Ad-supported video streaming (AVOD) is changing how we watch TV and movies online by letting everyone watch shows and movies for free, thanks to ads. In 2024, AVOD is big news because it makes entertainment easy to get for all kinds of viewers, helps those who make and share content earn money in new ways, and lets advertisers reach the right people. Dive into the article to see how AVOD is making a big impact on entertainment, showing us how it works, grows, and balances free access with making money from ads.

AVOD meaning

AVOD stands for Advertising-Based Video On Demand, a digital streaming service model in which viewers can access video content for free, with costs offset by embedded advertising. Unlike subscription video on demand (SVOD) services, which require a monthly or annual subscription fee, AVOD platforms rely on advertising revenue by displaying ads before, during, or after video content. Thanks to this approach, premium content becomes available to a wider audience without the financial barrier of a subscription fee.

The significance of AVOD in the current media ecosystem

The importance of AVOD in the media ecosystem of 2024 cannot be underestimated. The global AVOD market has been experiencing rapid growth, with projections suggesting it could reach significant values by the mid-2020s. For instance, a report from Digital TV Research projected that the worldwide revenue from AVOD services would nearly double from $53 billion in 2020 to around $100 billion by 2026.

AVOD enables viewers, regardless of their financial situation, to benefit from a wide range of video offerings. For content creators and distributors, AVOD opens new revenue streams and opportunities to monetize content without relying solely on subscription or purchase models. On the other hand, advertisers value AVOD platforms for their ability to reach specific demographics with precise targeting, making advertising spend more efficient and effective. Moreover, AVOD services contribute to the overall diversity of the streaming market.

How AVOD works

The AVOD business model is based on delivering video content to viewers at no direct cost, as opposed to subscription-based models (SVOD), which require a monthly fee, or transaction-based models (TVOD), which charge a fee per view or download. Revenue is generated from ads displayed in or alongside the content. This model creates a value proposition for all parties involved: viewers gain free access to a wide range of content, advertisers reach target audiences in a more engaging environment, and content creators and platforms generate revenue from ad placements.

Client-Side Ad Insertion (CSAI)

CSAI refers to the process by which ads are delivered and played from a viewer’s device during video playback. When the video content reaches the point where the ad is scheduled to play, the video player establishes a connection with the ad server. The ad server then sends the ad to the player, which temporarily pauses playback of the video content to play the ad. Once it is finished, video content playback resumes.

CSAI allows advertisers to dynamically select and serve ads based on real-time data, including viewer demographics or viewing history.

Server-Side Ad Insertion (SSAI)

SSAI, also known as dynamic ad insertion, involves stitching ads directly into the video stream on the server side before delivering the combined stream to the viewer’s device. This method makes ads appear as a natural part of the video content, with no distinct separation between content and ads.

Since ads are inserted into the content stream at the server level, it becomes challenging for ad blockers to distinguish between content and ads, reducing the effectiveness of ad-blocking software.

csai vs ssai comparison

Types of advertisements in AVOD platforms

Ads on AVOD platforms help monetize content for creators and platforms, but also provide viewers with access to a huge library of content for free. Let’s take a closer look at the different types of ads typically found on AVOD platforms.

Pre-roll ads

These ads are played before the video content begins. Pre-roll ads are particularly effective because they capture the viewer’s attention when they are at the peak of their intention to watch the selected content. These ads are usually short, often 15 to 30 seconds, to minimize disruption to the viewer. The advantage of this type of advertising is that it is more likely to be seen by the viewer if they really want to watch the video.

preroll ads

An example of a pre-roll ad. Source: 

Mid-roll ads

Mid-roll ads are like traditional TV ad breaks, placed at various points in video content. They are strategically placed during natural breaks or transitions in content to mimic television viewing. Mid-roll ads can be more engaging because they are viewed by an audience that is already engaged with the content, but they also risk disrupting viewing if not implemented thoughtfully.

It is worth remembering that these ads should not appear next to each other. You should also adjust the frequency of the ads to the length of the video.

Post-roll ads

Positioned at the end of the video content, post-roll ads play after a video has concluded. While these ads may have lower engagement due to viewers potentially leaving once the content ends, they offer an additional opportunity for advertisers to capture the attention of those who watch the content in its entirety.
Sponsored content and product placements

This advertising approach involves integrating a brand or product directly into the content. Sponsored content may include entire videos or segments created around a brand, while product placements subtly feature products within the content. These types of ads can provide a more organic experience for viewers, as they are woven into the narrative of the content.

Interactive ads

Some AVOD platforms incorporate interactive advertisements that engage viewers by inviting them to participate in some way, such as clicking to learn more about a product or to visit an advertiser’s website. These ads can increase viewer engagement and offer measurable insights into viewer interest and behavior.

Benefits of AVOD

Advertising-Based Video On Demand (AVOD) platforms offer tangible benefits not only to viewers but also to content creators and advertisers. This ecosystem creates a sustainable model in which each party gains something valuable, from free access to content to new opportunities for monetization and advertising.

Free access to content for viewers

The biggest benefit for viewers is the ability to access a wide range of video content without any subscription fees. High-quality entertainment, educational materials, and various forms of media are available to a wide range of audiences, regardless of their willingness and ability to pay for subscription services.

