nScreenMedia OTT multiscreen media analysis

DTC ad-supported services to the fore

platform share of online premium video ads

Ad view growth is accelerating online driven by MVPD TV Everywhere and the new vMVPDs. However, direct-to-consumer (DTC) ad-supported video services like The Roku Channel, Pluto TV, and Dreams are set to take over.

Ad views growing strongly

According to the latest Freewheel Video Monetization Report, ad views in premium content continue to grow strongly. The company says ad views grew 35% between Q2 2017 and Q2 2018, and 17% in the previous year. Operator TV Everywhere portals and virtual MVPDs such as Sling TV and Hulu Live are driving much of that growth. This digitally syndicated content has expanded the share of total online video ad views from 29% in Q2 2017 to 39% in Q2 2018.

Sports have helped drive the growth. The Winter Olympics, the Super Bowl, and the FIFA World Cup all helped drive the increase in syndicated ad views. Over the last year, live streaming increased overall share of ad views from 21% to 33%, with two-thirds coming from live sports.

Another key driver in the growth of online ad views is the connected TV.  Freewheel says that the connected TV delivered almost half of ad views in Q2 2018, up from 28% two years earlier.

However, there are signs that direct-to-consumer ad-supported video services are poised to take back the initiative.

Expansion in DTC ad-supported services

One of the most visible ad-driven premium video services is also one of the newest. The Roku Channel is barely a year old but is already driving $60 million in quarterly revenue for Roku. It was also in the top 5 channels on the platform in Q2 2018, as measured by reach.

Other services are also seeing strong growth. Pluto TV, which was started well before the first vMVPD Sling TV came along, is having success with the traditional linear TV approach online. Jeff Schultz, Pluto TV’s chief business officer, says linear online’s time has come:

“What we feel pretty strongly about is our market position and how unique it is: we are a free virtual MVPD. Like Sling TV, YouTube TV, but free. We also create and curate channels that are brands that we own.”

The approach appears to be working for viewers and advertisers. Pluto has attracted 10 million monthly active users. It is also airing both national and local ads, including paid pollical spots in the run-up to the November midterm elections.

[Update: Pluto TV launched in the UK on the Now TV box from Sky today, 10/2/18. The UK is seeing similar growth in DTC ad-supported video services.]

Xumo, which provides a mix of live and linear free-ad-supported content, is also seeing strong growth. The company says it had 3.5 million monthly active users in July 2018, an increase of over 300% from the same time last year.

Dreams smartphone video service

Dreams smartphone TV service

Confidence in the smartphone as a premium viewing platform is also growing. Dreams is a new free ad-supported TV service for the smartphone that launched in June of 2018. Investors Box Group, NEA, SV Angel, and Ronny Conway’s A Capital Ventures are betting $5 million that the service can attract enough viewers and premium advertisers to make their investment pay off.

Free-ad-supported content targeting a premium viewing experience is also available from services such as CuriosityStream, VRV, Crackle, and others.

Time is right for DTC ad-supported services

SVOD services have attracted nearly 7-in-10 viewers to an online viewing platform. Once there, it is only natural for people to look around to see what else is on offer. As they tire of handing over credit card details to yet another pay service, the allure of premium video to watch for free is beginning to draw their attention. It could also be setting the stage for an acceleration in the growth of video ad views online.

Why it matters

MVPD and vMVPD online video offerings are driving the growth in online video ad views.

However, the growing number of DTC ad-supported services like The Roku Channel, Pluto TV, and Dreams seem to be finding an audience.

Expect to see online ad view growth increasingly driven by these non-traditional premium video services.



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