Ad-based video on demand or AVOD is streaming that includes advertising. AVOD has been around since the 1990s, but in recent years was overshadowed by subscription video on demand (SVOD) services like Netflix and Amazon Prime. However, NBC Peacock, Tubi, Crackle and tiered services like Hulu are gaining in popularity, especially as advertisers are deploying creative advertising solutions that consumers don’t mind watching in exchange for free programming.

What Is AVOD?

Ad-based video on demand (AVOD) streams a variety of content for viewers who don’t want to pay monthly subscription fees. Simultaneously, AVOD offers opportunities for advertisers to reach streaming audiences. Unlike SVOD services, AVOD doesn’t always stream original or new programming. For example, before  it began offering original content, Hulu programming consisted of recent television episodes from partners NBC and Disney. Hulu is an example of a tiered AVOD service, where consumers can get free AVOD content with ads or pay for SVOD content without ads.

What Benefits Does AVOD Offer Advertisers?

AVOD offers advertisers access to streaming audiences who can often be hard to reach on subscription services like Netflix. The rise in popularity of smart TVs and cable cutting means nearly 200 million consumers in the U.S. watch AVOD services every month, making AVOD a potentially valuable channel for advertisers. “With streaming consumption still above pre-pandemic levels and digital ad spend steadily trending upward, ad-supported video couldn’t be better positioned to capitalize,” noted a recent Nielsen study on the rise of AVOD. In fact, only 26.3% of respondents in TiVo’s 2020 Video Trends Report said they would pay to avoid seeing ads. 

Advertising strategies and formats within AVOD include sponsored content, display banners, video ads and other streaming ad innovations, like pause and binge ads. More and more, streaming platforms and advertisers are making advertising palatable to consumers. Entertaining ads within streaming content is beneficial to streaming platforms, viewers and advertisers, as these ads are often more likely to be watched than content that feels disruptive.

“The simultaneous rise in both subscription online video and free AVOD consumption highlights increasing consumer awareness around content access. Free AVOD users show a high propensity to consume content; they are content hungry, not cost conscious. As AVOD services grow in popularity and improve their content offering and device accessibility, paid services will have to work harder,” notes Fateha Begum, principal analyst at London-based Omdia, a telecommunications, media and technology research firm. For advertisers that want to take advantage of consumer awareness and adoption of AVOD, it is essential to effectively leverage data, consumer preferences and viewing habits in order to target consumers and engage them across AVOD services.

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