The adoption of streaming services continues to grow, and with it, increased competition across content providers and advertisers as they seek ways to stand out in an industry that is increasingly competitive and fractured. Now providers like Netflix and Disney, who have historically relied on a streaming video-on-demand (SVOD) model, are embracing advertising-based video-on-demand (AVOD). With Netflix’s ad supported tier having launched in November and Disney+’s set to debut this week, this presents an exciting value proposition for advertisers and content owners looking to reach their target audiences at scale.
Let’s look at some of the opportunities that have been presented by providers like Netflix and Disney+ leaning into ad-supported tiers, and how advertisers can navigate this changing landscape.
Is there an appetite for ad-supported content on Netflix and Disney+ among consumers?
Advertisers are not the only ones eagerly anticipating the new ad-based offerings. Samba TV’s recent poll with HarrisX showed that nearly half of current Disney+ and Netflix subscribers would consider shifting to an ad-supported model once it has been made available.
And, of the Disney+ users who would be interested in dropping down to an ad-supported tier, over 40% were Millennials, the largest demographic group in the country. Furthermore, approximately one in four Gen Xers and Baby Boomers surveyed were interested in making the switch.
Additionally, the poll found that a whopping 90% of those who do not currently subscribe to Netflix or Disney’s premium offerings are already watching ad-supported streaming platforms. This suggests that not only is there significant interest in tiered options among subscribers to these services, but that streamers have the potential to tap into an entirely new audience by launching new, more affordable options.
How can advertisers win in a world where ad-supported tiers are ubiquitous?
As linear TV viewership continues to face tough competition from the shift to streaming, it becomes increasingly difficult for advertisers to reach audiences at scale through this one medium. With advertisers chomping at the bit to diversify their budgets to include streaming and on-demand platforms, the launch of Netflix and Disney+’s ad tiers presents more ways for savvy advertisers to access premier inventory to reach shifting audiences. The opportunity here is massive, with Netflix and Disney+ expected to garner a 15% share of the overall Connected TV advertising market as soon as 2026.
Advertisers looking to capitalize on these new AVOD offerings as efficiently as possible should go beyond basic targeting to leverage cutting edge creative capabilities, rather than simply recycling linear ads. The opportunity to innovate and refresh creatives within the Connected TV space is much higher than it is with traditional TV, allowing advertisers to drive not just top of funnel ad engagement but also bottom of funnel performance campaigns never before available on the biggest screen in the home.
With consumers poised to spend as they watch TV (almost half of Gen Z and millennials online shop while they stream TV), advertisers should get creative with their calls-to-action. Samba TV’s recent poll with HarrisX showed that 1 in 3 millennials have purchased products through a QR code shown on a TV ad, highlighting the ways that Connected TV ads can drive immediate, real-life outcomes.
While current opportunities are massive, the integration of Artificial Intelligence (AI) and Machine Learning (ML) into the advertising space means they will only continue to grow. In the very near future, advertisers will be able to align their message with the content their viewers are consuming. For example, someone watching a car chase scene on TV could immediately be targeted with a luxury car ad.
Who else wins in this new AVOD-forward model?
Aside from the obvious benefit of increased inventory for advertising opportunities, we should also expect to see improvement in the capabilities of viewership-based measurement and targeting. Platforms like Netflix had notoriously been elusive in divulging data, making it difficult for potential advertisers to truly understand more granular details about the audiences on the platform.
By including ads, both Netflix and Disney+ will now need to reveal more of this invaluable data, as well as adhere to regional privacy laws and regulation. This will not only improve advertisers’ ability to measure and target cord-cutters more effectively, but also have confidence in brand safety and consumer privacy when choosing to advertise on these popular platforms. This is great news for brands looking to measure their buys in a more scientific way with advanced measurement partners.
Additionally, these new ad-based tiers with Netflix and Disney+ also offer a potential halo effect for the wider TV and AVOD sectors, which may lead to more revenue for the streaming and TV industries to funnel into increased original content across the board. More original content and regular release cadences could also help push the continued adoption of these platforms.
What challenges do advertisers face in this new environment?
As Netflix and Disney+ iterate upon their ad-supported offerings and try to figure out what works best, they will need to be cognizant of younger audiences who have only known a streaming-first world. Compared to 45% of the general population who said they would drop to a lower priced tier of Disney+ with ads, only 27% of Gen Z Disney+ users said they would be willing to make the switch. Getting younger viewers to embrace ad-tiered models may pose challenges to advertisers intent on reaching Gen Z.
Advertisers will also need to be aware of the fickle behavior of consumers in this new era. The landscape has changed dramatically from the past, when viewers would sign up for cable and keep it for years on end. As we’ve seen, consumers are increasingly likely to sign up for a streaming service to watch just one program and cancel after they’ve finished it, with 69% of people planning to “subscription cycle” in the next 6 months. Advertisers will need to diversify their buys even more in the face of this emerging trend, to ensure they’re reaching people across AVOD and SVOD platforms as new content soaks up consumer attention.
In our constantly changing and evolving industry, the switch from SVOD to AVOD for giants like Netflix and Disney+ could seem like further congestion in an already crowded market. However, our data shows that consumers are hungry for the new offerings and, if approached strategically, advertisers can reap substantial rewards. The bottom line is that by these two streaming behemoths splashing into AVOD, the ability to monetize crucial audiences is bound to be a game changer and everyone stands to benefit.