December 12, 2018

The Impact of Pause Ads on Streaming Platforms

According to a recently published Variety article, AT&T and Hulu announced plans to introduce pause ads on their streaming platforms in 2019. A pause ad is simply an ad that launches when the viewer hits the pause button on their remote control. In contrast to live linear television where the timing of the ad is controlled by the broadcaster, pause ads enable the viewer to control the timing of the ad experience because the viewer has to act (hit pause) for the ad to be launched. AT&T and Hulu are planning to run ads during this pause period in hopes of engaging the viewer before they leave the viewing area.

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Have AT&T and Hulu stumbled on to a winning concept? Will pause ads be a significant revenue boost for streaming services?

Why do Viewers hit Pause?
Common reasons to hit pause during streaming include answering the doorbell, receiving a call, or running to the kitchen or bathroom. We know that viewers do not hit the pause button in hopes of receiving an ad. However, if AT&T and Hulu properly educate their viewers about the ads, there will at least be an expectation of an ad appearing, and that will go a long way in building trust with the service.

Advertising 101
Looking at the traditional ad model, successful ad campaigns have the characteristics of being relevant, authentic, contextual, and engaging. Can pause ads achieve this goal? Let’s take a look:

Relevance
Yes, much like traditional advertising on linear television, technology exists that help the marketer to target ads for brands that are in a viewer’s consideration set. However, because streaming is a digital medium, ads can be inserted both dynamically and programmatically, based on data such as the type of content being viewed, time of day, type of device, geographical location and other demographic and psychographic information relevant to the needs of both the marketer and the viewer. It can be argued that pause ads have an advantage over traditional ads when it comes to targeting and relevance.

Context
Yes, if done correctly, a pause ad should be contextually relevant to the viewer. Perhaps a tasty food ad shows up as you get up to go to the kitchen after hitting pause. A cell phone ad runs just after you hit pause to answer a call on a 7-year old flip-phone. A security system ad runs as your doorbell rings. These are all examples of ads that are in contextually relevant to the viewer experience. The problem with pause ads is that you are talking about a limited number of products that would be relevant.

Engaging
Yes. talented creative ad agencies can develop ads that catch a viewer’s attention. Engaging creative can use eye-catching visuals, humor, or great music to catch the viewer’s attention. Pause ads, however, are shorter in duration, thus making engagement more challenging.

Authenticity
Yes, a talented creative ad agency can develop an ad that is authentic, even in short form. Creating an authentic feeling ad is the most difficult challenge to developing quality creative.

Pause ads check off all 4 boxes regarding the basic creative building blocks of quality advertising, but do I believe that pause ads will be a knockout success? In one-word NO, and here’s why:

In the world of quantum video, there are additional elements to be considered when evaluating the potential impact of an ad on the consumer.

Context is not Good Enough, Environment Matters
A consumer is much more receptive to an ad if their mind is open to receiving the message. For example, if I am shopping in a mall, ads will more likely matter to me because my mind is open to receiving commercial messages. Conversely, if I am on vacation and binge watching my favorite show at the pool, that same ad becomes less meaningful, because my mind is not as open to receiving messages, increasing the likelihood of me tuning out.  Hitting pause while streaming means that I want to take a short break and leave to do something else, thus the odds of the message getting through to me are remote at best.

Expectations
It took the linear television world, years, if not decades, to train the consumer to expect, and be open to traditional advertising. Linear ads are timed to break the action such as during an exciting part of a broadcast television event, or a during timeout in sports. In each case, some viewers are expected to leave and hurry back so as to not miss any of the action and those that stay are accepting of the fact that ads will run.

Streaming services are far away from getting to the point of their customer accepting pause ads, especially since most streaming services cost money and the consumer is not expecting to pay both a premium price and receive ads. Netflix, for example, received strong negative backlash when they inserted promos for an upcoming premier that was relevant to the content currently being viewed because the expectation is that Netflix is an advertiser-free Network.

Economic Realities
In TDG’s syndicated report “Thoughts on the Future TV – The State of Quality Content”, TDG makes the point that even the top streaming services won’t come close to break-even using a subscription model alone. The investment in original programming is so steep that even an industry leader like Netflix must find additional revenue streams to maintain their success. AT&T and Hulu believe that ad supported models are a way to help offset the cost of originals, and that pause ads are a logical way to generate additional income needed to compete.

Conclusion
Pause ads alone are not going to solve the revenue problem that streaming services are encountering.  It is faulty logic to expect an ad unit that comes at a time when the viewer is trying to leave the room to be effective. When it comes to premium streaming services, consumer expectations have already been set and adding any additional ad units would be perceived as too disruptive.

Companies like AT&T and Hulu realize they require additional revenue streams in order to provide competitive quality content. The best solution is for these companies is to have an honest dialogue with their customers, in order to come up with the proper mix of revenue streams to be successful. Regardless of outcome, pause ads at best will be a very small part of the mix.

 

A 20-year veteran media executive, Rob Silvershein’s success in today’s competitive media environment is a direct result of his unique experiences spanning traditional, emerging, and startup media platforms. He is an accomplished strategist and spends most of his time advising media companies on how to structure themselves for long term success. He currently lives in Manhattan Beach, CA.

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