If you already run a video streaming business, you are aware of monetization models you can utilize. There are SVOD, TVOD, or AVOD platform. Also, you can mix several pricing models adopting a hybrid approach. They all have drawbacks and benefits, and you should research thoroughly before adopting one of them.
In this article, we are focusing on advertising-based revenue-generating strategies.
What is the Advertising-based Monetization Model?
Let’s observe an advertising-based monetization model in comparison with others. There are also subscriptions and a pay-per-view (TVOD). Subscriptions allow viewers to pay for access to videos once in a limited period (a month or a year). A pay-per-view is vice versa to a subscription model because it charges a fee for every video on the platform. iTunes is a great example here.
Subscriptions and pay-per-view require a fee from viewers, while the advertising-based model is usually free. Content consumers don’t need to purchase anything to watch your videos. Instead, they watch ads during the video playback.
How do providers make money, then? Content creators run ads on their videos, making revenue from that. It is a win-win-win situation for all: providers, viewers, and advertisers. Viewers watch content for free, advertisers receive their clients, and providers make money.
Advertising on online video streaming services is more accurate compared to television commercials shown to everybody. With online advertising, you can segment your audience based on demographics, interests, behavior, and other parameters. As a result, people watch ads about products or services they actually might be interested in.
Ad Insertion Methods
Commercials can be inserted by two different strategies:
- CSAI (client-side ad insertion) – advertisements are added to the playback on the end-users device. Content and commercials are separated.
- SSAI (server-side ad insertion) – advertisements are inserted on the server side with SSAI advertising. As a result, a commercial and a video are stitched together, which makes it difficult to block the ad. Ad-blockers don’t detect them.
All Advertising Based Models
There are different ways you can use advertisements in your video streaming business:
- AVOD or Advertising-based Video-On-Demand. VOD is a content format where videos are available for viewers at any time and on any device. As a result, people have full control over their content consumption. Moreover, with the advertising-supported model, their watch videos for free.
- SAVOD or Advertising-based Subscription Video-On-Demand. It is a hybrid monetization model that is gaining popularity now due to Netflix’s actions. The company implemented an additional ad-based plan for subscriptions. Now, viewers can purchase a lower-priced subscription with ads instead of a higher-priced ad-free plan.
- FAST or Free Ad-Supported Streaming Television. FAST services deliver linear TV, not requiring any purchases as well. Viewers can enjoy television programs transmitted via the Internet.
Drawing the Line
Advertising-based video streaming services have their benefits and drawbacks. They have promising forecasts from researchers saying that the revenue from ad-based services is going to increase. Such platforms will grow faster than subscription-based streaming services.
Ad-based services are profitable for viewers, providers, and advertisers, meeting everybody’s needs. They have better targeting capabilities, which increase the chances that a viewer will click on an ad and purchase further.
Because ad-based services are free, they are attractive to a wide range of customers.
However, as a provider, you will have to negotiate with advertisers. Not all of them will find your videos suitable for their commercials. Furthermore, some viewers will use ad blockers, which means that you may earn less money. But the decision is the right ad insertion technology.