Advertising-based Video-on-Demand (AVOD) is an OTT video distribution model where audiences can watch free video content online and streaming service providers monetize content by displaying advertisements as part of the viewing experience.
Over the past decade, AVOD has become one of the most lucrative distribution models for OTT video. AVOD revenues for TV series and movies in 2021 reached $12.9 billion in the United States and more than $33 billion globally.
For content sellers working to maximize the value of their assets through strategic licensing, AVOD distributors can deliver access to a wide viewership in addition to excellent revenue-earning potential. Here, we take a look at the top 10 most popular AVOD platforms driving OTT content monetization strategy.
A quick history of AVOD
The first AVOD wave began with the launch of social video-sharing platforms like Dailymotion, Vimeo, and especially YouTube in the mid-2000s.
YouTube was officially launched in 2005 and grew rapidly, receiving a reported 100 million video views per day by July 2006. Following its incredible growth, YouTube was acquired by Google for $1.65 billion in October 2006.
YouTube was focused on building a dedicated ecosystem of content creators and consumers, but it was time for Google to shift some of that focus to monetizing the platform in a way that could start recouping their investment.
Google began running in-video ads on YouTube in August 2007, resulting in one of the earliest implementations of the AVOD business model. By 2009, YouTube was showing ads in seven different formats and YouTube audiences were generating more than 1 billion video views per day. YouTube is now the world’s leading AVOD platform. After four consecutive years of 30%+ growth in advertising revenue, the company is set to generate more than $30 billion of AVOD revenue in 2022.
The second wave of ad-funded VOD platforms launched in the mid-2010s, including services like Xumo (launched 2011), Tubi (launched 2014), and the Roku Channel (launched 2017). Unlike earlier video-sharing sites that relied on community-generated content, these newer AVOD services built digital libraries of movies and TV series licensed from content sellers, monetized the viewing experience with paid advertisements, and allowed audiences to watch for free.
As the AVOD distribution model continues to mature, a growing number of OTT streaming services (e.g. Amazon Prime Video, Netflix) are now leveraging ad-based video monetization, along with other distribution models, as part of a hybrid monetization strategy.
AVOD vs. SVOD vs. FAST – What’s the difference?
As OTT video streaming has grown in popularity during the past decade, AVOD has emerged as a lucrative distribution model for video content. At the same time, we’ve witnessed the rise of subscription video-on-demand (SVOD) streaming services where audiences pay a monthly fee for unlimited access to stream video content.
And in the last 3-4 years, we’ve witnessed the rapid growth of free ad-supported streaming TV (FAST), a new kind of OTT video streaming service where video content is monetized with advertisements and presented in a linear TV format that’s similar to traditional cable or satellite TV.
While AVOD, SVOD, and FAST all have unique origins, the largest OTT video streaming providers in 2022 are experimenting with hybrid distribution strategies that incorporate more than one model (e.g. AVOD, SVOD, FAST, transactional video-on-demand (TVOD), etc.) to maximize revenue generation.
The top 10 AVOD platforms for content sellers
1) YouTube
YouTube is the world’s largest and most successful AVOD platform, with 1.7 billion unique monthly visitors spending an average of 19 minutes per day on the platform. YouTube is also the second-most visited website on the Internet (right after the Google homepage) with more than 14 billion monthly visits.
As a social video-sharing site, YouTube has significantly lowered the entry barrier for content owners to share their video content with the world. Instead of licensing content, YouTube allows content sellers/creators to upload videos and receive a share of the advertising revenue depending on the viewership they generate.
2) Peacock
Launched in 2020, the Peacock OTT streaming service is operated by the TV and Streaming division of NBCUniversal, a subsidiary of Comcast. The platform has grown rapidly in just a couple of years, reaching 30 million monthly active users as of September 22. Peacock offers a free ad-supported subscription (AVOD), along with paid subscription options for an ad-free viewing experience.
Peacock distributes licensed TV show and movies from content sellers, original television content, news programming, and high-profile sporting events including the Olympic games, Sunday Night Football, MLB Sunday Leadoff, and Notre Dame football.
3) The Roku Channel
Launched by Roku Inc. in 2017, the Roku channel is a free, ad-supported streaming service available on Roku Streaming devices. The Roku Channel reported more than 63 million monthly active users in the US in August 2022.
Roku offers both on-demand (AVOD) and linear (FAST) content formats, licensing television and movie assets from Sony Pictures, Warner Bros, MGM, Paramount Pictures, and through other Roku channel partnerships.
4) Tubi
Founded in 2014 and purchased by the Fox Corporation in 2020, Tubi is one of the most popular AVOD services available. In early 2022, Tubi announced that it had reached 51 million monthly active users and a total viewing time of 3.6 billion hours of content in 2021.
Fox is spending heavily on content licensing for Tubi. The platform’s programming library includes more than 40,000 on-demand titles from 250+ different content sellers.
5) Xumo
Xumo launched in 2011 and was acquired by Comcast in 2020. The platform offers a selection of OTT linear television channels (FAST) and on-demand video content (AVOD), all funded by advertising.
Xumo acquires content for its 190+ FAST channels and on-demand video service through digital content licensing deals with content sellers like A&E Networks, CNET, Warner Bros. Discovery, and Paramount Global.
