What is AVOD? A Complete Guide to Advertising-based Video on Demand

As video streaming continues to dominate digital entertainment, content publishers are exploring new monetization models that balance revenue with user experience. One standout approach is AVOD (Advertising-Based Video on Demand), which offers viewers free access to content while generating income through targeted advertisements.

This OTTclouds’ article will explain how AVOD works, compare it to SVOD and TVOD, explore the different ad types involved, and show why it’s becoming a go-to strategy across industries. Whether you’re a publisher, advertiser, or content creator, understanding AVOD is key to unlocking new opportunities in the OTT space.

>>> Explore more: 

• What Is Video on Demand (VOD)? Benefits, Features, and Platforms
• What is OTT (Over The Top)? What are the benefits of OTT?
• Key differences between VOD and OTT

What is AVOD?

AVOD stands for Advertising-Based Video on Demand, a popular monetization model in which video is made available for viewing on the Internet and supported by advertisements. Rather than charging viewers a subscription fee or requiring a purchase, AVOD platforms allow users to watch videos for free, with ads playing before, during, or after the content.

The appeal for audiences is clear: they get unlimited access to their favorite shows and videos at no cost. This has led to significant growth in AVOD viewership, especially in the U.S., where the number of users is projected to reach over 170 million by 2026. With such a large and engaged audience, AVOD remains a profitable and effective strategy for content platforms and advertisers.

AVOD, or Advertising-Based Video on Demand, operates through a strategic ecosystem of publishers, advertisers, content creators, and users.

Publishers

Publishers are OTT platforms that host or create video content. They generate revenue by allowing advertisers to place ads on their platforms.

The more engaging and high-quality the content is, the more viewers it attracts. This, in turn, increases the platform’s value to advertisers and boosts revenue for publishers.

By offering free access to compelling content, AVOD platforms naturally gain high viewership, which makes the advertising model even more effective.

Advertisers

Advertisers play a key role by paying for their ads featured on video content. Their goal is to increase brand awareness and drive customer conversions.

Publishers assist advertisers with targeting by using user-level data. This enables precise segmentation and personalized ad delivery, which leads to a better return on ad spend.

Content creators

Content creators are another essential part of the AVOD model. These individuals or teams produce and upload content to platforms, often without the platform needing to create or purchase content.

In return, creators earn a share of the ad revenue and can attract sponsorships, all while building their brand presence.

Users

Users are the final piece of the puzzle. They are the viewers who enjoy free access to their favorite shows and videos on AVOD platforms.

In exchange for free content, users watch ads placed throughout the video, making them the key to sustaining the AVOD revenue model.

See more:

• Automated Metadata Tagging: Streamlining Content Organization on White Label VOD Platforms
• Live Linear, OTT Linear, and FAST Channel – How Are They Different in the OTT Ecosystem?
• How do OTT platforms benefit from Programmatic Advertising?

The best examples of AVOD platforms

AVOD platforms are extremely popular in the U.S., where nearly half of all internet users regularly visit them.

YouTube is the most well-known AVOD platform, boasting over 2.5 billion active users worldwide. Users can sign up and watch content for free, but they’ll encounter ads before, during, or after their selected videos.

One of YouTube’s key strengths is its revenue-sharing model, in which content creators earn a portion of the advertising income. This model encourages creators to keep producing fresh content.

In addition to YouTube, other top AVOD platforms include Hulu, Tubi, and Pluto TV.

Tubi and Pluto TV are especially popular for offering a wide range of free content, from movies and TV series to live sports and educational videos.

Hulu combines the AVOD model with a premium, ad-free subscription plan, allowing users to choose between free content with ads or a paid experience without interruptions.

These platforms continue to thrive by offering diverse, engaging content for free while monetizing through ads — a win-win for users, advertisers, and creators alike.

How does AVOD work?

AVOD, or Advertising-Based Video on Demand, allows advertisers to pay for ad placements before, during, or after video content. This model enables content creators and platforms to monetize videos without charging viewers, making it ideal for streaming services, websites, and mobile apps.

To deliver these ads, AVOD platforms use two main types of ad insertion: client-side and server-side.

Client-side ad insertion (CSAI)

Client-side ad insertion (CSAI) is a method where ads are delivered separately from the video content and inserted in real time by the video player on the viewer’s device. When an ad marker is detected, the video pauses, a request is sent to an ad server, and the selected ad is played before the content resumes.

