Is Server-Guided Ad-Insertion (SGAI) revolutionizing streaming monetization?

The Ad Experience Today and Tomorrow

In today’s streaming landscape, media and entertainment companies focus on saving costs and increasing revenue through various strategies. Besides the subscription model, companies are expanding their presence across platforms and finding the optimal ad strategy to monetizing their content.

According to Statista¹, the over-the-top (OTT) TV and video revenue was 74 billion U.S. dollars in the United States in 2023. A forecast suggested that the revenue will continue to increase to over 80 billion U.S. dollars in 2029. While SVOD will likely remain the largest segment, ad-supported streaming will show the highest growth rate. Another report² shows, the advertising revenue of free ad-supported streaming TV (FAST) in the United States is expected to reach over six billion U.S. dollars by 2025. This marks an increase of about 3.5 billion U.S. dollars compared with the estimate of 2021.

When it comes to monetizing streaming content, companies need more viewers to generate more revenue. However, too many ads or a poor ad experience can push your viewers to other OTT providers. The challenge is that today’s ad format is not great. Viewers, especially the younger generations, don’t like to be interrupted by full screen ads when they are watching engaging content. 

Additionally, the viewer experience includes both the content and the advertisements. The video quality of ads significantly impacts how viewers perceive the quality of the advertised product. Poor ad experiences can negatively affect this perception. Therefore, it's crucial to ensure that the ad experience meets high standards.

To keep viewers engaged while seeking new monetization opportunities, companies are exploring innovative ad experiences and enhanced personalization options. Ideally, OTT providers and advertisers can deliver relevant ads that viewers actually enjoy watching.

Technologies Today - CSAI and SSAI

Let’s take a look at the most adopted ad insertion technologies today.

The pros and cons of Client-Side Ad Insertion (CSAI)

CSAI involves ads being inserted into the content on the client side, meaning the user's device. 
This method is easy to get started with and requires low infrastructure, offering high levels of personalization and customization. However, it can be very difficult to achieve a smooth cross-platform experience and involves high development costs and custom implementation. Additionally, it is susceptible to ad blockers.

Figure 1: Pros and cons of CSAI

The pros and cons of Server-Side Ad Insertion (SSAI)

To overcome the shortcomings with CSAI, many companies have transitioned from CSAI to SSAI (Server-Side Ad Insertion). SSAI, also known as "ad stitching," integrates ads into the video stream on the server side before delivery, making it more resilient to ad blockers. This method is easy to implement across platforms but has some drawbacks, including higher latency and start-up times. Additionally, SSAI faces challenges with scalability and personalization, involves higher costs, and does not support new ad formats.

Figure 2: Pros and cons of SSAI

CSAI and SSAI each come with their trade-offs. How can we keep viewers engaged while maximizing monetization opportunities? How can we deliver a smoother ad experience that viewers appreciate while efficiently generating more revenue? Current ad technologies, CSAI and SSAI, fall short of meeting today's and tomorrow's needs. We need new ad technology that offers a better, easier, and more cost-effective ad experience while enabling more monetization options.

What is Server-Guided Ad Insertion (SGAI)?

Server-Guided Ad Insertion (SGAI) is a new approach coming up on the ad insertion horizon. It is an advanced ad-insertion technology where the player and ad-server dynamically guide which ads to insert based on real-time viewer data and context. The ad breaks are signaled by the server, the client-side video player handles the personalization, ad insertion and beaconing, with the ready to play ad content provided by the ad-server. 

Figure 3: How Server-Guided Ad-Insertion (SGAI) works

By logically redistributing responsibilities, SGAI combines the strengths of CSAI and SSAI to deliver an optimal ad experience. It combines CSAI’s scalability and advanced personalization capabilities with SSAI’s seamless viewing experience. SGAI ensures that ads are precisely tailored to individual viewer preferences while being smoothly embedded into the video stream, effectively avoiding issues like buffering and ad blockers.

Figure 4: comparison table of CSAI, SSAI and SGAI

In the server-guided approach, the video player plays a pivotal role as the ad experience coordinator, gaining detailed insights about the platform, ad break duration, user profiles, and session context to deliver the most relevant and timely ads.

