In a burgeoning SVOD market, ad-supported video on-demand (AVOD) providers in the United States are on the offensive touting viewership and targeted ad spots, according to new data from IHS Markit Technology.
New AVOD roll-outs and improved ad-tech are expected to drive U.S. online video advertising revenue to $27 billion in 2023, growing 11% annually through 2023.
“The AVOD goldrush is here, and it represents a prime opportunity for service providers, new AVOD entrants and content companies,” Sarah Henschel, senior research analyst, media, for IHS Markit Technology, said in a statement. “Ultimately, the winners and losers in the AVOD industry will be determined not only by content, but also by data strategies and user acquisition.”
The London-based research firm contends the U.S. online video market is seeing a renewed interest in ad-supported services this year due to the maturing of the subscription video market, fears of overcrowding across over-the-top (OTT) services and limits to total consumer spending across online video platforms.
This has spurred a surge in the uptake of AVOD by content owners that are increasingly opting to go directly to consumers. As a result, companies aiming to monetize online video content through advertising now face an extra layer of complexity due to the requirements for solid ad-tech sales and data strategies, along with content and user acquisition.
Compared to a decade ago, AVOD companies today are competing in a more developed online video market that offers greater potential for digital advertising revenue and a more advanced advertising infrastructure.
Facebook and YouTube are expected to continue leading the market through 2023, trailed by Hulu, Roku, Pluto TV and Tubi, which are set to increase their market share. New players include NBC Universal’s Peacock and WarnerMedia’s HBO Now.
Despite the increasing number of competitors, there remains copious opportunity for new entrants to claim a slice of the growing AVOD revenue pie. As the competition intensifies, it is important for AVOD companies to sustain strong licensing partnerships with content owners and hone their data utilization skills for ad monetization.
“With the launch of premium services like Disney+, HBO Max and Apple TV+, AVOD services can continue to benefit from cord cutting and act as a compliment to paid services,” said senior research analyst Kia Ling Teoh. “Pure-play AVOD platforms also can expand customer penetration through B2B partnerships with device makers and online linear channels.”