OTT advertising is one of the common monetization models that video streaming services widely leverage. Alongside advertisements as a revenue-generating mode, there are subscriptions, pay-per-view, and a hybrid approach. They all are equally popular, but subscriptions and commercials have made a lot of buzz in the media.

Subscriptions were pretty convenient to viewers. However, they started switching to ad-based video streaming services for some reasons. Having noticed that trend, providers either added a new plan to the existing one or completely changed their pricing model.

Viewers today have 3-4 subscriptions. Many cannot afford to purchase more streaming services. For this reason, they start utilizing ad-based streaming services, as they usually offer free content.

For companies and organizations, the ad-based monetization model can bring its benefits and drawbacks. Let’s observe why businesses opt for advertising-supported streaming.

What is OTT Advertising?

OTT advertising is advertising via an internet-connected over-the-top application or platform that delivers live and on-demand content to viewers’ devices, bypassing traditional cable or satellite connection.

Viewers are consuming multiple videos on OTT platforms, and ad-based services are more than welcome among both broadcasters and users. Advertisers can reach their clients by displaying products and services in ads.

Since viewers have different devices, from TVs to mobile phones, advertisers have more chances that viewers will watch their ads.

3 Key Facts About OTT Advertising

• AVOD (Advertising-based Video-on-Demand) revenue is projected to reach $91 billion by 2028.
• The number of AVOD consumers is expected to amount to 3,44 billion users by 2027.
• The global OTT market is expected to be worth $1,04 trillion in 2027 with a CAGR of 29,4% during the forecast period of 2020-2027.

Benefits of OTT Advertising

OTT advertising has the following list of benefits:

• Accurate targeting. Remember traditional advertising on TV? Everyone, despite their age, interests, and needs, had to watch the same commercials over and over again. But video streaming platforms are equipped with targeting functionality that allows you to segment your audience and show them ads based on demographics, preferences, and behaviors. This means that you deliver commercials that people might be interested in, which increases the conversion rate.
• Cost-effectiveness. Traditional television advertising can be expensive compared to OTT advertising. Advertisers can pay only for impressions their commercials receive which reduces costs.
• Detailed analytics. You receive detailed information about the performance of commercials: their impressions, clicks, and conversions. This allows you to measure the success of a campaign and make more informed decisions in the future.
• Flexible optimization. OTT advertising allows you to introduce changes to your advertising campaigns quickly and easily. As soon as you receive data on performance, you can analyze it to understand what needs immediate attention.

OTT Advertising Challenges

OTT advertising for sure has a number of characteristics that make it beneficial for providers and advertisers. However, there are challenges you can face too.

• Viewers can feel frustrated because of many ads. This is the reason why subscription-based video streaming services are so popular. They remove commercials in exchange for a recurring fee.
• Technical issues can damage the performance of advertising. Buffering and latencies influence the effectiveness of commercials.
• Data privacy is also an essential issue. You should be careful when collecting and sharing data about viewers.

Despite these challenges, the sphere of OTT advertising is growing and evolving, attracting more players, providers and advertisers.

Ad-Insertion Models

There are two primary models of inserting ads into videos:

• Server-side ad insertion (SSAI): SSAI is also known as dynamic server-side ad insertion. When the SSAI technology is used, the commercial video is inserted on the server side. Such insertion results in a smooth ad stitching into a video, making a video and an ad to be glued together as if it is one uninterrupted video flow. One of the advantages of SSAI is that ad blockers cannot detect video ads to block them, which saves your revenue.
• Client-side ad insertion (CSAI): Unlike SSAI, CSAI delivers ad videos to devices, which means that insertion happens on the client side. When a video reaches an ad marker, the video player requests the delivery of a commercial.

SSAI can be a little more expensive than CSAI but more profitable. It can bring more impressions due to the resistance to ad blockers. Ad blockers were configured to remove CSAI ads in the first place.

Drawing the Line

OTT advertising is one of the monetization models in the OTT industry. It is usually about producing free content and generating revenue by running ads on your videos. It has multiple benefits due to the advanced technology development. This refers to more accurate targeting capabilities, real-time analytics, and cost-effectiveness. However, as with any other model, advertisements can bring some challenges, such as technical issues, data privacy, and viewers feeling frustrated by many ads.