Asia was slower to launch Over the Top (OTT) video offerings compared to the western markets. However, statistics reveal that the market is starting to shift with Southeast Asia leading the charge due to the launch of new services, growing smartphone adoption and changing media consumption habits.
Global Web Index revealed that six of 10 countries with the highest watchers of online TV and streaming globally are in Southeast Asia.
Source: “Digital vs. Traditional Media Consumption” Release Q1 2017 by Global Web Index.
According to YouGov and Brightcove at CASBAA OTT Summit 2018, a majority of OTT subscribers in SG and HK are subscribed to a single service, indicating the growth potential for OTT adoption.
Source: OTT Payments, Tolerance to Ads and The Churning Points, presented by YouGov and Brightcove at CASBAA OTT Summit 2018
However, even as a growing number of digital publishers and broadcasters race into the OTT space, it’s becoming increasingly clear that a subscription-based business similar to that of incumbents like Netflix and Hulu would not be able to sustain newcomers. Increasingly, ad supported streaming models are gaining traction with publishers and broadcasters looking to make their mark and protect their revenue. There will soon be a wave of fresh, highly viewable and highly addressable OTT and video inventory available to marketers. But why, at a time when many print media outlets are racing to put up paywalls, is digital video once again embracing advertising (with a few notable exceptions)?
The single biggest factor adding drag to this full-sailed approach to subscription-based OTT is subscriber churn. While incumbent platforms with massive libraries can afford to constantly update their library with pricey new streaming rights and original productions, newcomers are forced to reckon with the possibility that a smaller roster of content may mean a base of subscribers that turns over every few months once they feel that they’ve seen enough, making subscription revenue difficult to predict and challenging to grow.
Given the increased difficulty to break into the already-crowded OTT space with a subscription model, newcomers will need to rely on ad-supported streaming models similar to those employed by Hulu and YouTube instead of pure subscription revenue employed by Netflix. This presents a tremendous opportunity for advertisers as viewers continue to shift their viewing habits to digital and premium broadcasters are forced to bring their programming to the smaller screen, creating new ad placements that combine the attention-grabbing quality of television content with the highly-measurable impressions of digital.
In Asia, we see this strategy embraced by two local providers: LINE and OONA. In Thailand, LINE chose to follow the route of AVOD and established itself as a premium, free OTT service, focusing on a strategy where they could add value to advertiser mandates via curated contextual show categories as well as granular user data. By offering granular audience packages, LINE relied heavily on programmatic PMPs in comparison to more traditional direct sales. While adopting a similar approach, OONA differentiated themselves by rewarding virtual currency to users – t-coins which can be redeemed for Telkom Indonesian products and a selection of branded goods. Users can earn t-coins for watching TV, sharing video ads, engaging with other viewers and access to Genie in the App, OONA’s patented artificial intelligence product. This entertainment offer arranges the content and ads according to preferences of a viewer.
The shift to AVOD in this region is further driven by iFLIX’s shift away from the traditional SVOD model the platform was launched in towards an AVOD model. iFLIX will now offer its services for free for all users with the introduction of advertising opportunities for brands. The success of iFLIX adapting to market demand is evident in the growth in customer engagement, with content consumption doubling in the last five months for an overall 22.84 billion minutes (43,500 years) streamed since launch.
Who wins – International or Local?
The arrival of Netflix and Amazon Prime on a large scale in APAC established the viability of the SVOD model. With that said, data from eMarketer shows that outside of Australia, Netflix has yet to make a significant impact in other Asian markets.
Source: Netflix Users in Asia Pacific, by country, eMarketer June 2018
Asia is significantly different when it comes down to video consumption habits of consumers. One of the key consumer trends in Asia, as highlighted by Brightcove, is the considerably higher tolerance to advertising.
Also, plaguing content distribution is widespread piracy and copyright issues. Social media channels that have user generated content like YouTube and Facebook still command a lot of user attention. In this context, the recent acquisition of EPL broadcast rights by Facebook for Thailand, Cambodia, Vietnam and Laos becomes particularly important. This increases pressure on both traditional broadcasters and pure play subscription based OTT service offering to experiment with more creative business models. It is no surprise that a large number of local SVOD offerings by Asia OTT operators have come into play as a result.
Time for marketers to embrace OTT as a strategic opportunity
The potential growth of AVOD also means that marketers will be able to benefit from both traditional TV and digital video in OTT. Some of these benefits are:
Advertisements are viewable by default with full-screen placements that put the main message front and center and often non-skippable. In fact, OTT returns the highest completed view rate of any video format at more than 90%.
Access to Unique audiences
Advertisers are able to connect with high-value consumers including cord-cutters and cord-nevers who may not be accessible through traditional TV.
Advertisers can maximise campaign dollars by serving ads directly to specific target audiences with real-time metrics to reduce wastage, as well as re-target known viewers of an ad to continue the narrative with the consumer.
The measurability of the digital world lets advertisers understand the cost of media, the players in the supply chain and placement of ads and evaluate success.
The benefits of OTT are evident but not without hurdles for complete adoption. Some of these factors include unclear industry standards, disparities in ad creative formats between buyers, sellers and third parties, a lack of general understanding about OTT and gaps in ad delivery infrastructure.
The ad tech industry should consider OTT as a separate ecosystem with its own unique requirements instead of categorising it as a standard digital video or TV buy. The future does look bright nevertheless; the industry is currently developing a technology standard specifically for OTT with Interactive Advertising Bureau Tech Lab recommending the use of VAST 4.0 to allow buyers to send through several creatives such as mezzanine, standard MP4, and VPAID. This enables publishers to choose the format they want to use and allow a publisher’s ad server or player to consume the right ad on-the-fly for the right format, device or application.
Where do we go from here?
The growth of OTT over the next few years shouldn’t come as a surprise. The question lies in the direction the industry will take – AVOD, SVOD or potentially a hybrid model. Global trends show that while SVOD models score the biggest points with consumers – Netflix’s dominance, Hulu’s gain in market share with it’s AVOD/SVOD hybrid model in the US, and Netflix’s recent test of pre-roll advertising for their programs – OTT providers are aware of the potential revenue from keen advertisers that might be the key to their survival in market.
Finding the right balance of maintaining a strong user-base and offering for advertisers will be key for successful OTT providers. The trend of AVOD providers showing incremental growth and market share alongside iFLIX’s recent product pivot indicates that AVOD might be the model of growth in this region. Coupled with the price sensitivity of Asian markets plus their tolerance for advertising, AVOD models have seen much more recent local success but only time will tell as we can expect to see consolidation once the industry’s growth slows and providers vie for market share.
This piece was contributed by members of IAB Southeast Asia and India (IAB SEA+India) Programmatic Committee:
● Lachlan Kean, Sales Director, APAC, RhythmOne
● Matt Ware, Head of Programmatic, APAC, MediaCom
● Nilesh Jadhav, Regional Director, Programmatic Supply, APAC, Innity
● Vivek Misra, Group Director, Strategic Initiatives, AnyMind Group
● Yu Yan Tay, Commercials Manager, dataxu
● Antoinette Patterson, Senior Demand Facilitation, JAPAC of SpotX