Up until now, the subscription model has dominated the over-the-top content market, and the popularity of streaming services such as Netflix and Hulu have helped propel OTT from niche business into a fast-growing segment of the media mainstream. Magna just revised its Q2 2018 ad spend forecast upward, projecting a 40% increase in OTT spend this year to a total of $2 billion. Recently, however, amid concerns about subscription saturation, the industry has enthusiastically embraced ad-supported OTT and is encouraging advertisers to do the same. In fact, the inaugural meeting of the NewFronts West was less about ad buying and more focused on ad-supported (ASV) OTT thanks to both growing marketer interest and the release of a new study from conference-sponsor IAB on the ad-friendly characteristics of ASV OTT viewers. Let’s take a look at a few of the findings that help explain why ad-supported OTT is becoming one of the biggest drivers of the market’s expansion.
A Way in to a Hard-To-Reach Cohort
To gauge both the size of the ASV OTT audience and its demographic characteristics, IAB fielded two surveys in August and September of this year to first identify viewers and, in the second survey, hone in on their behavior and usage patterns. For advertisers, one of the most significant takeaways is that ad-supported channels like PlutoTV, Roku Channel, Xumo and others reach incremental audiences that are difficult to connect with via more traditional TV, SVOD or VOD platforms. This is because more than half of ASV OTT viewers (52%) are cord-cutters or shavers who do not typically watch linear TV. Instead, they opt for streaming. According to the study, 73% say they watch ad-supported OTT video and of those, nearly half (45%) watch ASV OTT the most. And they are doing more watching with each passing year.
ASV OTT Viewers Are High-Value and Highly Receptive to Ads
Those who watch ASV OTT most tend to be young (18 to 35), have means ($75,000 annual income and above) and skew male. Interestingly, despite being the typical ad-blocking demographic (young and male), the survey found that ASV OTT viewers are not only more receptive to advertising than either SVOD OTT or TV-only viewers, but they also enjoy interacting with ads and believe those found on ASV OTT channels are of higher quality than those found elsewhere. Specifically, 50% of ASV OTT viewers say ads can be useful or enjoyable, 56% like interactive ads (and provide feedback or take advantage of opt-in rewards) and 9 out of 10 believe ASV OTT ads are as good, or better than, TV ads. Such findings suggest that with ASV OTT, marketers have a rare opportunity to strike advertising’s holy trinity by connecting with interested, engaged viewers who have the financial means to buy.
A Direct-To-Consumer Dream
And this cohort does buy, according to study results. Twenty-five percent of respondents say they buy more products directly from brands online vs in-store, making ASV OTT viewers ripe for conversion. In addition, more than half (52%) say they are very likely to try new brands and products, one-third report being influenced by video and 26% are open to persuasion by influencers. In fact, ASV OTT viewers—particularly those watching free services—are far more likely than SVOD OTT viewers to engage with and/or follow YouTube and social media “stars” who discuss products, brands and services. The study also found that ASV OTT viewers spend more on online subscription purchases ($119 per month vs. $89/mo for SVOD viewers)—from meal kits to contact lenses—making them an ideal target for direct-to-consumer marketers.
ASV OTT is an emerging market and how it will evolve is not yet clear. The growth of OTT does speak to the power of TV’s original business model of providing free programming in return for watching commercials. And the IAB study, along with this article from Variety, offer marketers enough proof that it is a channel they should be actively investigating—and investing in—for access to prized demographic group that is interested in hearing what they have to say.