How to Scale and Accelerate Ad-Based Monetization
Advertising is now being or about to become the default monetization model for streaming in general; the outstanding question is more related to “how to scale” and “how to accelerate” rather than when to transition. Streaming service providers have all embraced this model or have started migrating towards this way of doing business, reaching different optimization stages. In a nutshell:
- FAST platforms are still relying on an “exclusively ad-based” business model
- Best-performing native streamers now see AVOD as the fastest-growing vector for new users’ acquisition
- Aggregators are already in an optimization phase, often using “subscription with ads” hybrid models
- Broadcasters are trying to make the most out of Addressable TV directly (D2C) and through their distributors (e.g., with revenue share).
- Operators are just starting to embrace this model, diversifying their revenue sources besides pure subscription plans.
In all cases, growing ad revenue without impacting the user experience is a challenge that can be tackled in multiple ways, for instance, by:
- Optimizing the distribution of linear ads
- i.e., pre- and mid-rolls (patterns, duration, workflows, …)
- Better selling existing inventory (at a higher CPM price point)
- e.g., with a performing Sales House, ideally in the publisher’s local market
- e.g., with 1st party data enabling better targeting
- Creating a new type of inventory with non-linear ad formats
While the first two options are interesting, this blog post will focus on a new approach, the last option. Today, only a few streaming platforms are leveraging this format, but the value proposition leads us to believe that this type of ad unit will likely grow massively in the coming years.
For instance, according to the last IAB Europe / PubMatic report on the state of online video advertising in Europe, “Sixty percent of advertisers view non-linear TV as a means of expanding the reach of broadcast campaigns.”
Whether interactive or not, non-linear ads are an opportunity to grow your business.
What are non-linear ads?
Before we discuss business models and use cases, we thought it would be wise to review definitions at this stage. Suppose we refer to the IAB reference specifications. In that case, we will retain that “non-linear video ads typically serve as images that “overlay” the video content. The ad runs concurrently with the streaming content, so the user sees the ad while “viewing the content without interruption.”
It is essential to realize that non-linear ads are independent of streaming workflows. In other words, non-linear ads can apply to any streaming workflow (such as live, VoD, catchup, start over, cPVR, time-shift TV, etc.).
Secondly, depending on the actual layout of the creatives and the rendering on the player side, non-linear ads may either overlay the video content or be displayed next to it. The experience is less impacted or non-disruptive since there is no ad break.
Considering the different types of non-linear video ads, we typically see static images (Display format) and video (with or without audio). Non-linear video ads need some care as they mean that two videos (ad and content) are potentially running side by side, which can be pretty challenging to handle from a UX standpoint.
Non-linear ads: use cases
Unlike linear ad formats, which are typically limited to pre-roll, mid-roll, and post-roll breaks, non-linear ad formats span across a wide range of use cases, including but not limited to:
- L-banner (aka L-shape) during content or when switching to a new program
- Split screen
- Pause TV
- Overlay (e.g., for product placement or branding)
- PIP (Picture in Picture)
The following snapshots are UX illustrations of non-interactive and interactive (shoppable in this case) L-banner ads.
Benefits of Non-Linear Ad Formats
Non-linear ad formats offer multiple benefits. What is interesting is that they enable multiple monetization use cases. They effectively offer a triple win for all parties in the advertising stack (advertisers, publishers, and end-users).
Better monetization without audience troughs
We can see a typical audience pattern if we zoom into what WURL, APPLOVIN, and ADJUST have highlighted in their “State of CTV in 2024” market report. As expected, many viewers stop watching TV at the beginning of the ad break and slowly return to the front of their devices when the next program resumes. This is a well-known drawback of pre- and mid-roll ad breaks (linear ads), which strongly impact viewer sessions and ad revenue. What we did on the following chart is to overlay a simulated projection of what viewer sessions would look like with non-linear ads. As one can see, the expectation is to have a much smoother audience pattern, avoiding troughs of ad impressions. In this scenario, the area in every trough is effectively the revenue loss. Non-linear ads would help to clear.
Technology options
Today, we can see the following types of options emerge
- Proprietary/closed ecosystem: client-side
- Proprietary/closed ecosystem: server-side re-encoding
- IAB SIMID standard-based solutions
Option 1 may look like a shortcut, but it is typically a limiting path at some point. The recent “Ad Format Hero” initiative launched by IAB Tech Lab in October 2024 sends a strong message to the industry. In other words, the time to align, standardize, and normalize has come!
Option 2 may seem appealing in the first place, but it rapidly suffers from scalability issues, especially in programmatic, where the number of combinations (ad + content) can quickly explode. With this approach, content must be re-encoded for the duration of the non-linear ad, as many times as ad campaigns count, multiplied by the number of monetization occurrences within the content. More importantly, going down a proprietary path and being cornered into a non-standard ecosystem is a significant risk. The Ad Technology stack is evolving rapidly. Any publisher moving into a solution based upon black boxes and non-standard interfaces will likely face compatibility challenges at some point.
Option 3 deserves some attention. It leverages a standard-based specification from IAB called SIMID (Secure Interactive Media Interface Definition). IAB SIMID is replacing the VPAID deprecating format. While IAB OMID brings a standard way of verifying and measuring, IAB SIMID uses interactive and/or non-linear ad formats.
What is compelling with the IAB SIMID approach is that
- It scales
- It is future-proof (IAB standard-based)
- It is fully compatible with SSAI (see SSAI vs CSAI blog) and does not require CSAI or SGAI (Server Guided Ad Insertion).
- It opens the door to very advanced scenarios, including a high level of interactivity (polling, gamification, voting, …).
Conclusion
As seen above, non-linear advertising is gaining momentum, which is no surprise. With a value proposition concurrently benefiting advertisers, publishers, and viewers, this type of ad unit brings significant incremental ad revenue potential to the digital advertising equation. For publishers trying to optimize their ROI or those simply starting their migration to ad-supported business models, non-linear ad unit formats are a unique opportunity to grow their ad revenue at an accelerated pace.
Publishers can enter a new monetization phase with L-banner ads, split screen, pause TV ads, product placement, and branding. Making those ads interactive (e.g., with “Click2” shoppable TV ads) is the next logical step to grow the CPM revenue further or even move to a performance advertising model. Broadpeak has an IAB SIMID-compliant ad tech stack and is deploying this technology today. If you want to know more about the strategy options, the ecosystems, and the solution, see a demo, or learn how to set up a PoC, we’ll be very excited to engage with you.
Ready to rethink your ad game?
