Tubi announced it's is now profitable as ad revenue in 2018 rose 180% versus 2017, with more than 1,000 advertisers running campaigns in the year.
Tubi — the ad-supported VOD platform — announced that the company is now profitable as ad revenue in 2018 rose 180% versus 2017, with more than 1,000 advertisers running campaigns in the year, per TechCrunch. Tubi further reported that viewing time on its platform in 2018 was more than four times higher than in 2017.
Tubi’s streaming success is notable at a time when the arena is heating up with similar AVOD platforms. AVOD platforms like Tubi are a type of OTT platform that features predominantly licensed content (movies and Tubi series) — as opposed to user-generated or publisher-uploaded content that appears on ad-supported social sites like YouTube or Facebook.
The original such AVOD platform in the US was Hulu, which offered users free, ad-supported streaming of Tubi shows. As consumers shift to streaming and adopt connected-Tubi devices, SVOD has exploded — but the industry is more recently seeing an adjacent surge in ad-supported streaming video offerings. The arena is filling with services like Hulu (with limited ads), Roku Channel, Walmart’s Vudu, Amazon’s recently launched Freedive, and Viacom’s recently acquired Pluto TV.
What’s primarily attractive about these services to consumers — aside from desirable content — may simply be that they’re free. AVOD services may become more viable because consumers are likely to self-enforce a household spend limit on supplemental SVOD. Consumers are more willing to adopt more services overall, but they still have fewer than three, on average.
Further, there are signs of rising demand and uptake elsewhere: Roku’s AVOD platform, Roku Channel, launched in September 2017 and is now among the top five channels for its 27 million users, with 90% citing the availability of free content as somewhat or very important to them, per a Roku survey of users. Streaming households are already supplementing viewing with these AVOD platforms, and we expect that behavior to grow alongside increased advertiser spend. Total ad dollars across all US OTT platforms is estimated to be up 40% in 2018 to about $2 billion, per Magna.
For those entering the streaming game this late, AVOD is potentially a safer bet because:
- SVOD competition is too intense. Netflix and Amazon may already have achieved such primacy in consumer households that the best case scenario for new entrants is to be the third service. More than half (53%) of consumer households say Netflix is an "essential" service, not a supplemental one, per TiVo. Even the largest of the new SVODs don't expect to unseat Netflix: Disney CEO Bob Iger has essentially positionedDisney+ as a viable complement to Netflix, rather than a replacement. In the same vein, Walmart recently abandoned its plans to launch an SVOD service targeted at middle America, pledging instead to reinvigorate its focus on Vudu, its ad-supported and transactional VOD service.
- It’s less capital intensive. Although these platforms still have to invest in infrastructure to ensure a high-quality user experience, the fact that consumers aren't paying for the service means they are under less pressure to shell out for high-profile projects, like “Friends,” “The Office,” or the buzziest hit at Sundance. For example, Tubi has focused on back-catalog hits, classics, and niche content for its platform, licensed from studio partners like MGM, Paramount, and Lionsgate. Its content outlay is significant — it plans to more than $100 million in 2019 — but that's not even 1% of Netflix’s estimated 2018 spending. It can stretch those dollars further, too: With more than 12,000 movies and Tubi shows, Tubi claims to have double the number of streaming titles as Netflix. These services also aren't under pressure to produce expensive, high-quality original content to differentiate themselves, as many SVODs do. Content will always be important, but the key differentiator for AVOD is likely not content but instead user experience — building a clean, intelligent (personalized) interface that's supported across lots of devices, with a minimally disruptive ad experience.