The following is a guest post from Bill Kiriakis, senior vice president of global sales at Adjust. Opinions are the author's own.
Nothing has demonstrated the centrality of streaming video more than COVID-19, as billions of people around the world remain at home, relying on screens for communication and entertainment. With revenue in the video streaming segment expected to grow to $30.4 billion by 2024, and big players including Disney, HBO and Amazon placing huge bets in the space, over-the-top (OTT) media is fast becoming a key vertical for both app developers and advertisers.
When we think of OTT, we think of television over the internet. But whether in the living room or on the move, mobile is an important component in the OTT mix. An eMarketer report found that 63% of U.S. consumers access OTT most frequently on their TVs. Mobile comes in second, with a modest 11.6%.
However, when you examine the length of time each user spends streaming OTT content on their device, mobile makes up almost a quarter of total viewing time. That means mobile users spend more time than average watching OTT content.
Additionally, mobile is often a second screen for OTT consumers. Roku supports a function where viewers can turn their mobile phone into a remote control, but more generally, who hasn't used their smartphone to catch up on a much-hyped episode while on the go? Strategically, this is important for marketers because even people watching connected TV may be persuaded to install an app they saw while viewing a streaming service.
As the OTT ecosystem continues to swell, competition for eyeballs will grow with it. After 10 years of almost complete dominance, Netflix now has sizable challengers. OTT is no longer a niche market.
With greater competition comes increasing pressure, especially for marketers. In a more competitive ecosystem, measurement becomes essential. User acquisition (UA) managers for OTT services — and advertisers looking to capitalize on the OTT boom — will have to become more critical of which sources are driving customer lifetime value. Demonstrating performance is the name of the game.
More advertising coming to OTT channels soon
What's occurring in OTT is a microcosm of trends in the wider advertising industry. As COVID-19 upends old certainties, advertising on all platforms faces unprecedented challenges. On mobile, installs and sessions in entertainment apps are seeing positive growth as the world is social distancing and hunkering down at home.
However, as an economic recession bites, budget limitations for UA managers could force marketers to adopt creative solutions to find new users. Platforms are already experimenting with innovative formats to show ads, such as Hulu announcing space for pause ads.
We're also likely to see more in-show monetization in the near future, with shoppable content embedded directly within the stream. Amazon is already thinking holistically about this, with TV shows like "Making The Cut" allowing viewers to purchase the designers' products on Prime after the show airs.
In China, Tencent boasts technology that similarly creates ad inventory inside a TV program. Using augmented reality (AR) techniques, ads can be shown on billboards inside the stream — or even on a coffee cup an actor holds.
Shoppable content and AR technology may turn out to be ideal for mobile, as smartphone users are already comfortable interacting with ads. While subscription-based services like Netflix, Amazon Prime or Disney+ are currently the gold standard for streaming services in the West, monetization strategies that rely on ads are more common in other parts of the globe.
In the post-COVID world, many consumers will have to prioritize their spending, and subscriptions are often the first cost to cut. OTT platforms will have to adjust to this new reality, as people are unlikely to continue to subscribe to many channels. This means we will likely see more product placement and freemium models in the long term.
A more diverse marketing mix for OTT
If you want to advertise in the OTT space, your options are currently limited. However, with cash-strapped consumers voting with their wallets, advertising-backed video on demand (AVOD) is seeing a huge boost in the current crisis, with growth of 148%.
There's already plenty of ingenuity in terms of ad formats on OTT, with Hulu Sling TV offering its pause ads and introducing a primetime "happy hour" of free content. This freemium model is likely to become more common going forward, leading to a more diverse marketing mix for the OTT space.
Even when the effects of COVID-19 begin to wane, it's likely that subscription fatigue will hit some consumers — if it hasn't already. OTT users follow content, with high levels of subscription churn once certain keystone shows end. When this combines with the huge proliferation of platforms, it will become increasingly difficult to watch all the buzz-worthy shows with only one or two subscriptions. Users, wanting to catch the shows that everyone is discussing, might become more tolerant of advertising so they don't miss out.
We're already familiar with seeing ads on TV or YouTube. But what will fundamentally shift the relationship between ads and OTT is when media that hasn't yet fully made the jump — like live sports — start to migrate to streaming platforms.
Sports are incredibly tied to advertising, and moves like Amazon Prime showing the NFL's Thursday Night Football will only become more common. In other markets, this is already normal. The Indian OTT platform Hotstar acquired the rights to stream the Indian Premier League in 2017, capitalizing on India's fanaticism for cricket to drive massive user growth. This growth has helped Disney to dominate in the Indian market, as Disney+ partners with Hotstar.
In the long run, we will see more ads in OTT, whether it's ads that play in our streaming window or digitally displayed on objects or banners within our streams. TV is such a defining part of our culture that the OTT sector is something mobile marketers cannot afford to ignore.