OTT Platforms Grab Bigger Ad Gains

In the digital world everyone wants scale -- virtually every platform needs it to survive. How about ad-supported video ventures? Even more so.

With all the problems Facebook has, marketers will continue to buy in -- because of its scale. Being on that platform continues to move products and services.

This has not gone unnoticed by new OTT/video digital services, which means small and large TV and video programmers, producers and networks will feel business dings.

In September, Amazon began instituting a 30/70 advertising share with third-channel video owners of its Fire TV OTT platform -- taking a 30% cut of advertising inventory from those providers. Previously, it allowed video channels/providers to keep all of their inventory.

Is this a new model? Amazon’s approach follows growing set-top/OTT platform Roku, which has a similar 30% ad revenue-share with its third-party ad-supported channels.

Traditional TV networks understand this. For decades, cable operators, satellite and telco pay TV distributors have been getting roughly two minutes of advertising an hour as part of carriage deals with TV networks. Figure roughly 15 minutes per hour of non-program time run on those networks. That’s roughly a 13% share, and more so when factoring in just total paid TV advertising.



Roku, for one, says it has been seeing amazing success in ad revenue growth, especially for its ad-supported Roku Channel. The ad share is a strong piece of its overall advertising revenue business.

Amazon's move seems more robust -- especially when video ad impressions are connected with its ecommerce business.

At the same time, one can be sure that in making deals with TV producers/channels, Amazon is also telling those partners they gain by appearing on the Fire TV platform  — in targeting consumers using Amazon’s consumer purchasing data.

Here’s a number to consider concerning local cable advertising: $6.9 billion. That’s a 2018 yearly estimate from BIA/Kelsey -- up slightly from $6.8 billion in 2017.

Yes, we know comparing this with what digital/OTT platforms are doing is apples and oranges. Traditional pay TV providers are gaining on marketers' local TV budgets, local TV advertising and ‘spot’ regional budgets.

Digital media OTT platforms are going after bigger catch -- a share of national TV advertising. That could prove more lucrative in the long run.

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