• by Charlene Weisler , June 1, 2022

Technology is improving the quality and ability of viewers to customize their media usage in both online and offline environments. In this ecosystem, ad tech is advancing, especially in advertising-based video-on-demand, according to Brian Kline, president of Penthera.

Charlene Weisler: What are the greatest opportunities for advertisers in AVOD today?

Brian Kline: Streaming can offer similar or greater reach than traditional TV distribution, while at the same time offering much more granular targeting and data availability. As large segments of the population migrate to be “streaming-first,” AVOD publishers can offer advertisers a mechanism to reach these audiences that are difficult to find on traditional TV platforms.

Beyond this, there are a number of innovations coming that will enable advertisers to have a broader spectrum of creative delivery options/audience ownership. While the initial iteration of CTV/OTT has relied on a traditional TV advertising model, this is evolving to bring innovative approaches that will deliver more flexibility and customization for advertisers, at scale, with the ability to micro-target audiences.

Weisler: What are the greatest challenges to advertisers in AVOD today?

Kline: Fragmentation across inventory sources and technology platforms and budget control/management. As streaming becomes a more important part of the media mix, the decision on where to manage budgets is becoming critical.

What we’ve seen in the market to this point is friction between an advertiser’s TV and digital agencies. TV agencies view AVOD/streaming as “digital” and aren’t generally used to buying media in the way that AVOD is sold (data-driven, not measured by Nielsen, using programmatic systems, etc.).

Digital agencies are generally very comfortable with these points, but find themselves fighting for access to “TV-quality” ad assets and budget. Much of this could be resolved at the advertisers’ direction, but the decision on how to handle this new channel from an agency standpoint needs to be made.

Beyond this, technical and platform fragmentation presents a challenge for advertisers. Each platform can have its own creative technical specifications, publishers tend to use multiple programmatic selling platforms (SSPs), and advertisers often use more than one buying platform (DSP), which opens the potential for an advertiser to bid against themselves for the same piece of inventory. There are paths for solving this problem, but it’s important for advertisers to be aware that it exists, and to find mechanisms for measuring the occurrence of self-competitive bidding.

Weisler: You have a new product called 2nd Look. What does it do?

Kline: In VOD with SSAI, all of the ad decisions are made in between the time the user presses “play” on their device and the first frame of the video showing up. This is because the ads must be “stitched” into the stream (technically the stream’s Manifest) before playback begins, since the player will only request the stream’s Manifest once at the beginning of the process.

Offering the stream’s entire inventory simultaneously and well ahead of when the ads are going to run has a number of negative effects, including:

 1) Forcing a large volume of decisions to be made in a compressed timeline, which increases the chance of timeouts and failure to fill inventory.

 2) Placing ads in the stream that will exceed their timeouts (e.g. ads in the second hour of a movie that required a <10 minute time-to-live) causing publishers to go unpaid.

 3) Forcing ad systems to evaluate all of the inventory at once instead of on a pod by pod basis, leading to uneven or reduced advertiser participation through the stream.

The net result of these issues to an AVOD publisher is lower fill, lower CPMs on ads that are filled and missed revenue opportunities.

2nd Look is a cloud service designed to address these issues. We accomplish this by eliminating the requirement to make decisions upfront, enabling decisions to be made immediately before each pod. In doing so, we enable the publisher’s ad server and programmatic systems to operate more efficiently. It does not replace any part of the publisher’s ad stack, and is interoperable with any VOD stream, from any type of device (CTV, mobile, PC, etc.) that uses SSAI.

Weisler: Where do you see AVOD in the next three years?

Kline: We expect AVOD to continue to grow and account for the majority of viewing hours, and expect  more hybrid subscription models that are partially or entirely subsidized by advertising. As SVOD publishers reach market penetration limits, they will be forced to explore new revenue models that can enable their continued revenue growth.

The market will influence how much SVODs can charge for a subscription, and the user’s disposable income will dictate how many subscriptions they can afford. To capture additional users who have allocated $$ elsewhere, SVODs who offer AVOD tiers will lower the bar to entry and see expansion in the number of users interacting with their service.