How the Growth of AVOD Impacts the Future of Programmatic TV Ads

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Why AVOD (Advertising Video on-demand) is Growing its Market Share in Programmatic TV Ads

As more consumers become overwhelmed by the number of paid streaming service options, ad-supported video on demand (AVOD) has emerged as the solution for cutting subscription costs, opening the door for marketers to develop engaging programmatic TV ad campaigns.  

On average, every month, North Americans spend $31.50 on subscription-based video on demand (SVOD). This cost is significantly less than the $112.10 spent monthly on TV bundles. However, to many, fancy video entertainment plans are a luxury they can choose to go without in today’s economy.

That’s where AVOD, video services like YouTube, Roku, and TiVo+ that provide ad-supported free content to viewers, enters the frame. Obviously, the major appeal of streaming platforms is not having to watch ads. However, consumers are more receptive to ads if it means not expending another monthly fee on an additional subscription. In a TiVo survey of 4,500 consumers, 81% said they would rather use a free, ad-supported streaming platform than pay for another subscription service.

Why Marketers should Pay Attention

Within the first year of the pandemic, the number of consumers using AVOD services grew from 34% to 58%. While this rapid growth further breaks up digital marketing channels, it also gives marketers opportunities to engage viewers independent of third-party data.

AVOD allows brands to leverage their customer data by integrating it with AVOD services in a privacy compliant manner. Then, companies can match their first-party data with the AVOD provider’s audience data. This allows them to find new target audiences, create customer segments, and conduct marketing analysis.

Of course, quality first-party data is necessary for an effective programmatic TV ad. But it’s not the only factor in a successful campaign. Brands need to know their audiences and understand what appeals to their target demographics. Ads that are personalized to specific consumers’ interests are proven to be more engaging and generate higher conversion rates.

Why AVOD Ads Deliver a Higher ROI

Fortunately for marketers, viewers report that programmatic TV ads viewed on streaming services are twice as relevant to their interests compared to traditional tv ads. Viewers aged 18-29 even considered streaming ads four times as relevant. This shows that AVOD is a key channel in digital marketing for companies looking to reach a younger audience.

Part of what makes streaming ads more relevant to the viewer is that AVOD services provide consumers with personalized watch recommendations, making the viewer more connected to the content and the accompanying ads. Furthermore, matching first-party data ensures that marketers can find consumers who share the same characteristics as their customer base. This means that brands can still scale up their audiences while creating a personalized experience for all viewers.

As TV viewership continues to shift to CTV platforms, marketers need to target consumers when and where they consume content. This means advertisers have to focus on developing the best practices for leveraging their first-party data within the AVOD ecosystem as more consumers search for alternatives to staggering subscription fees. Marketers who invest the time to tap into the AVOD market will put themselves in the best position to maximize their business’s audience potential and drive brand-measuring ROI in today’s streaming world.