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Considerations When Monetizing Your OTT Offering

Bleuenn LeGoffic

VP Strategy & Business Development, Accedo

March 2, 2022


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The video landscape continues to rapidly evolve, and OTT services need to follow suit. As recently highlighted by our Head of Products, Markus Hejdenberg, in a blog post on the topic, this includes the ability to constantly evaluate and optimize one’s feature set. However, a comprehensive growth strategy also touches on other cornerstones that together make up a successful OTT service. In this blog post, we will look at how video providers can leverage data to unlock new revenue streams and continuously monetize their offering as they scale.

Business model vs. monetization strategy

Before we focus on how to determine a monetization strategy, it is important to define what we mean. All too often there is confusion between choosing a business model and defining a monetization strategy. In reality the two things are very different. Video providers need to improve their monetization strategy, but this doesn’t necessarily mean changing their business model. The business model, whether that is Subscription Video on Demand (SVOD), Advertising Video on Demand (AVOD) or Pay-per-view, is linked tightly to the platform and the audience.However, in the fast-paced video world, it will not be enough to base your entire monetization strategy on these models. These will not generate the same revenue over time as is, because consumer expectations and business drivers are constantly changing. This means that video providers need a monetization strategy that will constantly evolve and adapt to current market dynamics and consumer expectations. Netflix is a good example of this. It has not changed the fundamentals of its business model, but has definitely innovated in its monetization strategy with mobile only offerings, or even proposing video games as a retention tool to augment successful content.So how do video providers build on whichever business model they adopt to create a monetization strategy?

The role of data

The ability to maximize revenue streams often starts with data. In order to push content recommendations, tailor advertising, or experiment with things like shoppable experiences, it is vital that you understand the behavior and preferences of different kinds of users. Without this intel, it will be very difficult to truly engage your audience. And without user engagement, it is almost impossible to unlock new opportunities for monetization.In a survey recently commissioned by Accedo, the vast majority (85%) of industry executives said that they are either likely or very likely to experiment with the user experience in a bid to harvest intelligence on usability and engagement. This may not come as a surprise but as our CEO, Michael Lantz, recently commented in an article for Videonet: while the OTT video industry is collating huge amounts of data, companies are often falling short in fully utilizing it to make the right business decisions.

Building a strong business model

Whilst monetization strategy is separate to the business model it is still important to start with a good base and build on that to create an engaging offering that consumers will stay subscribed to. Whatever the business model, an optimized user experience is vital for maximizing the path to monetization, ensuring viewers can quickly and easily navigate to the content they want to watch. If content discovery is not seamless, users will very quickly get frustrated and direct their attention elsewhere. For a subscription service, this generally means high churn. For an ad-supported service, less engagement means less value for advertisers.As outlined above, data plays an important role here, making it easier to push personalized content recommendations and simplify the path to content discovery. However, when it comes to generating advertising revenue, it is arguably even more important as it also helps service providers make a compelling case for advertisers who can now serve ads to a much more tailored audience. For providers operating under a hybrid business model, data can also help push recommendations of pay-per-view content that is most likely to be appealing to a particular subscriber.

Unlocking monetization opportunities

Video providers now need to expand their monetization strategy by creating new ways to engage with users. While certain engagement could lead to a new revenue stream such as a shoppable experience, they should be primarily evaluated and tested as a way to build stickiness with the existing user base. Looking again at the example of Netflix offering video games, this is being offered free to the user and that certainly represents a significant investment. It is also a win for Netflix which will gather a lot of data about its audience that is interested in gamification of the experience. This might then lead to a new revenue stream potentially if we think of Netflix as the next Twitch platform.Overall, we are seeing a number of new innovative opportunities arise. Many leverage immersive technologies to incorporate value-add experiences that can help video services open up entirely new revenue streams.One example is that of shoppable experiences which can be seamlessly integrated into an OTT streaming platform. As well as being a huge potential revenue generator for the service provider, it greatly increases value for advertisers while also giving consumers an easy route to purchase items they see on screen.This will be even more appealing when paired with next generation technologies. We have already seen some level of experimentation with Extended Reality (XR) functionalities, which can allow video providers to build an entire universe of immersive experience around their content catalogs. These premium experiences increase engagement and help to reduce churn, but they also open up potential new revenue streams. Imagine, for example, enabling your viewers to purchase virtual assets using XR functionalities on your platform. Service providers will need to revert back to the data to understand who is using this so they can effectively monetize it.

Making monetization work

There is no doubt that video service providers need to constantly evaluate their monetization strategies to stay competitive in a fast-evolving market. As consumption habits change, it may become more challenging to monetize one’s offering in traditional ways. At the same time, we are seeing new potential revenue streams emerge which give consumers a more compelling experience while enabling providers to differentiate their services. There is a clear need to distinguish product enhancement roadmap and monetization innovation projects, as they will not have the same KPIs for success nor the same need for investment.Data should be at the heart of any monetization strategy. All video service providers have access to insight about their audience, many are using it to some extent, but few are truly maximizing its potential. If done comprehensively, high-quality data should enable you to fully understand your audience, their consumption preferences, and habits. However, it should also empower you to experiment and make decisions that will have a real impact on bottom-line revenues.

This is why the Accedo One Saas platform offers an aggregated display of service analytics and user intel that helps companies make better decisions, fast. By basing all optimizations on real-world data, service providers can make sure that they are not only providing the best possible user experience, but also maximizing revenue opportunities. Accedo One handles the now and enables optimization but it also prepares our customers for the future with the capacity to test out new experiences custom made for the experiment.

Planning for the future

While getting the current monetization strategy right is important, it is also really important to always be planning what is coming next. It is about creating the foundation for your next investment so you can expand your monetization strategy. This could be about looking at new business features to add in the future, such as gamification, or creating other new revenue streams. Accedo One includes a marketplace of expert vendors that are pre-integrated, making it easy for video providers to test the features they believe will drive the next generation of the monetization strategy.To find out more about how Accedo One can be leveraged to help you scale your offering, book a demo with one of our platform experts.

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