This approach offers advertisers greater control, flexible ad formats, and more accurate performance tracking thanks to real-time user data. However, it can lead to buffering issues, inconsistent performance across devices, and greater vulnerability to ad blockers, which may impact the viewing experience.

Server-side ad insertion (SSAI)

Server-side ad insertion (SSAI), also known as ad stitching or dynamic ad insertion (DAI), integrates ads directly into the video stream before delivery, creating a seamless and TV-like viewing experience. 

When a viewer hits an ad break, the server selects and stitches ads that match the video’s technical specs, ensuring consistent playback across devices and reducing buffering. SSAI is less prone to ad blocking and more reliable across platforms, making it ideal for delivering smooth, uninterrupted content.

However, it offers less real-time control over ad delivery, supports fewer interactive formats, and requires extra tools to accurately track user engagement and performance.

>>> Explore more: What is the difference between SSAI vs CSAI ads?

Advantages of AVOD

1. High Viewership Potential

A significant advantage of AVOD is its ability to attract massive audiences. Around 84% of viewers are open to watching ads in exchange for free content. This broad acceptance has driven AVOD revenue projections to over $41 billion in 2023, making it a profitable option for both publishers and advertisers.

2. Low Risk for Publishers

Unlike subscription-based platforms (SVOD) like Netflix or Disney+, AVOD platforms generally don’t need to invest heavily in content creation or licensing. Instead, these platforms often host user-generated or independently produced videos. Content creators upload their material, and publishers earn revenue by integrating advertisements. This model reduces upfront costs and allows platforms to earn from ad placements without significant financial risk.

3. Revenue Opportunities for Creators

AVOD platforms encourage a continuous stream of fresh content by offering revenue-sharing opportunities to creators. The more views a video garners, the more ads it serves, benefiting both the platform and the creator.

4. Advanced Ad Targeting

Advertisers benefit from access to diverse audiences and deliver highly targeted ads. Thanks to the publisher’s user data, ads can be personalized by behavior, demographics, or location, increasing the likelihood of engagement and conversion. This personalization’s level helps advertisers reach the right audience at the right time, increasing engagement and improving return on ad spend. This means better ad performance metrics and stronger relationships with advertising partners for publishers.

5. Flexible Ad Strategies

Publishers have control over ad formats and placement. Whether pre-roll, mid-roll, or post-roll, or the most effective moments to display them, this flexibility allows experimentation to balance user experience with ad performance.

Disadvantages of AVOD

1. Disrupted Viewing Experience

While AVOD provides free access to content, ads can sometimes disrupt the viewing experience. Poorly timed or overly frequent ads may frustrate users, leading to a decline in viewership or user churn.

In some cases, viewers may prefer to pay for a premium, ad-free subscription to avoid interruptions altogether. To retain users, AVOD platforms must carefully manage ads’ frequency, timing, and quality to balance monetization and user satisfaction.

2. Measurement Difficulties

It’s often hard to measure whether viewers are paying attention to ads. Passive viewing behaviors—like looking at a phone or walking away—make attribution challenging unless users directly interact with the ad.

3. Inconsistent Revenue

Since AVOD income depends on ad views and clicks, revenue can fluctuate. Skippable ads or low engagement can lead to zero earnings, making it harder for platforms to rely on a stable income stream. Some platforms offset this by offering optional subscriptions for more predictable revenue.

AVOD vs SVOD vs TVOD

SVOD (Subscription Video on Demand)

SVOD platforms charge a recurring subscription fee for unlimited, ad-free access to content. They often feature premium or original content, building loyalty among users. Examples of SVOD include Netflix, Disney+, and Amazon Prime Video.

Key Points:

• Paid access, no ads
• Offers exclusive and high-quality content
• Predictable revenue model
• Higher barrier to entry for users

AVOD vs SVOD:
AVOD is ideal for free, ad-supported content and wide reach, while SVOD delivers a premium, ad-free experience for paying users. AVOD offers flexibility; SVOD offers consistency.

TVOD (Transactional Video on Demand)

TVOD platforms allow users to rent or buy individual titles—no subscription needed. This model is often used for new releases or one-time viewing. A typical example of TVOD is Apple iTunes.

