New Challenges for Advertising: Fickle Video Viewers

The media market is transforming with technology, distribution, revenue models, and advertising mechanisms all in flux. Under the traditional broadcast and pay-TV model, advertisers previously enjoyed a relatively concentrated choice of video distributors that offered premium content to viewers and had consistency in their measurement tools. They now face a fragmented market, with fickle viewers shifting in and out of services quickly.

Nearly half of OTT subscribers hop from one streaming service to another multiple times over a 12-month period.

At the same time, data has never been more abundant or personal. Smart TVs, streaming media players like Roku and Fire TV sticks, and mobile phones generate data insights that traditional TV sets did not provide. The vast majority of internet households with TVs have at least one smart set, while just 25% of US internet households own a TV set but do not have at least one smart TV at home (or are not aware that their TV can be connected to the internet).

Leveraging that data to provide relevant content and digital advertisements to keep viewers engaged is crucial, and tricky. Data is fragmented across operating systems and applications, and viewer consent is required. Businesses can no longer collect personal user data without first acquiring consent. Data collection and management must be transparent, and new legislation is helping enforce these privacy requirements.

This is great for the consumer, but presents new challenges for advertising.

Diversification of Streaming Models: The Rise of Ad-Based Streaming

Streaming is the dominant form of video consumption. The shift from broadcast and traditional pay TV to online distribution also shifted viewing models from bundles of live/linear channels to video-on-demand consumption. Initial OTT business models were predicated on the absence of advertisements in exchange for a small subscription fee. As these subscription-based video-on-demand (SVOD) services (e.g., Netflix) experienced success, more players entered the streaming market and competition increased.

According to Parks Associates’ data from Q1 2023, 87% of internet households subscribed to at least one OTT service, and 47% subscribed to at least five. In contrast, just 44% of internet households still subscribe to a traditional pay-TV service.

Streaming business models have since diversified. Consumers increasingly use ad-supported methods to access content.

• 31% of internet households reported using ad-based OTT video services in 2023, up from 18% in 2018.

Ad-based streaming models such as FAST and AVOD services derive most or all revenue from advertisers and are available at no cost to the consumer. FAST and AVOD models are now even more popular as consumers look for ways to access entertainment, but also ease their wallets and subscription fatigue.

Ad-supported services grant access to hours of entertainment with no fees, and sometimes even without creating an account.

Streaming TV and hybrid streaming models, both of which rely on a mix of subscription and advertising revenues to achieve profitability, are also on the rise. Netflix , Disney+, Hulu, Paramount+ , and Max (formerly HBO Max ) all offer ad-based tiers.

These are prime examples of new hybrid or “SAVOD” services. Streaming TV services, from vMVPDs like Sling TV , YouTube TV, Fubo, and Hulu TV Live Info , as well as streaming options from traditional TV players like DIRECTV , replicate the traditional pay-TV experience with bundles of live/linear channels, premium content, live news, and sports for a premium subscription price and advertisements.

• 24% of US internet households, roughly 28M households, now subscribe to a leading vMVPD service, up from 10% in 2018.

This is an excerpt from new research, Overcoming Complexity: Advertising in A Fragmented Landscape, released in partnership with Adeia . We welcome any comments and appreciate support of Parks Associates research. Please consider joining us in November at our Future of Video Executive conference. ?