As the streaming landscape evolves, Advertising-Based Video on Demand (AVOD) has emerged as a compelling alternative to traditional cable and subscription-based services. Offering free or low-cost access to a wide array of content, AVOD platforms are reshaping how audiences consume entertainment. From Tubi and Pluto TV to ad-supported tiers of services like Peacock and Netflix, AVOD is becoming an increasingly influential force. This article explores the mechanics of AVOD, its benefits and challenges, and its role in the future of streaming.
The Foundation of AVOD
AVOD is a streaming model where content is available on demand, and access is funded by advertising instead of subscription fees. Viewers watch movies, TV shows, and sometimes original programming for free or at a reduced cost, while advertisers pay to reach audiences through strategically placed ads.
By 2024, AVOD platforms had captured a significant share of the global streaming market, with revenue expected to exceed $20 billion by 2026. AVOD appeals to a broad audience by eliminating financial barriers, making it especially attractive in price-sensitive markets and among younger demographics seeking budget-friendly options.
See also: Are Prop Firms Only for the Wealthy—or Is That Changing?
How Content Delivery Functions
AVOD platforms deliver on-demand content via apps and websites accessible through smart TVs, mobile devices, and desktops. The experience mimics SVOD platforms, allowing users to browse catalogs and stream instantly—but with ads integrated into the viewing session.
Common AVOD Ad Formats:
- Pre-roll ads: Play before content starts, preparing viewers for the session
- Mid-roll ads: Appear during natural content breaks, similar to traditional TV
- Banner/overlay ads: Display alongside or over video content, used more sparingly
Typical ad loads range from 4 to 12 minutes per hour, significantly lower than broadcast TV’s 15–20 minutes, preserving viewer satisfaction. Some platforms, like Netflix, are introducing features like “binge ads” that reward ad-watching with ad-free episodes to enhance the user experience.
Revenue Generation Through Advertising
The core revenue model in AVOD is built on advertising sales. Platforms sell ad space to brands, who target audiences based on:
- Demographics
- Viewing behavior
- Content preferences
Ad inventory is sold through programmatic systems, using algorithms for real-time placement, or via direct sponsorships for premium positioning. Cost-per-mille (CPM) rates—what advertisers pay for every 1,000 ad views—can vary from $10 to $50, depending on targeting sophistication and platform quality.
To ensure relevance, AVOD platforms use first-party data to match ads with viewer interests. A user watching sci-fi on Pluto TV might see ads for gaming consoles, while a viewer on a romance movie marathon might be targeted by travel or lifestyle brands. Strict content standards help maintain trust, blocking inappropriate or deceptive ads.
Content Libraries: Breadth Over Exclusivity
AVOD services focus on broad accessibility, prioritizing licensed titles and genre variety over exclusivity. Content libraries typically include:
- Older films and TV shows
- Syndicated reruns
- Niche genres (e.g., cult horror, classic Westerns)
Platforms like Tubi and Pluto TV feature thousands of titles, catering to casual viewing habits. Pluto TV, for example, mimics live TV with curated channels for news, sports, and entertainment.
While original content is limited, some AVOD platforms are developing low-budget productions to differentiate themselves. Tubi has launched original movies in thriller, drama, and romance categories to attract niche audiences. Still, AVOD platforms often lack access to blockbuster titles due to licensing prioritization by SVOD platforms.
Viewer Experience: Balancing Ads and Accessibility
AVOD’s greatest strength is its accessibility. Free access attracts users across income brackets, particularly in emerging economies and among Gen Z. Platforms are optimized for ease of use, offering intuitive navigation and compatibility across devices.
However, the inclusion of ads affects immersion. AVOD services strive to minimize this through:
- Shorter, less frequent ad breaks
- Strategic ad placements
- Skippable or interactive ad options
Some services reward extended viewing with ad-free perks, like a fourth episode with no ads after watching three with ads. The trade-off—ads in exchange for free access—is generally well-received for
casual or background viewing.
For advertisers, frequent ad slots ensure maximum exposure, though platforms must strike a balance to maintain user satisfaction. Premium AVOD tiers, like Netflix’s, offer a more polished, lightly ad-supported experience appealing to users transitioning from SVOD.
Challenges and Limitations
Despite its appeal, AVOD faces several hurdles:
- Revenue volatility: Dependence on ad spending makes AVOD sensitive to economic shifts
- Content quality: Focus on licensed, older content may struggle to compete with SVOD’s high-budget exclusives
- Licensing restrictions: Certain studios restrict their top content from appearing on ad-supported tiers
- Measurement limitations: Some AVOD platforms lack detailed analytics tools, making attribution harder for advertisers
Viewer retention is a challenge as well. While free access draws users in, poor ad experiences or shallow content libraries can lead to churn. To address this, AVOD services are investing in user experience, including curated recommendations and exclusive content where possible.
Opportunities for Advertisers and Creators
The growth of AVOD presents expansive opportunities:
For Advertisers:
- Access to a massive, diverse audience
- High CTV (Connected TV) viewership—over 40% of AVOD viewing in 2024 came via smart TVs
- Enhanced targeting through viewing behavior and genre interest
- Innovative ad formats, such as:
- Shoppable ads
- Interactive overlays
- Branded content sponsorships
For Content Creators:
- Global reach for independent or niche projects
- Platforms eager for fresh, cost-effective content
- Extended monetization window for older or catalog titles
While entry can be competitive, the low barrier to viewer access gives creators the chance to engage wider audiences without the need for a subscription gate.
The Future of Ad-Supported Streaming
AVOD is well-positioned to grow in tandem with viewer demand for affordable, flexible streaming. Looking ahead, expect to see:
- Expansion of ad formats (e.g., QR-based ads, gamified experiences)
- Increased investment in original content
- Platform bundling with SVOD services for hybrid monetization
- Live streaming integration, including sports and news, to drive real-time engagement
Services like Tubi are testing partnerships with retailers for interactive shopping experiences, while Netflix is pushing into live event sponsorships, broadening AVOD’s scope and value proposition.
A Transformative Model for the Streaming Age
AVOD represents a transformative force in entertainment—blending free access with smart advertising to create a mutually beneficial system for viewers, brands, and content providers. While challenges around content exclusivity and measurement persist, ongoing innovation and consumer demand continue to propel the model forward.
As streaming audiences diversify and content costs rise, AVOD offers a sustainable path forward—balancing accessibility, engagement, and monetization in a rapidly evolving digital media landscape.