6) Crackle
Crackle was founded as an AVOD service called “Grouper” in 2004 before being acquired by Sony in 2006 and re-branded as Crackle in 2007. Sony eventually sold its stake in the platform to Chicken Soup for the Soul ENT. Crackle’s viewership includes 40 million monthly active users as of January 2022.
Crackle features a mix of original content, featured film and TV shows licensed from Sony Pictures, and licensed video from other content sellers like Epic Pictures, MGM, Lionsgate, BBC Worldwide, and Hallmark Entertainment.
7) Pluto TV
Owned and operated by Paramount Global, Pluto TV is a hybrid FAST/AVOD platform featuring ad-supported video content in both linear and on-demand formats. The platform boasts an engaged audience of 72 million monthly active users as of October 2022.
In addition to offering thousands of on-demand titles, Pluto TV offers more than 250 FAST channels across categories that include classic television, reality TV, movies, game shows, crime, lifestyle, and culture.
8) Hulu
Hulu has a unique story as an OTT video streaming service. The platform launched in 2007 as an ad-funded service but would launch a subscription-based (SVOD) service tier just three years later. In doing so, Hulu became one of the first OTT media companies to adopt a hybrid, multi-tier distribution strategy.
Hulu is now jointly owned by Comcast and Disney. The platform licenses film and TV content from networks like Bravo, Oxygen, and Fox Sports, as well as larger content sellers like Lionsgate, FX, DreamWorks Animation, IFC Films, and Magnolia Pictures.
9) Amazon Prime Video & Freevee
Prime Video is widely known as Amazon’s SVOD video streaming service, but the platform has been adding new content to its library of ad-supported TV and movies since 2019. Amazon also acquired the AVOD platform IMDB TV (now rebranded to Freevee) in the same year.
As part of these changes, many of the less popular titles owned by Amazon have been removed from Prime’s SVOD catalog and monetized with ads through its AVOD services. Amazon owns the largest content library available, licensing content from creators and sellers around the world. That includes deals with Universal Pictures, Lionsgate, FilmRise, MovieSphere.
Amazon says that more than 55 million monthly active users are viewing ad-supported content on Freevee and Amazon Prime.
10) Netflix
Netflix was one of the first SVOD services, launching in 2006 and growing into the most successful subscription-based OTT streaming provider with 220 million subscribers and nearly $30 billion in annual revenue (2021).
Netflix recently launched a new, ad-supported version of its streaming service. Instead of paying the full subscription price, audiences can opt to pay a lower monthly subscription fee for a viewing experience that includes advertisements.
Benefits of AVOD monetization for content sellers
Licensing content to AVOD video streaming platforms offers significant benefits for content sellers, especially the following:
1) Reach a wider audience
AVOD streaming services are generally free to watch, allowing content sellers to reach a broad viewership. Reaching a wider audience means creating more brand awareness in the market which can lead to downstream market opportunities like merchandising or converting AVOD viewers into SVOD subscribers.
2) Low barrier to entry
AVOD platforms offer content sellers a low barrier to entry to bring their content to audiences. Some sellers are even experimenting with uploading content to social sharing platforms like YouTube that are traditionally associated with community-generated videos.
3) Excellent revenue potential
AVOD platforms offer excellent revenue potential for content sellers. A typical AVOD licensing contract involves revenue sharing, where the platform and the seller split the ad revenue. Estimates vary considerably, but AVOD platforms often take between 30-50% of advertising revenue, with the rest paid out to content sellers. With annual AVOD revenues valued at $33 billion per year, this equates to billions of dollars paid to content sellers each year.
AVOD monetization challenges for content sellers
The proliferation of new AVOD and hybrid-monetized OTT platforms has made things significantly more complicated for content sellers who manage their licensing deals using legacy software tools. Some of the most common challenges include:
1) Tracking content performance
With multiple distributors reporting revenue at different cadences and with different licensing terms, it’s now more challenging than ever for content sellers to track the performance of their assets and know which titles and distributors are driving the strongest ROI.
2) Managing distributor compliance
Distributor compliance is another big challenge for content sellers managing licensing agreements across multiple AVOD platforms. Revenue leakage is preventable but depends on content sellers being able to find answers to questions like:
- Am I collecting what I should from distributors based on license agreements?
- Do royalties and payments received align with deal terms?
For content sellers that manage license agreements using legacy software tools, answering these questions is complex, costly, and time-consuming.
3) Forecasting distributor revenue
To maximize licensing revenue, content sellers need the ability to accurately forecast revenue, content demand, and distributor performance, but most content sellers rely on messy spreadsheet formulas to make an educated guess. A more data-driven approach to forecasting distribution revenue would help content sellers make better predictions about the future and stronger decisions about where and how to license content.
Maximize revenue from AVOD monetization with Revedia
Revedia is empowering content sellers with a data-driven approach to optimizing content licensing on AVOD platforms.
Our Revedia Digital platform gives content sellers the ability to:
- Aggregate and normalize data from multiple AVOD platforms using artificial intelligence to better understand content performance and ROI,
- Increase visibility into distributor compliance to collect the full revenue to which they’re entitled, and
- Accurately forecast revenue and distributor performance to make the best licensing decisions for maximizing future revenue.
Ready to Learn more?
Check out our blog Introducing the All-New Revedia Digital Platform for more details, or request a demo of Revedia Digital to see how you can maximize revenue generation from your video content on AVOD platforms.
