The Freemium Model: Role of AVOD in the Indian OTT advertising ecosystem

AVOD helps brands get an engaged audience and viewers get free content, here's how the freemium model is impacting the OTT space.

Jagruti Verma
Aug 16, 2021 04:50 IST
Freemium AVOD OTT

AVOD helps brands get an engaged audience and viewers get free content. Experts share what works in AVOD from a content and advertising perspective.

Ever since the closure of cinemas due to the pandemic-induced lockdown, there has been a rise in OTT consumption. A lack of new content on TV too added to this effect. Though both industries tried to stay afloat by opening theatres in areas and at timings it was safe to do so and by adhering to norms while shooting new content, it has been a tough ride. With all family members majorly staying at home, the pattern of individual viewing has definitely increased as it helps facilitate harmony in close quarters. Even when the theatres were open, in some places, people weren't allowed to take eatables inside — chipping away at the experience of it all. The convenience and choices offered by OTT platforms have been to help tilt numbers in their favour, helping the freemium model with advertising video on demand (AVOD) options.

According to a PwC report, India holds the most potential of any market in the world. It is expected that the country will overtake South Korea, Germany, and Australia by 2024, jumping to being the six-largest market with its OTT video revenue. "Subscription video on demand will be the prime driver of revenue, increasing at a 30.7% CAGR from US$708mn in 2019 to US$2.7bn in 2024," the report states.

Another interesting aspect of this growth is how it's helping the ecosystem at large. According to PwC, this new 'at-home' entertainment has led to the rise of direct-to-consumer apps, local ‘bite-sized’ entertainment platforms, and user-generated content (UGC) formats. This trend can be seen to be favourable for OTT advertising as brands get to tap into niche audiences that would not just watch the content and become potential customers but also engage in word-of-mouth and organic marketing.

The freemium model is like a cherry on top as it helps facilitate gains for both brands and OTT viewers, via AVOD. Especially, in the Indian market, where users are critical of paying a fee for content. For instance, when Netflix first entered India, many opined that the OTT platform will have to work hard to convince Indian content consumers to part with a premium fee. While there has been a shift over the years with research showing that Indian viewers now prefer renting content officially as opposed to owning it illegally (pirated content), freemium model played a key role in finding a mid-way that works for both parties.

Share Of The Pie

The OTT market is segmented into advertising video on demand (AVOD), subscription video on demand (SVOD), and transactional video on demand (TVOD). "The market remains highly focussed on the ad-based model (AVOD), where advertisements drive revenues. However, the COVID-19 pandemic was a great accelerator for the Indian SVOD market with OTT video subscriptions doubling to 60mn+," Mansi Datta, Chief Client Officer & Head – North & East, Wavemaker India tells us.

Saurabh Jain, Managing Partner – South, Havas Media India adds to the conversation, stating that the 2020 lockdowns acted as a propeller to the category. "In fact, local home-grown OTT players like Zee5, MX Player, Voot, Eros Now, Hoichoi, Hungama, Voot, and Alt Balaji, each have shown a significant rise in viewership – ranging between 75% and 150% – compared to the pre-COVID period."

A huge chunk of video advertising is taken up by the behemoths YouTube and Facebook. "The ad revenue of all these AVOD platforms still pales in comparison to these behemoths," Mansi tells us, adding that the key drivers of OTT growth include the growth of ownership of devices and low cost of data.

However, when it comes to brand safety, OTT platforms have a clear strategic edge over social media platforms feels Saurabh. "Content that goes on OTT platforms is checked and authorised. Whereas there have been instances in the past where the authenticity and ad transparency of certain social media giants have been compromised and questioned."

"However, with Facebook and other social platforms introducing short format videos, spends on these platforms are likely to increase as they work on a huge scale. Also, there is a huge performance element that is driven by social," he adds.

Also Read: How Netflix India uses Indian-Global parallels for better content discovery

Advertising On OTT

What works while advertising on OTT platforms? Especially, as consumers on these platforms arrive with the intention of consuming content and interacting with brands.

Mansi further tells us, "A big consideration for advertisers focusing on video advertising is on the completion of videos, reaching out to the critical mass audience for different audience cuts, building campaigns in a brand-safe environment and on platforms that match with the brand imagery. OTTs do score high on completion of videos, however, efficiency and other factors do come in."

"Longer duration videos work best for driving awareness through such platforms," Saurabh explains, when asked about which campaigns/ad formats work best on OTT platforms.

He adds, "With digital advertising, there is a lot of scope of layering campaigns with data/cohort that helps advertisers define their core audience and drive better ROI from their campaigns. Advertisers are also using their first-party data to reactivate their inactive users. Content integration is also an important aspect with paid subscribed users to engage and create a much larger impact."

Content Drives Change

In the freemium model, what potential does content hold?

"A few years back, a lot of consumption on OTT was driven by catch-up TV. However, now the scenario has changed with fresh original content being available on OTT (which is different from what's on TV). The content is different in terms of themes being explored, in audacity, in boldness with liberal policies in place," Wavemaker's Mansi tells us.

Unpacking this aspect more, she explains that OTTs have the advantage of being able to cater to different audience cohorts without worrying about catering to large sections of audiences. Additionally, this high-quality original programming is available in a flexible, on-demand manner across devices, offering consumers better, at will entertainment. "This high-quality fresh content availability is the driver that will pave the way for OTTs versus video sharing platforms," Mansi opines.

"OTT platforms like Hotstar are considered key drivers because of the release of direct to digital films during the pandemic period while there was a dearth of fresh content on television. The creation of hundreds of hours of original content on OTT platforms and episode-based content increased the demand for OTT subscriptions. In fact, there is a positive sentiment towards OTT platforms due to the rise in paid video subscriptions," adds Saurabh.

Inside the OTT Space

Giving a glimpse into how brands are leveraging OTT advertising to reach regional markets, Akshay Bardapurkar, Founder, Planet Marathi says, "The brands are looking for regional OTT players but currently barring Manorama Max and SunNxt, there is hardly any other AVOD platform in regional space. The brands are keen to be part of more regional-specific AVOD platforms across languages. It is going to be an interesting space for advertisers in the coming times."

"The trends I could see rising in the next few months are more regional OTT players, more category and interest-specific OTT players will be launched. With the lockdown opening up, the viewership might go down a bit. I could also see a lot of unreleased films will be premiered on OTT platforms," Akshay predicts.

Planet Marathi is currently in the process of creating some good ad inventories, keeping in mind the viewers' sentiments. They expect a good revenue stream from advertising.

The Indian market has perhaps always been driven in a manner where freebies are followed with a loyal consumer base and returns — provided the product/content cuts through. The same can be seen true for the freemium model with the rise of AVOD on OTT platforms, potentially leading the way for subscribers and an increase in interest for premium/paid content. There is also a great potential for regional markets here, provided the platforms pay heed to the winds and amp up their game to collect the gains.

With Inputs From Saloni Surti

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