It’s a tale that can send chills down the spine of even the most seasoned advertising executive: As streaming services and online video that consumers can take with them virtually anywhere continue to explode in popularity, some of the best-known streaming services offer special subscriptions to avoid advertising altogether.
According to a Deloitte study, 55 percent of all U.S. households now pay for streaming video services. Nearly half of all households stream television content daily or weekly. All told, consumers shell out about $2 billion a year for video content they’re watching on smartphones and tablets.
In a few cases, that streaming or video content is presented without advertising. Some of that $2 billion is paid to avoid all advertising, which seemingly presents a challenge to Direct Response and other marketers. Advertisers need not worry, though.
Platforms are finding it difficult to subsist without some form of advertising. The result is more opportunities for Direct Response and other advertisers in the form of expanded ad inventory on streaming platforms and also opportunities for niche advertisers that may have previously elected to bypass mass media advertising when their audience was especially narrow.
Because streaming media lends itself to a targeted approach, advertisers can reach smaller audiences that are interested in what the advertiser is offering and are likely to be more responsive to the presented offer.
To Run Ads Or Not To Run Ads, That Is The Question
Hulu, an online streaming video site that offers viewers access to movies, network television and its own highly-regarded original content, offers both ad-free and advertised subscriptions. The service will start showing “pause ads” this year. The ads will appear whenever content is paused on a viewer’s electronic device, offering the service the ability to sell ads and further subsidize the content creators.
“As binge-viewing happens more and more, it’s natural they (viewers) are going to want to pause… (stretching and getting snacks provides) a natural break in the storytelling experience,” said Jeremy Helfand, Hulu vice president and head of advertising platforms.
Other streaming service and Internet providers are exploring the same sort of advertising for their customers. A version of pause ads already exists on DirecTV.
What about YouTube Premium? The well-known international video sharing forum is selling a subscription service, formerly called YouTube Red, offering ad-free videos for a monthly fee. It includes exclusive access to original programming and a membership to Google Play Music. Online video advertising might seem doomed with this heavy hitter off the market, but that could soon change.
The company that lets you upload your video to the world is in a contest with two giants – Amazon and Netflix – fighting for streaming supremacy. And they do not pack the firepower to compete.
According to the Hollywood Reporter, the YouTube budget for original content is in the hundreds of millions of dollars. While that seems like a lot, the biggest players are spending billions per year. Amazon and Netflix are fighting for dominance in streaming content and YouTube is a distant third place in that contest. The effect of that competitive environment is not explicitly named as a cause, but YouTube will decrease its commitment to original content starting in 2020.
If YouTube can’t offer the lure of its own programming, it’s one less reason to purchase the service. The company has never released the number of users subscribed to the premium service.
Viacom recently completed its $340 million acquisition of Pluto TV, a free, ad-supported streaming service. Sources report that Pluto TV streams more than 100 channels and has more than 12 million monthly active users. But Pluto TV won’t stay ad-free for long. In fact, it appears to be an acquisition made to help advertisers reach their audiences.
“The completion of this deal marks an exciting next step in Viacom’s evolution and a powerful opportunity for us to extend our consumer reach and broaden our ability to add value across the industry as the media landscape continues to segment,” said Bob Bakish, Viacom president and CEO. “Together with Pluto TV, we look forward to becoming a stronger partner to distributors, advertisers, content providers and audiences around the world.”
Streaming content and subscription video services are on the rise, but traditional television is still the biggest forum for video-based advertising. An analysis by PriceWaterhouseCoopers (PwC) predicts ad revenue should be around $20 billion a year by 2022. The study by the professional services firm also predicts cable network ad revenue will hit about $22 billion by the same time. By way of comparison, advertising to the mobile consumer is expected to generate only $16 billion in 2022. While it’s a lower number, it’s expected to represent a 21 percent rise in revenue.
Still, the landscape will change as more consumers turn to streaming services. “As people continue to change the way they access content across increasingly sophisticated devices, more robust data is required to build a deeper understanding of consumer habits,” the PWC study concluded. The report also said ads will be created to follow people’s online habits more than their demographics.
For more information on buying media that sells and how to capture a share of the streaming content audience, contact Diray Media today.