Bill Kiriakis, Global SVP, Sales, Adjust

Nothing has demonstrated the centrality of video streaming more than Covid-19 as billions of people around the world remain at home glued to their screens. 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.

Traditionally, when we think of OTT, we think of TV over internet, but mobile is also an important component of the OTT mix. A report from eMarketer found that 63 per cent of consumers in the US access OTT content on their TV, while a modest 11.6 per cent use mobile phones. However, when you examine the length of time users spend streaming OTT content on their devices, mobile makes up almost a quarter of total time spent viewing. This means that mobile users spend more time than average watching OTT content.

As the OTT ecosystem continues to grow, competition for eyeballs is growing with it. After 10 years of almost complete dominance, Netflix is now facing strong challengers. OTT is no longer a niche but a mass market.

With increasing competition comes increasing pressure, especially for marketers. In a more competitive ecosystem, measurement becomes essential. User acquisition managers for OTT services and advertisers looking to capitalise on the OTT boom will have to analyse which sources are driving customer lifetime value. Demonstrating performance is the name of the game.

More advertising coming to OTT channels soon

What is happening in OTT is a microcosm of trends in the wider advertising industry. As Covid-19 upends old certainties, advertising on all platforms is facing unprecedented challenges. On mobile, installs and sessions in entertainment apps are seeing positive growth as the world is social distancing. However, as recession bites, budget limitations for user acquisition managers could force marketers to adopt creative solutions to find users. Platforms are already experimenting with innovative formats to show ads, such as Hulu announcing space for pause ads.

We are also likely to see more in-show monetisation in the near future, with shoppable content embedded directly inside the stream. In China, Tencent boasts technology that creates ad inventory inside the TV programme. Using augmented reality (AR) techniques, ads can be shown on billboards inside the stream or even on a coffee cup an actor is holding. Shoppable content and AR technology may prove to be ideal for mobile, as mobile users are already used to interacting intensively with advertisements.

While subscription-based services like Netflix, Amazon Prime and Disney+ are currently the gold standard for streaming services in the West, monetisation strategies that rely on adverts are more common in other parts of the globe.

In the post-Covid world, people will have to prioritise their spending and subscriptions are often the first cost to cut. OTT platforms will have to adjust to this new reality. Consumers are unlikely to continue to subscribe to multiple channels. This means we are likely to see more product placement and freemium models in the mid to long term.

A more diverse marketing mix for OTT

Options for apps that might be interested in advertising in the OTT space, are currently limited. However, with cash-strapped consumers voting with their wallets, advertisement-backed video-on-demand is seeing a huge boost in the current crisis, recording a growth of 148 per cent. This low inventory problem is something that will change going forward.

There is already plenty of ingenuity in terms of ad formats on OTT, with Hulu Sling TV offering pause ads and introducing a prime time “happy hour” for free to households. This freemium model is likely to become more common going forward, leading to a more diverse marketing mix for the OTT space.

Even as the effects of Covid-19 begin to wane, it is likely that “subscription fatigue” will hit at some point. What will fundamentally shift the relationship between ads and OTT is the migration of media like live sports to streaming platforms. Sports are incredibly tied to advertising. For instance, Indian OTT platform Hotstar acquired the rights to stream the Indian Premier League in 2017, capitalising on India’s fanaticism for cricket to drive massive user growth. This growth has helped Disney to dominate the Indian market through its partnership with Hotstar.

In the long run, we are going to see more ads in OTT, whether it is ads that play in our streaming window, or ads that are displayed on objects or banners within our streams.