Move over cable television; over-the-top (OTT) internet television is here. With what started as a service that offered viewers subscription-based online movies, it has transformed into a powerful phenomenon that is changing the way people consume content. OTT services find relevance with viewers by offering them deals such as service bundling, binge-watching, time-shifting, place-shifting. For a relatively small fee, one can watch linear television on any standard internet-enabled devices without signing up with a cable provider. While OTT promises to offer a customized experience at affordable costs to viewers, what’s in it for service providers? The primary sources of monetization for OTT providers, apart from subscriptions, is advertisements. And since the OTT space is so widely different from cable TV, its advertising models are varied too. Let’s look at how advertising has changed in the OTT industry.
Time management: The world of traditional television programming and viewing is heavily related to the time of the day or even the season, however the concept of time does not apply to the OTT industry. Except for a few categories such as live event broadcasts, the concept of primetime, day parts, and seasonal viewership variations is not applicable.
Audience measurement: In the traditional television world, it is possible to determine the performance of a network program through the measurement of standard media metrics such as reach, frequency, gross rating point, and target rating point. This information is vital for advertisers and agencies to design ad campaigns. Based on this information, they decide which products are to be advertised and which campaigns need to be run on a certain network, and at what time. However, in the world of OTT, such metrics are difficult to track, and are known only to the service providers. The total number of subscribers across various OTT platforms is not made available to outsiders (read: brands, advertising agencies, and so on) due to which the demographic segmentation, content preferences, and time preferences are difficult to measure. The target rating point (TRP) for a show can be computed accurately only if all OTT providers reveal their subscription and customer information through a common forum. Therefore, the mechanism of audience measurement will need to be redesigned for the OTT industry.
Operating models: There are a few OTT players such as NetFlix and HBO Go that offer services through a pure subscription model, eliminating options for advertisements. On the other hand, there are some providers, such as Hulu, that have adopted ad-supported models, and others like CBS and HotStar that have established hybrid models. Companies with hybrid models offer services at a meagre subscription fee since they are supported by ad-led revenue as well.
Ad spot multi-sale: In the traditional television world, one ad spot corresponding to a particular show on a certain channel can only be sold to one advertiser. This is because airing is a time-bound phenomenon in advertising. But in the OTT world, with the concepts of video-on-demand and catch-up, the same ad breaks can be serviced with different advertisements based on viewer preferences. For instance, during a football match, three viewers could be watching three different ads in the same ad slot. Service providers can deliver personalized and hyper-targeted advertising experiences, as it is now possible to micro-segment audiences based on audience behavior or personality traits. This information can be sourced from consumers’ social media activity or spend behavior.
Interaction-based pricing and measurement: While in the traditional television ad measurement and pricing is mostly through impact or impressions, in the OTT world it will be enabled through user interactions, leads, acquisitions, and so on.
What Lies Ahead
The rate of spend increment on the digital space is encouraging, owing to the adoption of OTT and non-linear digital channels. The OTT advertising ecosystem will be based on the foundations of traditional television and online advertising practices, with additional dimensions around media measurement across discreet multi-channel platforms; targeting and personalization; consumer interactivity; programmatic buying; and media planning. The other elements that the OTT industry will borrow from the cable and digital industries are ad exchange platforms, data platforms, and demand- and supply-side platforms. The focus on this space will drive the new era of television advertising, especially with the availability of advanced technology.
We will follow up with detailed posts around some of the advertising elements adopted by the OTT industry. Stay tuned!