The Future of Streaming is Ad-Supported

By Max Newfield | September 24, 2024

Despite what the chatter on social media would have you believe, The Bear is not the biggest story in streaming… but it’s close.

Many people who tuned into another season of white tablecloths and Wilco needle drops almost certainly got a front row seat to Hollywood’s hottest topic these days–advertisements.

Every ad run during The Bear represents not just a respite from intense interpersonal drama, but also the evolution of a business model that once forsook the oldest form of monetization in media.

Instead of exclusive content or to-cheap-to-believe SVOD rates, streaming leaders are putting their ads business front and center in their strategies these days. One study from PwC projects that by 2028, “advertising will make up almost 28% of all the money that streaming services make.”

So where did this sudden focus on ads come from? Don’t consumers prefer SVOD? How can I get in on the advertising action? Read on to find out all this and more.

Wondering how to insert ads into your content? Heard of CPM but not sure why it’s relevant to you? Our experts can help! Schedule time to speak with a Matchpoint expert today and find out how we can help monetize your streaming business.

If you’re wondering why everyone is talking about ads again, the answer is simple: growth.

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Some projections show global ad revenue reaching $1 TRILLION by 2025. But considering that American entertainment media has been home to advertisements for over 100 years, and the way we watch movies and TV has radically shifted in the streaming era, it’s probably time for some advertising innovation as well.

Amazon Prime Video

One of the companies leading the charge in the streaming ads shakeup is Amazon Prime Video. The company made headlines at the beginning of the year when it made all accounts ad-supported by default. Projections showed that move will generate $3.3 billion in revenue in 2024 alone but the former Barnes & Noble competitor turned mega-company still had more tricks up their streaming sleeves.

In May, Amazon Prime Video announced multiple new ad formats–one featuring interactive trivia questions during live events and others that display on pauses to nudge viewers into buying featured products.

Considering that less than 10% of Prime Video members plan to upgrade to the ad-free plans, millions of Prime members are about to get a whole lot better at trivia.

While pop up ads during a major sporting event might not be feasible for every streaming business, Amazon’s approach is a good reminder that streaming affords far more advertising flexibility than traditional broadcast. Think of it as an opportunity to monetize your business and keep audiences engaged at the same time.

Disney

While relative newcomer Amazon Prime Video leans-in on ad innovation, Hollywood stalwart Disney is going old school with their ad strategy. The first step? Partner with the biggest names in the game.

This spring, the House of Mouse joined forces with WalMart to create a targeting resource that pairs Walmart’s shopping data with Disney’s streaming portfolio. Disney also teamed up with Google and The Trade Desk–two rivals in the programmatic space–to make space on Disney+ and Hulu available to a massive array of marketers at the national, regional, and local levels.

In addition to their new ad offerings, Disney is also seeking to undercut the current ad market. The company ruffled industry feathers at June’s upfronts by rolling back their CPM rates by as much as “10 %to 15%,” according to Variety. When you own the rights to Marvel, Star Wars, and 100 years of beloved family cinema, you can take a short-term loss to build for the future.

Netflix

While Amazon is trying to re-invent the streaming ads game, and Disney is flexing their Old Hollywood muscle, Netflix seeks to own the entire streaming ads landscape.

In a deep dive discussion with The Verge, Netflix co-CEO Greg Peters provided an overview of the company’s advertising strategy. Essentially, Peters sees the company’s value as that of a TV broadcaster on steroids, where Netflix creates “culture defining moments” and sells advertiser space around those events. Makes sense when you have the single largest streaming on Earth, and nearly two decades of audience data to leverage.

With that in mind, the company is seeking to verticalize their ads business by creating an in-house ad technology platform that would theoretically compete with the likes of Amazon, Google, and Meta. It’s a move that will let Netflix deliver hyper-personalized ad content to its nearly 300-million subscribers instead of relying on outside expertise. And it likely explains why the company is phasing out its basic, ad-free plan in the US. You need revenue to pay for shiny new technology and–hopefully–another season of Mindhunter.

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With all this ad investment going on you’re probably wondering… how on earth can this work? Don’t viewers hate ads? The answer is… not really.

It turns out, two out of every three viewers would opt for an ad-supported streaming plan to save money. And as consumers remain laser-focused on cost of living increases, AVOD streaming is projected to make up the majority of streaming plans in the US by 2026.

The one caveat though, the ad-experience needs to be exceptional or viewers will bounce for another option. A recent YouGov survey found that 37% of U.S. consumers have canceled a subscription because of the ads experience. That same study also found that a majority of U.S. consumers prefer a personalized ad experience.

The lesson here? There is a ton of room for both growth and experimentation in the AVOD space. Streamers have more resources than ever before to monetize their content. But just as it has been for the last century of American media, audience experience has to come first.

Don’t know where to begin with your streaming ads experience? Let Matchpoint handle the hard stuff for you. Dispatch allows you to ingest once and deliver to all major platforms while serving your audience highly personalized ads, powered by next-generation technology. Schedule a demo to find out how it works.