to consider all the endpoints where a publisher might place that content, and if TV programming is no longer bound to a box in the living room then the way viewers are measured will need to evolve.

While television’s OTT evolution will produce numerous new opportunities for marketers, it will likewise create new measurement challenges. In digital, third-party verification providers have played an important role by allowing marketers to measure the value and veracity of their inventory across platforms and at scale. As television becomes increasingly digital, the verification industry will need to support marketers with commensurate levels of transparency into how their ads are being consumed across devices and platforms.

Learn more about the future of OTT and Advanced TV HERE