Subscription-based OTT aha takes advertising route to drive revenue

Representative image.

At a time when US streaming giant Netflix is experimenting with advertisements on its platform, an Indian player, aha, has already taken the hybrid approach.

Last financial year, the company started offering brand solutions through which it earned $2 million in revenue. The company says it has doubled that in the first four-five months of FY23.

Following brand solutions, aha is now launching advertising on the platform that will let them run ads while they stream content. For running ads on the platform, they have partnered with Google.

With this, aha expects ad revenue to increase 5x in FY23 versus last year.

“We have on-boarded 50 advertisers so far. We expect revenue from ad inventory to contribute 25-30 percent to the overall business. We also want to do on-ground events and take those on the platform and from this segment. We are looking at 15-20 percent (ad revenue) contribution," Nitin Burman, Vice-President, Head, Non-subscription Revenue, aha, told Moneycontrol.

Tapping the ad market     

Aha, which is co-owned by popular film producer Allu Aravind, started in 2020, with just one language content—in Telugu—and offered subscription plans.

Since then, the platform has expanded both in language and revenue model.
The over-the-top (OTT) platform, which, earlier this year, added Tamil content, is now tapping the OTT ad market. This ad market is expected to grow to $2.4 billion in 2026 from $1.1 billion last year, according to a 2022 report by Deloitte.

"The advertising video on-demand (AVOD) market is 10 times the subscription video-on-demand (SVOD) market and that made us look at this market. If you look at Andhra Pradesh-Telangana, in the next two-three years, there will be 5 million subscribers. We have a subscriber base of 2 million. So, the next phase of growth that we saw was through advertising on the platform," said Vaasudev Koppineini, Senior Vice-President, content & non-subscription revenue business, aha.

Burman said overall, the Andhra-Telangana market contributes to around 8-10 million subscribers. "So now, we are reaching out to the audience from Tier II and III markets who want to pay less for subscription and are okay with watching content with ads. We will also launch our hybrid plans from October and give low entry-level ad plans, and device-specific plans," he said.

Advertiser associations 

While the upcoming festive period is the time when advertisers will test ad inventory on the OTT, Burman said that inventory in terms of sponsorships is sold out.

"When we started with brand solutions, we worked with FMCG clients, including HUL, Dabur, and ITC. Tech clients like Instagram and new-age companies like Swiggy and Zepto launched services by advertising on aha. Swiggy launched its Genie product in Hyderabad, while Zepto launched its service in the city by coming on board as co-presenting sponsor for Telugu Indian Idol," he said.

Zepto is further looking to enter Tier II and III markets by marketing on the OTT. The platform has also struck a deal with beverage brand Sprite. "To address the customers of AP/Telangana, Sprite is carrying the aha logo on its bottles and consumers use the logo to get access to its premium packs," said Burman.

The biggest boost in terms of advertiser interest has come from the non-fiction content slate, he said. "We created a game show for a gaming client and are replicating it for Tamil language. The Chef Mantra web series was created for advertisers like MTR Masala and Himalaya, targeting women. They are coming on board again for Season 2 of the series," said Burman.

The OTT is also looking at live commerce in the next phase of the AVOD model growth. "We will come up with buying while watching content. Currently, we are offering video inventory like banner ads. Also, we will limit the number of ads to one in the beginning and two-three in the middle and not bombard viewers with 10-20 ads in a 20-minute episode," said the official.

Cost of advertising

When asked about ad rates,  Burman said aha is charging 1.5x premium of what Google charges on digital in India. These ad rates will further increase during the festive period, he said.

Ad rates on video-streaming platforms, which are tracked through cost per mille (CPM) or cost per thousand impressions and cost per completed video (CPCV), range between Rs 75 and Rs 200 for a 10-second slot, according to industry estimates.

This can go up to Rs 450-1,200 for a 60-second slot. Ad rates during Indian Premier League (IPL) 2022 ranged between Rs 199 and 277 per CPM for a 10-second spot on Disney+Hotstar.

Competition and growth

Experts note that AVOD has the potential to unlock a big subscriber base as unpaid content reaches a larger audience, and 10-20 percent of the users opt for subscription plans.

Currently, the biggest chunk of the OTT ad market is taken by YouTube at 30-40 percent followed by Disney+Hotstar (around 20 percent) and MX Player (around 8-9 percent).

OTT players like MX Player and Zee5 are dialling up their regional content, especially Tamil and Telugu films and series. ZEE5, which follows a freemium model, saw its revenue growing from Rs 107.5 crore in Q4FY21 to Rs 161.4 crore in Q4FY22.

Koppineini said many players are looking at the Tamil and Telugu-speaking markets and that the ad strategy will help them challenge competition that have deeper pockets.

"Riding into profitability is difficult for OTTs because of the huge investments in content. Then, there is the limited subscription base and the wallet of the subscribers is also going to be shared with competition," he added.

Last year, the percentage of paying subscribers to total OTT consumers remained less than 10 percent in the video-streaming market, according to an EY-FICCI 2022 report.

But competition in the OTT ad space is also going to get stiff, especially with Netflix experimenting with the ad model. On the other hand, analysts believe that the AVOD market is a big one, which is expanding faster at 30-35 percent in India, compared to digital advertising, which is growing at an annual clip of 25 percent in India.