Editor’s Corner—Amazon rumors show ad-supported video picking up steam

Amazon's Fire TV Stick
Amazon Fire TV stick. (Amazon)

If Amazon is indeed planning to launch an ad-supported streaming service, it’s further proof that AVOD is claiming more prevalence in the streaming video marketplace.

According to The Information, Amazon wants to launch an AVOD on its Fire TV streaming devices. The move would expand Amazon’s current streaming video advertising efforts including Twitch, ads running during its NFL Thursday Night Football coverage, and ad-supported video on IMBD.

It’s unclear what content would populate such a service from Amazon but it is clear that Amazon is paying attention to what other similar companies are doing.

Roku is still ahead of Amazon Fire TV in the U.S. streaming player market, according to May 2018 figures from Parks Associates. And Roku is taking advantage of that through the launch of its own ad-supported Roku Channel. So far, it’s been having a positive effect.

Roku’s second-quarter platform revenue grew 96% year-over-year, with advertising revenue representing the largest driver. The company said ARPU in the second quarter increased 48% year-over-year to a record $16.60, driven by growth in video advertising.

“We’ve doubled ARPU over the last two years, driven primarily by advertising, with the majority of ad revenue coming from video ads we serve on ad-supported channels, and we also continue to see strong audience development and brand sponsorship ad growth,” said Roku in an earnings release. “To continue to fuel ARPU growth, we are expanding our access to advertising inventory supply and expanding our audience reach both on and off our platform through free, ad-supported channels (aka apps) like The Roku Channel.”

Apple TV also holds a significant piece of the streaming player pie in the U.S. The company is currently assembling a significant slate of original programming and it’s entirely possible that Apple will offer that content for free on an ad-supported basis.

And, of course Google, another big presence in the U.S. streaming player market, has YouTube.

While hybrid subscription/ad-supported services like Hulu have been a big factor in the U.S. VOD marketplace for years, more free ad-supported streaming services like Tubi, Pluto and Xumo have continued to grow their lineups with more free channels and develop experiences that are closer to the experience consumers expect from traditional pay TV services.

eMarketer earlier this year predicted that OTT ad spending will increase in 2018. The firm said this year, Roku’s U.S. ad revenues, which are mostly video, will hit $293 million, up 93% annually, and Hulu’s U.S. ad revenues will rise 13% to $1.12 billion.

Unreel.me, which was recently added to Roku’s preferred developers program, sees AVOD on the rise. Unreel Entertainment CEO Dan Goikhman said there’s still demand for both AVOD and SVOD, but that there are more people thinking about AVOD today and there’s more momentum in the OTT advertising space.

There’s clearly opportunity within the AVOD space to steal share in the $70 billion U.S. television advertising market. But the fact that major companies like Amazon are reportedly considering ad-supported streaming could also be a sign of fatigue from chasing Netflix. Netflix still completely dominates the U.S. SVOD market in terms of subscribers. Hulu is also growing fast and Disney is planning its own subscription streaming service for 2019. Amazon also has a significant subscriber count for its Prime Video service but it’s unclear how many of its 100 million Prime members actually watch the service.

In a world where the average U.S. consumer will only pay for three VOD services, and VOD success is still largely measured by subscriber additions, going after advertising revenue may seem like less of an uphill battle. — Ben | @fierce__video