Vubiquity – Cracking the code: navigating the challenges of monetizing FAST channels
Nate Frink, EVP Global Operations, Vubiquity
Free Ad-Supported Streaming Television (FAST) channels have emerged as an attractive option for content monetization. FAST offers a unique opportunity to monetize content that might not perform well in Video-on-Demand (VOD). Think of the back catalog of classic game shows. Driven by nostalgia, people will often watch, but will they search for them? And will major streaming services promote them?
According to S&P Global Market Intelligence, FAST’s US ad revenues approached $4 billion in 2022 and are expected to reach just under $9 billion by 2026. The promise of substantial advertising revenues is also a significant driver for FAST’s European growth. According to Omdia, by 2027, the opportunity outside the US is expected to be approximately $1.6 billion with strong expansion and increasing adoption.
When done right, FAST can generate real money, but channels face numerous challenges. And many struggle to simply survive.
The struggle is real: the reality of monetization
Take the example of Tastemade TV. Despite engaging content, the channel couldn’t attract a sustainable viewership due to a lack of differentiation from other food and travel content. By pivoting their strategy and partnering with multiple streaming platforms, Tastemade attracted 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.
The first could be described as the “field of dreams” mentality. “If you build it, they will come.” Many operators believe that merely distributing quality content will attract advertisers. This is a critical misconception. Without a robust strategy to attract advertisers, 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, channels without active monitoring face insertion rates as low as 5% or less, leaving unfilled revenue opportunities running as generic slates (we’ll be right back). A low fill rate and CPM mean operating costs exceed revenue, leaving channels financially strained.
The second hurdle is the technological complexity of FAST channels. Broadcast media benefits from decades of streamlined vendor support. FAST is still in its adolescence and requires integrating multiple technologies, an often fragmented process. Efficiently delivering high-quality video via the internet demands content delivery networks (CDNs) capable of handling fluctuating bandwidth. Plus, dynamically inserting ads without disrupting the viewer’s experience requires sophisticated ad-decision servers and real-time bidding systems.
Playback technologies must ensure that content is accessible across multiple devices and platforms, from smart TVs to mobile phones. Varying device specifications require adaptive bitrate streaming and robust transcoding. Analytics and reporting tools to monitor performance, viewer engagement, and ad effectiveness need the integration of multiple data sources and backend systems.
The fragmented nature of these technologies means any incompatibility can significantly hinder performance. It is not just a matter of assembling the right pieces; those pieces must work seamlessly together, a complex and ongoing challenge.
The third consideration are the many government regulations. For example, European FAST channels face the stringent requirements of the General Data Protection Regulation (GDPR) which mandates that consumers provide active consent before ads can be served. This regulatory hurdle significantly impacts the revenue potential for European FAST channels, adding another layer of complexity to monetization strategies.
FAST Forward to Profit
How do you overcome these common, yet significant, challenges? First, partnering with server-side ad platforms and matching ad marketplaces to your content 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.
Attracting FAST advertisers requires data-driven strategies, targeted marketing efforts, and strong relationships. Channels must demonstrate value to advertisers by leveraging viewer data and analytics to offer targeted ad placements.
FAST employs two primary monetization models:
- Revenue-Share: The platform sells ads and shares the revenue with the channel. This is the most prevalent model.
- Inventory-Share: Both the platform and channel sell ads and retain their respective revenues. This provides more control over sales and access to audience data.
In Europe, Revenue-Share models with syndication platforms are a more viable strategy since direct consumer delivery conflicts with GDPR requirements. Syndication endpoints, such as Samsung TV+ and Freevee, handle insertions and provide a single opt-in for ad delivery, a more straightforward path to monetization.
Additionally, the competitive landscape of streaming services necessitates continuous innovation. Channels must understand audience preferences to create content that attracts viewers and keeps them engaged. This ongoing effort can increase viewership, making the channel more appealing to advertisers.
Media companies need a managed services partner like Vubiquity who understands this technology’s intricate nature. Comprehensive, end-to-end solutions are essential for seamless operations. A full suite of services will help reduce your juggling act with multiple vendors. Careful partnering provides access to FAST technology expertise, allowing you to focus on creating content.
A streamlined approach ensures that channels operate efficiently and effectively, free from the technological hiccups that often plague FAST. This enhances viewer experience and optimizes your operational workflows.
The future is FAST
Despite the challenges, there is reason to remain optimistic about FAST’s future. Take the example of Pluto TV, a FAST pioneer offering a variety of channels and on-demand content. It succeeds by curating content that appeals to diverse audience segments. A user-friendly interface that mimics traditional cable TV with linear channels make it attractive to cord-cutters. The acquisition by ViacomCBS in 2019 expanded its offerings and secured financial backing.
The importance of matching content with the right audience cannot be overstated. Quality content can attract an audience and make money where it couldn’t otherwise. FAST also lowers the cost of making niche content profitable, provided the right ads match the content.
From technological fragmentation to regulatory hurdles and monetization issues, navigating this landscape requires expertise and innovative solutions. By simplifying the tech stack, partnering with ad platforms, and understanding regional regulations, businesses can unlock this burgeoning market’s full potential. Are you ready to take your content to the next level with FAST channels?
