Given the fact that consumers around the world are facing rising prices in all areas of life, it is hardly surprising that SVOD growth has slowed, and ad-supported content is surging in popularity. As I discussed in a previous blog post, the effect that inflation is having on the video industry is marked. Consumers are looking to reduce regular expenditure, and demand for perceived non-essential costs like SVOD services is on the decline. In a bid to address the resulting increase in churn rate, the likes of Netflix and Disney have already made the decision to introduce lower ad-funded tiers. It is quite reasonable that other SVOD service providers will follow suit.
It isn’t just stretched budgets that are causing more consumers to ditch paid services and sign up to ad-supported TV. There are other factors at play such as ad personalization, and a sense of being overwhelmed with choice, that have made ad-supported content more palatable.
The power of (ad) personalization
In the past, it was difficult to effectively target ads due to the lack of good usage and behavioral data. This meant many of the ads shown were not relevant, which was a waste of time for the consumer, and a waste of money for the advertiser. We now live in a time when a huge amount of information can be collected about users and as long as this information is properly handled, it can be incredibly powerful. Better technology allowing for improved data collection and analysis has made it possible for service providers to know more about their viewers’ behavior and preferences. This means that ads can be much more effectively targeted, and relevant, which will not only improve the value for the advertisers but also make the viewing experience more enjoyable.
Alongside the ad-supported models of AVOD and hybrid AVOD/SVOD, FAST channels have also started generating a lot of interest due to their immediate appeal to large demographics, and their relative simplicity to deploy and manage. The model is already being used by a number of popular platforms such as Roku Channel and Pluto.
The absence of subscription fees is, of course, a driving factor behind the rising popularity of FAST but another reason may also be its linear nature. According to a recent US survey, a significant number of adults aged 55 and over are still watching linear TV and continue to crave a viewing experience similar to the traditional TV environment they grew up with. It is also possible that, because consumers have had access to seemingly limitless content across a myriad of services, some are feeling overwhelmed by the sheer amount of choice and prefer to get a more packaged offering. FAST’s linear format partially takes away the need to choose what to watch, and this may well be a refreshing change for some consumers.
Now, this doesn’t necessarily mean that FAST offers less value for the user. These services can be designed to meet the needs of a particular target audience so that consumers are able to watch the channels of their choice, on their preferred device, wherever they want. In addition, FAST channels should evolve over time to adapt to user behavior and preferences. This differentiates FAST from other linear models such as cable, satellite and traditional digital, and makes it attractive to those consumers who still want a linear experience.
What challenges will the explosion of FAST create?
I believe that exclusive and high value content is best suited to the subscription model. Conversely, syndicated shows with many seasons or other types of programming can fit better within an ad-supported environment, where it’s all about generating the extra minutes of viewing to drive revenues. I believe that FAST will follow that same reasoning, with service providers retaining the high value content for the premium services, while creating different types of offerings for the FAST channels.
Without the promise of exclusive content, the FAST strategy to attract and retain users will have to be focused around offering a suitable and engaging user experience that will make users continue to watch your channel instead of moving to a competitor channel. Promotions and content discovery will be key, and the continuous monitoring and measurement of performance of the FAST channels will enable the providers to evolve into a gradually better offering. I believe that it will be increasingly important to provide a better and more attractive user interface around the FAST channels. With potentially hundreds of FAST channels available, the discoverability problem will rapidly become significant.
Effective ad-targeting will also be critical for FAST channels when it comes to customer retention because engagement rates increase when ads are of interest to the viewer. Ensuring that only personalized ads are used in commercial breaks on a linear channel can be difficult, in part because of the logistics around the varying length of ads, but also because you may not know enough about the user. Being in a position to enable high level ad-targeting is not only important because it will help to keep viewers engaged, but it will also help providers maximize their advertising revenue. This is going to be incredibly important for the success of any FAST channel. The complex logistics of advertising fulfillment and delivering personalization at a level never seen before is manageable thanks to the advent of sophisticated advertising solutions.
At Accedo, we’re always preaching about the need for the best possible user experience to fit your target audience. When moving to FAST services, it’s even more important. It is likely that FAST viewers enjoy simplicity and don’t like searching and browsing for content. It is important to aim to solve that simplicity requirement while at the same time offer the consumers a way to understand what’s actually available to them.
If you would like to find out how we can support your journey towards delivering an engaging, world class user experience for your FAST channel, please get in touch.
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