Television has never been more popular but the way we watch it, and video content in general, is changing fast.
The men’s football World Cup in Qatar is a throwback in terms of our viewing habits because we just don’t watch live or linear TV like we used to.
According to Rakuten Advertising’s report titled 'Advertising in Economic Uncertainty: The Role of AVOD', almost half of people (44%) don’t watch live TV, while 86% watch at least some video on demand (VOD). Crucially, 38% of viewers watch only VOD and no live TV at all, reflecting the growing trend of ‘cord cutting’, where people are moving away from multi-channel TV subscriptions.
The world of connected TV (CTV) is changing too, for a combination of reasons including consumer behaviour, the economic climate, and industry changes. The recent decisions by leading subscription-only VOD services to offer ad-supported tiers is a game-changer for the advertising-based video on demand (AVOD) market.
Subs benched: how the cost-of-living crisis is fuelling AVOD
Viewers behind subscription pay-walls have, until recently, been out of reach for advertisers. Having risen sharply, the SVOD market is now in decline with the number of UK households holding at least one streaming subscription decreasing by almost half a million between April and June 2022.
The cost-of-living crisis has prompted people all over the UK to interrogate their monthly spending, with VOD subscriptions coming under particular scrutiny.
More than half of viewers (55%) say they’re considering cutting their paid subscriptions as a direct result of the crisis, while 65% are considering watching more free streaming services with advertising. This is even higher for younger viewers – more than 70% for 18-24 year olds – and female viewers.
Another factor in AVOD’s favour is the trend for subscription sharing with 45% of viewers admitting to sharing subs to mitigate the cost. More women (55%) than men (34%) say they do this. Understandably, younger viewers are more likely to share subscriptions as well as being more likely to subscribe to a service for a specific show, but, equally, they are likelier to cancel a subscription after watching that specific show.
See through to cut through: honesty and transparency are top of mind
The current social and financial climate mean viewers want ads that are honest and more empathic.
Luxury brands need to be mindful and show awareness of the economic landscape. Brands like John Lewis - which has partnered with fostering charity Action for Children - and M&S have used their traditional Christmas ad to highlight charitable and community causes.
Almost half (49%) of respondents want to see ads that are more transparent and honest because of the cost-of-living crisis, 42% want brands to communicate how they are trying to help, and 40% believe brands should make their advertising more relatable.
People are receptive to advertising, with 79% of viewers willing to watch between one and three ads as long as the content is of a high enough quality which means funny, engaging and relevant to their interests. Only 32% are bothered about already knowing the brand that is advertising to them.
Conclusion: AVOD/FAST is a key part of the media mix
There is a split in viewing habits. Almost three quarters of viewers (69%) follow the now traditional VOD trend of knowing exactly what they want to watch when they sit down but a similar number (64%) say they still frequently scroll through content to find something of interest. That behaviour aligns with the Free Ad-supported Streaming TV (FAST) experience.
Almost half of viewers (45%) use shortcuts on their TV remote to reach their favourite streaming service, while 56% often watch content recommended based on their previous viewing.
The industry now acknowledges that the direction of travel is towards a hybrid model with AVOD/FAST a key part of the mix. The flexibility and measurability of CTV advertising combined with a growing audience on AVOD can deliver significant success for agencies and brands in 2023.
