For many viewers around the world, AVOD services became the go-to for online video consumption in 2020. In the US, the most valuable AVOD market in terms of revenue, huge audiences willingly watched ads in return for video content, with 200 million consumers regularly using ad-supported streaming services according to Omdia data earlier this year. Meanwhile, analysts are pointing to Europe as the next frontier for AVOD expansion, both from major US players looking to assert dominance and smaller local OTT services eager to gain a foothold. Ampere Analysis highlights the UK as a prime target for AVOD, and a stepping stone for broader European expansion, with high engagement levels for free VOD services and a greater tolerance for seeing ads while watching TV. Ampere found that 64% of UK internet users are already active AVOD or catch-up service users; data from Integral Ad Science reflects the UK’s higher levels of ad tolerance, finding that 83% of consumers are happy to watch ads to gain access to streaming content.

With the world mainly having stayed at home in 2020, there was naturally an uptick in streaming subscriptions. However, as consumers become more aware of over-subscribing and paying for more services than they need, they are increasingly turning to the growing range of free ad-supported services that offer a compelling value-for-money proposition, albeit with differing user experiences. Many streaming services are diversifying their business models and offering ad-based packages to achieve long term sustainability. The highest profile case of this is HBO Max, which recently switched on an advertising option in return for a cheaper monthly subscription – a notable move considering HBO’s ad-free approach has always been a prominent feature in its marketing.

As AVOD services look to provide the most engaging user experience, it is necessary to look at the overall quantity of ad spots available in a single programme. Still, providers can only do this if they increase the value of the ad inventory they offer by ensuring the ads are relevant to the viewer. The industry is demonstrating the high value of having the necessary tools for addressable and programmatic advertising. In the US, Roku’s deal to buy Nielsen’s Advanced Video Advertising business and Comcast’s ownership of FreeWheel have brought advanced advertising centre stage. Meanwhile, in Europe, ad sales agreements like EBX have brought together several major broadcasters.

Programmatic and advanced targeting can significantly elevate the revenue potential of the AVOD opportunity, but there are multiple building blocks required to achieve this. The video stream is the central cog of the entire content and advertising chain. If it is not correctly prepared and ready for delivery across multiple platforms and devices, the ad sales processes that are being implemented will not achieve their potential. Content assets must be highly dynamic to cope with the demands associated with today’s streaming platforms and be adaptable enough to meet fast-evolving monetisation requirements.

Traditionally, various methods have been used to implement AVOD, including ​“pre-baking” and client-side ad insertion (CSAI), but these processes are outdated. ​“Pre-baking” places ads on to a content asset at an encoder level – this is a very inefficient approach and drastically reduces the ability for ad targeting. Client-side ad insertion does allow ads to be targeted, but this is a clunky process; additional bandwidth is required to fetch and load an ad on the player’s device while the main content is playing, and it can be susceptible to ad blockers.

However, advertising in online video goes further than simply stitching an ad onto a programme. The expectation now is that it is delivered in a way that ensures a seamless TV-like viewer experience, while meeting the targeting and measurement demands of advertisers and brands – plus, video content must support modern streaming features, like ​“skip intro.” Using server-side ad insertion (SSAI) is the only means of doing this, and streaming providers must prepare their content libraries to be able to manage them in such a dynamic way.

Enhanced MP4 files provide the route to dynamic streaming. They contain all the necessary indexes that ensure all event markers are in place when the video stream is created. These event markers specify exactly where ad breaks begin and contain essential programme information, such as the precise timing of where the opening credits are placed for ​“skip intro.”

Enhanced MP4s are fundamental to delivering and monetising a premium video service today. The files can be easily encoded into HLS and MPEG-DASH streams to support the diverse range of OTT platforms and devices while retaining all critical event data. They can be managed as playlists via a straightforward, easy-to-access web-based content management system (CMS) or control panel where they can be adapted to suit the viewer’s tastes.

AVOD services can capitalise on the rollout of advanced advertising technologies, but only if they have video libraries that are well-prepared and adaptable enough to meet the dynamic requirements of streaming today. They must adopt playlist-based workflows to succeed over the long-term. This dynamic approach allows them to offer a range of pricing models – from premium ad-free to fully ad-based – all easy to manage via the playlist. If a UK audience needs fewer ads per mid-roll break than in France, this can be executed through the playlist instead of making any changes to the video asset itself. Crucially, to help support advanced targeting, a playlist-based design enables content curation at scale because the file size of the playlist being delivered to each user’s device is so small.

Industry analysts are forecasting a lot of growth for the AVOD market. As broadcasters and media companies lick their lips at the prospect of enhanced revenue streams created by the rollout of advanced advertising, they need to prepare their video libraries correctly to capitalise on this opportunity. Dynamic streaming with a playlist-based approach is the best way guarantee success in an increasingly crowded market.

This article was published on Mediantek