The Impact of Video on Demand and Streaming on TV Advertising

With Video-on-demand businesses like Netflix is gaining momentum all around the world, people binge-watching favorite TV shows at their own timetable is increasingly becoming the norm for today’s generation. The question that arises with this trend is- What would be the impact of TV advertising with the rise of VOD? In this blog, we will be covering how does video on demand impacts TV advertising and how it provides new opportunities for advertisers.

All around the world, such is the fantastic fame of video on demand services than an ever-growing number of people are cutting the cord. In 2018, the number has crossed $33 million in the US alone. But the happy news for TV advertisers is that while VOD services have changed the way people consume content, linear TV is still in demand with the audience. Millennials spent over 107 minutes every day watching linear TV worldwide.

As the broadcast TV is still a preferred choice for many, even with a multitude of choices now at their convenience proves its power. In the third quarter of 2019, Netflix has over 158 million subscribers worldwide with 60.62 million from the US alone. These figures show that subscription video on demand service depends mainly on subscriptions to make money than advertising. If you are looking for how to start video on demand business, it is also important to understand how to give space to TV advertisements so that you generate more revenue along with offering opportunities for advertisers to thrive in the industry.  Let’s see the impact of VOD on TV advertising and how the industry is transforming. 

Traditional TV and non-linear content offerings will coexist

Video on demand and linear content will be equally important and both will coexist in the future. VOD will soon become mainstream among all user groups, at the same time, the significance of linear TV will remain intact as well. To be precise, content like sports and other major events will preserve the significance of traditional linear TV. 

Additionally, TV advertising will adapt to different formats and focus more on personalized and targeted ads. Utilizing customer data will facilitate stakeholders to target their content and ads, and maximize customer value and experience. However, the limits of targeted advertising patterns will greatly depend on regulations and the customer’s willingness to share their data. Advertising marketing will be in between sales negotiation and fully automate the process. 

Broadcast VOD offers new possibilities for TV advertisers

TV broadcast networks are successfully following the VOD trend with broadcast VOD services like 7now, SBS on demand, and 9 Now, have them on demand platform that allows users to stream content according to their preference. The shows on such BVOD platforms will still display ads like as on the traditional TV meaning that TV advertisers can be assured that there are ample possibilities to reach users when advertising on broadcast VOD. Although many traditional broadcasters have their video on demand services, there are still a number of serious issues with BVOD inventory. As TV audience decreases in size, BVOD inventory is critical for advertisers who want to achieve incremental reach and access to a younger audience. 

BVOD also faces challenges from a broader VOD space that includes Netflix, amazon prime and YouTube. However, Netflix like any other subscription on demand service is ad-free and YouTube while offering scalability cannot compete in terms of inventory quality and brand safety, something very important to advertisers moving from TV into digital. 

Advertising on BVOD usually comes as mid-roll, more like traditional broadcast television, while a lot of content that appears on broadcast video on demand are played simultaneously on secondary channels. When building your VOD platform, you can use video on demand software that integrates with video ad serves to gain control over your ad inventory. Advertisers these days are aware of the effect that subscription VOD services are having on their TV space. The TV ad sales in the US fell by 7.8%. However, advertising budgets do not just fade off, they are reallocated elsewhere. 

Video on demand advertising is on the rise

With video consumption shifting towards Internet-connected TV, advertisers are also following the trend. The VOD ad revenue generated in North America is expected to hit $ 10.98 billion in 2021. The two major industry leaders in VOD advertising are Roku and Hulu as they already have a pretty good established ad business. A growing percentage of ad impressions are being produced by people consuming content through Internet TV. However, with subscription streaming services like Netflix rising in popularity, it is challenging for advertisers to identify their best bet. With advertising video on demand, the path of growth is much cleaner comparatively.

The market is flooded and new opportunities for advertisers are emerging

While Roku and Hulu bring a huge percentage of ad revenue into video on demand, new entrants are also emerging. For example, it is seen that an increasing number of people prefer watching YouTube on a TV screen. Considering that fact, YouTube is taking more effort to convince advertisers to compete with traditional TV. The streaming platform also has been able to earn some advertisement bucks from traditional TV recently. YouTube is also reconsidering its production quality so that viewers will prefer viewing videos on the big screen. Additionally, YouTube is also planning to come up with its streaming TV service to start premier original shows on its free and ad-supported business model.

Along with YouTube, Amazon is also putting efforts to make more TV ad revenue bidding for live sports right and ad video streaming apps for news and entertainment. With Amazon acquiring more fire TV inventory and employing a team to sell it to TV advertisers, it is evident that Amazon is actively targeting TV advertisers for its internet TV called Fire TV.

However, for both Amazon and YouTube to make money with TV advertising, they need to prove that they can successfully compete on a similar level as TV networks. There is this conception that being on a big screen is more valuable than being present on a video anywhere screen that they have to overcome. 

In conclusion

The world of TV and the way people consume videos is changing rapidly- based on not what they watch but how they watch. With the emergence of Netflix, Amazon Firestick, and Apple TV has also changed how TV advertising works. As traditional broadcast TV networks are giving way to video on demand, the business model for TV advertising is transforming as well. 

Even with the rising popularity of video on demand and streaming services, TV advertisers can still be assured that advertising will have the highest reach. However, it is important to capitalize on the rising opportunities offered by video on demand to bring in traffic from TV ads rather than viewing it as a risk.