Advertising-Based Video on Demand, or AVOD is a monetization model in which video content is made available to users for free, with the caveat that they must view ads in order to access said content. The AVOD business model has gained enormous traction in recent years, owing to its adoption by major platforms such as YouTube, Hulu, and — more recently — Netflix. By 2028, total AVOD revenue is predicted to reach $91 billion.
How AVOD Works
Video On Demand platforms — also known as streaming services — are currently among the most popular applications in the world. These content distribution platforms give the end user complete freedom with regards to when, where and how they consume media. This is in sharp contrast to traditional, network-based media delivery, which operates on a set schedule.
Maintaining and distributing a vast library of video content is incredibly expensive, and no business operates for free. As a result, several VOD monetization models have emerged over the years. AVOD is arguably one of the newest, generating revenue through advertising.
Other models include:
Subscription-Based Video On Demand (SVOD). Users must pay a monthly subscription fee to access the video platform and its content. Examples include Disney +, Netflix, Crave TV, and Amazon Prime Video.
Transactional Video On Demand (TVOD). Users can sign up and access the platform without paying a fee, but they must rent or purchase content in order to view it. Examples include Amazon Video and YouTube Movies & Shows.
Premium Video On Demand (PVOD). Users pay an additional fee for exclusive, early access to video content. Typically used alongside other monetization models.
Typically, an AVOD platform will integrate one or more ads into the viewing experience. AVOD ads are generally targeted based on a user's viewing history, on-site behavior, or demographic details, and the revenue they generate is typically split between the AVOD platform and rights holders/content creators. AVOD advertising options include:
Standalone Ads. Rather than being part of another video, these ads usually appear in a user's video feed or video queue. TikTok and Snapchat both leverage this ad format.
Pre-Roll Ads. Served to the user prior to accessing a video. The user may be given the option to skip immediately, or they may be required to view a certain percentage of the ad.
Mid-Roll Ads. Served at intervals throughout a video. Streaming platform Twitch.tv makes extensive use of mid-roll ads during live streams.
Post-Roll Ads. Served at the end of a video.
Display Ads. Served as part of the platform's interface in lieu of being integrated into a video.
Sponsorships. Unique to user-driven platforms such as YouTube, sponsorships and brand deals typically encourage users to input a unique code for a discount tied to a specific content creator.
The Benefits of AVOD for Advertisers
The advantages of AVOD include:
Engaged Viewership. Per a recent survey from Adtaxi, roughly 48 percent of Americans respond positively to advertisements on video streaming services, particularly if the ads are relevant to their interests or needs.
Favorable Perception. According to the same Adtaxi survey, 82 percent of consumers were either likely or very likely to switch from a paid subscription to an ad-supported service.
Better Targeting. You can learn a great deal about someone by examining their viewing history — and those insights are invaluable when it comes to serving the right ads to the right people.
High Potential Returns. A well-executed AVOD campaign has the potential for an incredibly high return on ad spend (ROAS) compared to other advertising formats.
Best Practices for Advertising via AVOD
While AVOD can be incredibly beneficial when done right, it's very easy to do it wrong as an advertiser — the following best practices can help you avoid some of the most common mistakes:
Put the User Experience First. Do not approach AVOD in the same way you would approach television commercials. Keep your advertisements short, simple, and straight to the point. Respect your audience's time by allowing them to skip your ad if they aren't interested.
Familiarize Yourself With Your Audience. Before you start pumping out ads, take some time to research your platform. You'll want to answer the following:
What kind of content is most common?
What is the demographic of the average user?
What are the platform's users most interested in?
Does the platform primarily serve short form or longform content?
Is this platform reputable?
What content moderation policies does this platform have in place?
Be Creative. An engaging, creative, or entertaining advertisement can go a long way towards not only bringing in new leads, but also generating goodwill for your brand. Don't be afraid to experiment with new formats and interactive elements.
Measure and Optimize. Approach AVOD the same way as you would approach any marketing campaign — identify and monitor KPIs while continuously looking for ways to improve.