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Cracking the Code - Navigating the Challenges of Monetizi...

15/08/2024

By Nate Frink, EVP Global Operations, Vubiquity Free Ad-Supported Streaming Television (FAST) channels have emerged as an attractive option for content monetization. FAST channels offer a unique opportunity to monetize content that might not perform well in a Video-on-Demand (VOD) setting. Think of the back catalog of classic game shows. Driven by nostalgia, people will often watch them, but will they search for them? And will major streaming services even promote them?

According to S&P Global Market Intelligence, total FAST ad revenues in the U.S. approached $4 billion in 2022 and are expected to more than double to just under $9 billion by 2026. The promise of substantial advertising revenues is also a significant driver for the growth of FAST in Europe . According to Omdia, by 2027, the revenue opportunity outside of the US is expected to be approximately $1.6 billion. This growth will be driven by markets like the UK and Germany, which show strong expansion and increasing FAST adoption.

When done right, FAST can generate real money, but channels face numerous challenges on the road to success, and many struggle to simply survive.

The Struggle is Real: The Reality of Monetization Take the example of the Tastemade TV. At the initial launch, the channel struggled due to a lack of differentiation from other food and travel content. Despite the engaging content, the channel couldn t attract a sustainable viewership. However, by pivoting their strategy and partnering with multiple streaming platforms to increase its reach, Tastemade was able to attract a larger audience to become a prominent FAST player.

Despite their increasing popularity, many FAST channels still struggle to achieve profitability. There are three primary reasons for this.

The first issue could be described as the field of dreams mentality "If you build it, they will come. Many FAST channel operators believe that merely distributing quality content will attract advertisers. This is a critical misconception. Without a robust strategy to attract advertisers, simply having good content is not enough.

Consider the CPM (cost per mille), which calculates the total ad spend per 1,000 impressions. Many FAST channels grapple with ad marketplaces that don't match their content, leading to low CPM and lower revenue. Even worse, many channels without active monitoring face ad insertion rates as low as 5% or less, leaving unfilled revenue opportunities running as generic slates (we'll be right back). This low fill rate and CPM mean that operating costs frequently exceed revenue, leaving these channels financially strained.

The second major hurdle is the technological complexity in launching and maintaining FAST channels. Unlike broadcast media, which benefits from decades of streamlined vendor support, FAST technology is still in its adolescence. A FAST channel requires integrating a multitude of technologies, making it a complex and often fragmented process. Efficiently delivering high-quality video via the Internet demands advanced content delivery networks (CDNs) capable of handling fluctuating bandwidth requirements. Also, there's the need for sophisticated ad-decision servers and real-time bidding systems to dynamically insert ads into the streaming content without disrupting the viewer's experience.

In addition, playback technologies must ensure that content is accessible across a variety of devices and platforms, from smart TVs to mobile phones. Devices often have different specifications, requiring adaptive bitrate streaming and robust transcoding solutions. Plus, analytics and reporting tools to monitor performance, viewer engagement, and ad effectiveness necessitate the integration of multiple data sources and backend systems.

The fragmented nature of these technologies means that any disruption or incompatibility can significantly hinder the performance and reliability of the channel. Thus, it is not just a matter of assembling the right pieces. It's also ensuring those pieces work seamlessly together, making it a complex and ongoing challenge for organizations venturing into the FAST space.

The third consideration is the myriad of government regulations that vary across geographies. For example, European FAST channels face the stringent requirements of the General Data Protection Regulation (GDPR). Touted as the toughest privacy and security law globally, GDPR mandates that consumers must provide active consent before ads can be served to them. This regulatory hurdle significantly impacts the ad revenue potential for FAST channels operating in Europe, adding another layer of complexity to their monetization strategies.

FAST Forward to Profit So, how do you overcome these three common, yet significant, challenges? First, by partnering with server-side ad platforms and matching ad marketplaces to your content types, you can improve ad placement and monitoring. Continuously monitoring channels will ensure they hit the desired CPM and fill rates. Actively adjusting ad-run times, breaks, and targeting can provide better monetization outcomes. A well-matched ad marketplace matches ads, consumers & content.

Attracting advertisers in the FAST ecosystem demands more than just content creation; it requires data-driven strategies, targeted marketing efforts, and strong relationships with advertisers. Channels must demonstrate value to advertisers by leveraging viewer data and analytics to offer targeted ad placements.

The FAST ecosystem employs two primary monetization models:

Revenue-Share Model: The platform sells the ad inventory and shares the revenue with the channel. This is the most prevalent model.

Inventory-Share Model: Both the platform and the channel sell portions of the ad inventory and retain their respective revenues. This model can be advantageous for channels that want to ha
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