Viewers can browse vast libraries of movies, TV shows, documentaries, and more, making AVOD platforms a popular choice for consumers looking for flexibility and variety in entertainment options. Moreover, the presence of advertising often means the content is regularly updated and expanded, which improves the viewing experience over time.

Monetization opportunities for content creators

For content creators, AVOD platforms provide an effective way to monetize without having to rely solely on direct payments from viewers. This model allows creators to monetize the advertising placed on their content, making it a viable option for both established media companies and independent creators.

The AVOD model also encourages wider content distribution, as creators are incentivized to reach as wide an audience as possible to maximize advertising revenue. This can lead to greater visibility and audience growth, which will further increase your earning potential. Additionally, the flexibility of AVOD allows creators to experiment with different types of content and formats, supporting creativity and innovation in the industry.

Benefits for advertisers

Advertisers can benefit significantly from the AVOD model because it provides targeted access to diverse audiences. With advanced analytics and data tracking capabilities, AVOD platforms can provide advertisers with detailed insight into viewer behavior, preferences, and demographics. This allows advertisers to fine-tune their campaigns, improving ad performance and ensuring that their messages reach the most relevant audiences.

The interactive nature of digital advertising also allows for real-time feedback and adjustments, making AVOD an attractive option for advertisers looking to maximize return on investment. Moreover, the growing popularity of AVOD platforms provides an ever-growing audience base, expanding the potential reach of their advertising activities.

Drawbacks of AVOD

While AVOD platforms offer significant benefits, they come with inherent drawbacks that affect viewers, content creators, and the overall streaming ecosystem. Understanding these limitations is essential for stakeholders to navigate the AVOD model’s challenges effectively. Here are some of the primary drawbacks associated with AVOD.

Intrusive advertising

One of the most frequently mentioned disadvantages for viewers on AVOD platforms is the presence of intrusive advertising. Unlike subscription-based services where content is uninterrupted, AVOD uses advertising to generate revenue, which can disrupt the viewing experience. Frequent, poorly timed, or excessively long ads can lead to frustration and discouragement among viewers, potentially leading them to seek ad-free alternatives.

Ad blocking

The effectiveness of ad blocking technology poses a significant challenge to AVOD platforms, directly impacting their ability to generate revenue. Viewers using ad blockers bypass the ad-based revenue model, creating a scenario where platforms must constantly develop countermeasures, which could lead to increased operational costs and a potential arms race with ad blocker developers.

Privacy concerns

To deliver targeted advertising, AVOD platforms collect and analyze vast amounts of viewer data. The practice raises privacy concerns, especially amid growing scrutiny over digital privacy and data protection laws. Viewers may be wary of platforms that collect extensive personal information, which affects trust and engagement.

The role of technology in AVOD

Technology plays a key role in the effectiveness of AVOD platforms, shaping how content is delivered, ads are displayed, and user experiences are improved.

The impact of AI and Machine Learning on AVOD services

AI and ML offer powerful tools to automate and optimize many aspects of the ad delivery process. Artificial intelligence algorithms can predict viewer preferences with incredible accuracy, enabling the automatic selection and insertion of ads that will appeal to each viewer. Moreover, AI-powered insights can help advertisers and content creators identify emerging trends and viewer behavior, enabling them to adapt their strategies in real-time.

ML techniques are also used to continually improve the accuracy and efficiency of ad targeting. By analyzing data from previous ad performance, ML models can refine targeting criteria and ad placement strategies, ensuring that each ad reaches its target audience at the optimal time.

Advances in ad targeting and personalization

One of the most important technological achievements of AVOD platforms is the improved ability to target and personalize advertising for individual viewers. Advanced data analytics and audience segmentation tools allow AVOD services to collect and analyze vast amounts of viewer data, including viewing habits, preferences and demographic information. This data-driven approach enables advertisers to deliver relevant ads to specific audience segments, increasing the effectiveness of ad campaigns and improving the overall user experience.

Personalization technologies also include content recommendations, so viewers receive content and ads that match their interests. This level of personalization improves viewer satisfaction, increases engagement rates, keeping viewers on the platform longer, which in turn increases advertising revenue opportunities.

Is AVOD a model for you?

Deciding on the Advertising-Based Video on Demand (AVOD) model depends on your role in the content ecosystem and your strategic goals.

For content creators and distributors, AVOD offers an appealing route to monetize content without charging viewers directly, making it suitable for targeting a broad or price-sensitive audience. It’s particularly effective for those with high-volume or frequently updated content that can seamlessly integrate ads. If your objective is to quickly expand viewership and establish a competitive stance in the market, AVOD can provide an accessible platform for achieving these goals.

For advertisers, AVOD platforms present a valuable opportunity for precise audience targeting. The advanced data analytics capabilities of these platforms allow for the efficient reach of specific demographics, aligning well with advertisers seeking to optimize their ad spend for maximum return on investment.

The last words

AVOD, or ad-based video on demand, offers benefits for viewers seeking free content, creators seeking monetization, and advertisers seeking targeted reach. Despite its advantages, challenges such as ad blocking, maintaining a good viewer experience, and protecting privacy are part of the package. As technology advances, AVOD’s potential to better display ads, streamline streaming, and engage audiences grows. Whether AVOD meets your needs depends on your content and audience goals.