Key Points:

• Pay-per-title model
• Ideal for exclusive or new content
• No recurring fees
• Less user engagement unless they frequently purchase

AVOD vs TVOD:
AVOD offers free, ad-supported viewing, while TVOD charges per video. AVOD suits casual, ongoing viewers; TVOD targets users seeking specific content.

>>> See more: FAST Channel vs AVOD: What’s the Difference?

AVOD ad types

AVOD platforms offer a variety of ad formats, giving publishers flexibility in how they deliver advertising while balancing viewer experience. Here are the most common types of AVOD ads:

Pre-roll Ads

Pre-roll ads play before the selected video content begins. Since users are just settling in to watch, these ads are highly visible and minimally disruptive. It’s an ideal time to engage focused and ready viewers.

Mid-roll Ads

Mid-roll ads appear during the video, pausing content at a natural break. While potentially disruptive, they effectively reach an engaged audience and can deliver strong results strategically, with the right timing and frequency.

Post-roll Ads

Post-roll ads are shown after the content ends. These can be less effective since users may leave or lose interest once the main video ends. These ads must be quick and compelling from the start to capture attention.

Display Ads

Unlike video-based formats, display ads appear on the AVOD platform interface, on the homepage, or alongside search results. They help build awareness without interrupting playback.

Banner Ads

Banner ads are shown within the video player, but don’t pause the video. They are typically placed at the screen’s top, bottom, or side, offering subtle brand exposure during playback.

Interactive Ads

Interactive ads encourage users to engage directly, like clicking a poll, swiping a carousel, or playing a mini-game. These ads are great for boosting user interaction and creating memorable experiences.

Is AVOD the right model for publishers?

AVOD is a great fit for publishers looking to grow quickly and reach a wide audience without complex subscription models. It allows users to access content for free, making user acquisition easier and faster.

You don’t need to invest heavily in content creation. Independent creators can keep your library fresh while sharing in ad revenue. If you can maintain engaging, diverse content, AVOD offers a cost-effective way to scale and monetize your OTT platform.

How to get started with AVOD as a publisher

Ready to launch your AVOD platform? Here’s how to get started:

1. Choose a Video CMS: Pick a reliable content management system to upload, organize, and manage your video library.
   
2. Build Your OTT Platform: Develop your platform from scratch or choose a white-label OTT platform provider like OTTclouds to speed up the process.
   
3. Use a CDN: Select a content delivery network to ensure smooth and fast video streaming for your viewers.
   
4. Set up Ad Monetization: Explore ad types in-stream (pre-roll, mid-roll, post-roll) or out-stream ads.

You can successfully launch and monetize your AVOD platform by combining the right tools and strategies.

AVOD Streaming in Different Industries

AVOD (Ad-supported Video on Demand) is used in many industries to share video content and earn money from ads. It’s a great way to let people watch videos for free while still making revenue.

Entertainment and News

Streaming platforms like Hulu and Tubi use AVOD to let people watch shows and movies without paying. News channels like CNN and NBC News also use this model to show their news videos online, earning money from ads instead of charging viewers.

OTT Platforms

OTT (Over-the-top) services like YouTube and Tubi have grown fast with AVOD. Since people don’t need to pay to watch, more viewers come to these platforms. They offer all kinds of content from movies and shows to live events and tutorials, while ads bring in the money.

Education (EdTech)

AVOD is also helpful in education. It allows students to learn for free by watching videos with ads. This helps teachers and schools reach more students without extra costs. The ads can also be targeted, making them more useful for the viewers.

Sports

Sports teams and leagues leverage AVOD by launching their streaming platforms to broadcast games, highlights, and exclusive content. Ads integrated into these streams provide a consistent revenue source while keeping content free and widely available for fans.

Conclusion

AVOD offers a win-win model for everyone in the OTT ecosystem: publishers earn through ad revenue, viewers enjoy free content, and advertisers gain access to highly targeted audiences. With flexible ad formats, growing adoption across industries like entertainment, education, and sports, and the ability to scale without heavy content investment, AVOD is rapidly shaping the future of streaming. If you’re looking to launch or expand your OTT platform, embracing AVOD could be your most brilliant move—and OTTclouds is here to help you make it happen.

FAQs about AVOD (Advertising-based Video on Demand)