What is AVOD (Advertising-Based Video on Demand)? Everything You Need to Know

Co-Founder & CEO

In the digital streaming world, AVOD (Advertising-Based Video on Demand) has become one of the most effective ways for content providers to monetise their platforms. By offering free content to viewers in exchange for watching ads, AVOD gives users access to high-quality programming without a subscription fee. For advertisers, it opens up vast opportunities to reach a large audience with targeted messages. In this article, we’ll explore the inner workings of AVOD, its advantages, and how it compares to other popular monetisation models like SVOD and TVOD.

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What Makes AVOD Unique?

AVOD (Advertising-Based Video on Demand) offers free content to viewers, monetised through the display of advertisements. Unlike SVOD (Subscription Video on Demand), which relies on subscription fees, or TVOD (Transactional Video on Demand), which charges viewers on a pay-per-view basis, AVOD allows users to access a wide range of content at no cost. In exchange, viewers are shown ads before, during, or after the content they are watching.

The key difference with AVOD is its accessibility—users don't need to pay anything upfront, making it an attractive option for a larger and more diverse audience. For advertisers, AVOD presents a valuable opportunity to reach a broad audience by delivering ads to viewers in a more targeted, digital environment.

Key Benefits of Advertising-Based Video on Demand

AVOD offers numerous advantages for both content providers and users:

For Content Providers:

Scalable Revenue Stream: AVOD allows platforms to generate revenue based on the volume of views and the number of ads served. This makes it easier to scale, especially as the audience grows.
Large Audience Reach: By removing the paywall, AVOD platforms attract a broader user base. More people are willing to watch content for free with ads, which leads to a wider range of potential advertisers.
Low Barrier to Entry: AVOD offers users free access to content, lowering the barrier for new viewers to engage with the platform.

For Viewers:

Free Content: The major appeal of AVOD for users is the ability to watch content without any payment. This opens access to movies, TV shows, and more without the need for subscriptions.
Variety of Content: AVOD platforms often offer a diverse array of content, including niche genres, older films, and user-generated content that may not be available on premium subscription-based platforms.

AVOD vs. SVOD vs. TVOD: Which Model is Best?

When it comes to VOD (Video on Demand) models, AVOD, SVOD, and TVOD each offer unique benefits. Here’s a quick comparison:

AVOD (Advertising-Based Video on Demand)

Monetisation: Free content supported by ads
User Experience: Viewers watch ads in exchange for free access
Audience: Large, diverse audience with no financial commitment
Best For: Platforms seeking broad reach and scalability

SVOD (Subscription Video on Demand)

Monetisation: Paid subscriptions (ad-free)
User Experience: No ads, uninterrupted viewing
Audience: Loyal, paying subscribers
Best For: Platforms offering exclusive content and premium experiences

TVOD (Transactional Video on Demand)

Monetisation: Pay-per-view model (rent or buy)
User Experience: Users pay for individual content
Audience: Viewers willing to pay for specific content (like new releases)
Best For: Exclusive content, limited-time offers, or rentals

While AVOD is ideal for reaching a large, non-paying audience, SVOD and TVOD are better suited for users seeking premium or on-demand content with more specific revenue models.

How AVOD Works: A Deep Dive into the Process

Understanding the mechanics of AVOD helps content providers and advertisers harness its full potential. Here’s how AVOD typically operates:

Free Content Access: Viewers can access content for free, as long as they are willing to watch ads. This makes AVOD platforms highly attractive to viewers who are unwilling or unable to pay for subscriptions.
Ad Insertion: Ads are inserted before, during, or after content (pre-roll, mid-roll, post-roll). The frequency and length of ads depend on the platform’s model and viewer engagement.
Monetisation: Revenue is generated from advertisers who pay for ad placements. Ad rates can vary based on factors like viewer demographics, ad format, and placement within the content.
Targeted Advertising: Using user data and viewing behavior, AVOD platforms can serve highly targeted, relevant ads to different audience segments. This improves ad performance and overall revenue for platforms.

Best Practices for Implementing AVOD

To successfully implement an AVOD model, content providers should follow best practices to balance user experience and ad revenue generation:

Optimize Ad Placement: Ads should be strategically placed at natural content breaks, like scene transitions or between episodes, to minimise disruption and maintain viewer engagement.
Limit Ad Frequency: Too many ads can drive viewers away. Striking a balance between ad frequency and content consumption is key to maintaining user satisfaction.
Leverage Data for Targeting: Use viewer data to target specific demographics and viewing behaviors, ensuring that ads are relevant and effective for the audience.
Offer Multiple Ad Formats: Providing a variety of ad formats, such as skippable or interactive ads, can increase engagement and improve the overall viewing experience.

How Advertisers Can Maximise AVOD Potential

For advertisers, AVOD platforms offer a unique opportunity to reach a wide audience with targeted messages. Here’s how they can make the most of AVOD advertising:

Target Specific Audiences: By using data to understand viewers' preferences and behaviors, advertisers can serve highly relevant ads to specific audience segments, increasing the likelihood of engagement.
Experiment with Interactive Ads: Interactive ads, where viewers can engage directly with the content (e.g., clicking on links or making purchases), can enhance user interaction and drive conversions.
Measure and Optimize: Constantly monitor ad performance, including metrics like click-through rate (CTR), view-through rate (VTR), and revenue per thousand impressions (RPM), to fine-tune campaigns and improve ROI.

Tracking Success: How to Measure AVOD Performance

To evaluate the effectiveness of an AVOD strategy, it's essential to track key performance indicators (KPIs):

Ad Impressions: The total number of ads served to users is a direct measure of ad exposure and potential revenue.
Click-Through Rate (CTR): Measures how often viewers engage with ads by clicking on them, providing insight into ad relevance and effectiveness.
Revenue Per Thousand Impressions (RPM): Calculates how much revenue is generated per 1,000 ad impressions, helping to assess the profitability of ad inventory.
Viewer Retention: Keep track of how many users return to the platform and watch content again. High retention rates indicate that users are satisfied with the ad experience and the content offered.

Conclusion

AVOD (Advertising-Based Video on Demand) is an effective and scalable monetisation model for streaming platforms. By offering free content to viewers and generating revenue through targeted ads, AVOD provides content creators with a powerful way to reach a large audience. For advertisers, AVOD offers valuable opportunities to engage with consumers through highly targeted, interactive ads.

As the digital streaming landscape continues to evolve, the AVOD model will likely remain a key player in how content is monetised. By adopting best practices and measuring success with key metrics, content providers and advertisers can maximise the potential of AVOD to boost revenue, increase viewer engagement, and expand their audience reach.

FAQs

What is the difference between AVOD and SVOD?

AVOD is ad-supported and free for viewers, while SVOD requires users to pay a subscription fee for ad-free access to content.

Can AVOD generate significant revenue?

Yes, AVOD can generate substantial revenue, especially if the platform has a large user base and effective ad targeting strategies.

How can I optimise my AVOD platform for better performance?

To optimise AVOD, balance ad frequency, target ads effectively, and ensure that the ad experience doesn't disrupt the viewing process. Regularly measure performance metrics to refine your approach.

How can AVOD platforms attract a larger audience?

Offer high-quality content for free, ensure seamless user experience, and provide a mix of relevant ads to keep users engaged. The more attractive the content, the more likely it is to attract a wider audience.

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Dan Burcaw

Dan Burcaw is Co-Founder & CEO of Nami ML. He built a top mobile app development agency responsible for some of the most elite apps on the App Store and then found himself inside the mobile marketing industry after selling his last company to Oracle.