Ad-Supported Streaming experiences significant growth in Q2

Kantar, a marketing data and analytics firm, recently published its latest Entertainment on Demand (EoD) data and analysis on the global video streaming industry. The EoD study revealed key trends in the global VoD market from April to June 2024:

Ad-supported streaming saw notable growth in Q2 2024, with AVoD increasing by 10% and FAST by 6%. Nearly half (49%) of households are open to accepting ads for a lower-cost service. Specific content remains a major factor in attracting new subscribers, highlighting the need for a steady stream of high-quality content. Bridgerton on Netflix was the most popular title in Q2, followed by Fallout on Prime Video. Discovery+ and Apple TV+ were the fastest-growing paid VoD services in the first half of 2024, with discovery+ leading in Q2. Prime Video regained the top spot for paid VoD subscriptions in Q2. Netflix continued to have the highest Net Promoter Score (NPS), with Apple TV+ rising to second place among major multi-market streamers, achieving an NPS of +33.

The growth of ad-supported streaming

The ad-supported streaming segment is experiencing significant growth within the global streaming market, both in paid (AVoD) and free formats (FAST). Both formats saw substantial growth in Q2, continuing a strong upward trend over the past year. Ad-supported services made up 47% of all new services adopted in Q2, emphasizing the increasing role of ads in the streaming video on demand landscape. More consumers are willing to accept ads, with 49% of households globally opting for ad-supported services to access more affordable content.

Andrew Skerratt, Global Insights Director at Kantar, stated: “Ads offer streaming services opportunities to diversify revenue while catering to diverse audience preferences, with tiered options providing consumer flexibility. However, the impact of ads on viewer experience is significant. Currently, only 22% of viewers enjoy the ads they see on streaming platforms, and less than a quarter find them relevant. Nearly one-third want more personalized ads, and only 20% associate a streaming ad with purchasing a new product or service, indicating room for marketers to improve their ROI.”

Among major streamers, discovery+ has provided the best ad experience, setting a high standard for viewer satisfaction and engagement. Ads on discovery+ are more effective than those on other platforms, with viewers appreciating the balance of commercials and the duration of ad breaks, enhancing their viewing experience.

Skerratt added: “Apple TV+ is currently the only major multi-market streaming service without an ad tier, but this could change. Despite having a smaller reach than some competitors, advertisers would value engaging with a premium, highly engaged audience.”

The growing importance of content recommendations

As viewers divide their attention among multiple streaming services, averaging 4.6 VoD services per household, the quality of recommendations becomes increasingly important. Currently, only 8% of viewers are satisfied with the recommendations from their VoD services, with Netflix leading in satisfaction rates. Netflix's advanced algorithms, now enhanced with AI, excel at learning from viewing habits to provide tailored content suggestions. The platform's dynamic thumbnails and personalized ads are effective, with 37% of streamers discovering new content on Netflix, far ahead of Prime Video in second place with 14%. Interface issues also contribute to cancellations; in Q2, 30% of cancellations were due to content dissatisfaction, while 24% were due to issues like difficulty finding content or poor ad experiences.

Skerratt noted: “Effective recommendations significantly impact viewer engagement and retention, often overlooked. Increasing user engagement is crucial for streaming services, as households frequently switch platforms, often due to a perceived lack of compelling content or attraction to specific offerings elsewhere.”

Top content enjoyment on Netflix and Prime Video

In Q2, Netflix saw high engagement levels, largely driven by the release of the new season of Bridgerton. This series was the most enjoyed and most viewed of the quarter, accounting for 14% of new subscriber sign-ups. Prime Video also performed well, with Fallout ranking as the second most enjoyed and third most viewed show of the quarter, supported by The Boys and Clarkson’s Farm. Disney+ saw success with the Japanese historical drama Shogun, which ranked sixth for most viewed and fifth for most enjoyed show, and the release of season 20 of Grey’s Anatomy attracted new subscribers.

Discovery+ momentum heading into the Olympics

Discovery+ continued to excel in Q2, building on a strong Q1 and becoming the fastest-growing paid VoD service by subscriber growth. Partnerships and strong advertising campaigns have been key to this success, along with a strong lineup of reality and sporting content. However, like Apple TV+, discovery+ faces challenges with higher churn rates, especially among households drawn to specific content. Discovery+ aims to maintain its growth with the upcoming Olympics, showing promising signs.