This hyper-personalization targeting enhances viewer engagement. Furthermore, SGAI is highly scalable, allowing it to manage large amounts of ad inventory without needing extensive server infrastructure. This makes it both efficient and flexible in meeting different demands.

The Benefits of Server-Guided Ad Insertion

In the competitive world of streaming, striking the right balance between monetization and viewer engagement is crucial. The key to success is delivering an exceptional viewer experience.

Utilizing SGAI offers several significant business advantages:

• Simplicity with No Long Manifests or DVR Window Limitations: with SGAI the player only reaches out to the ad decisioning server when a break is actually going to be played. This removes the need to pre-populate the manifest with advertisements.
• Unmatched Scalability and Low Risk: with SGAI there is no central component in the backend (stitcher) that needs to scale to all viewers and impacts all viewers if something goes wrong.
• Guaranteed Ad Delivery: with SGAI the player only requests inventory when the ad break will be played, the ad break is served as one playable stream and is fully ready made by the POD serving, the player is in control of playback and can easily adjust to changing conditions and timing.
• Enhanced Analytics and Monitoring: with SGAI, the player handles ad splicing and is fully aware of the ad breaks. This means the player has complete information on the viewer, device, and playback session, allowing for detailed analytics through solutions like MUX, Conviva, and NPAW. This results in a high degree of insights into viewer behavior and ad performance.
• Real-Time Flexibility and Lower Latency: with SGAI there is no need to do the ad decisioning call ahead of time or at playback start, this improves the video start-up time and makes low-latency possible. Secondly the just in time request for ad breaks makes it highly usable for low-latency streaming.
• Optimized Viewer Experience: with SGAI, the player controls the splicing process, fully aware of upcoming breaks, platform specifics, and content conditions. This empowers the player to select the optimal playback and insertion strategy tailored to these parameters.
• Agility and Customization: with SGAI, there is no central stitcher (as discussed earlier), which eliminates a single point of failure that could impact all viewer sessions. This decentralization reduces risk and streamlines the process of making adjustments. As a result, customers can adopt new features and roll out releases more quickly and efficiently.
• Cost-Effective Operations: with SGAI, ad requests will only go out for breaks that will be effectively viewed. Through more insights in the different sessions, the ad server knows upfront what ads are playable and should be offered to the viewer. Therefore, it’s much more efficient.

Overall, SGAI enables streaming companies to maximize revenue while enhancing the viewer experience, providing a competitive edge in the industry.

The Pivotal Role of the Video Player

In the context of SGAI, the video player evolves from a component in your video workflow to a pivotal orchestrator within the whole workflow, enabling next-level ad experiences. It goes beyond only playing the content. With SGAI, the video player leverages insights of the platform, user, and session data to work closely with the server, delivering the most relevant ads.

This elevated role of the video player helps to enhance ad experiences and support innovative formats like L-shaped and double-box ads. Additionally, it plays a crucial part in achieving optimal latency by balancing buffer, device, and stream performance. As a result, the video player is the key element not only for improving viewer engagement but also opens up new opportunities for monetization, setting new benchmarks for ad delivery and overall streaming performance.

Server-Guided Ad Insertion with THEOplayer

At THEO, our journey into advertisement and SGAI has been shaped by various innovative projects and real-world challenges. We collaborate closely with our customers to enhance low-latency ad delivery using SGAI, exploring new applications and market needs to innovate future ad strategies.

Our venture into SGAI began with an internal project on low latency mid-roll ads. Testing both SSAI and CSAI, we found CSAI struggled with proprietary signaling and smooth playback, while SSAI increased latency and zapping time. This led us to adopt a hybrid approach, combining the strengths of both technologies.

We addressed smoother ad transitions on older smart TVs by modifying our player to prevent decoder resets, highlighting the importance of maximum stream awareness. Similarly, we resolved lip sync issues on smart TVs caused by inaccurate SSAI stitching by implementing a player-side workaround.

Collaborative efforts with various partners have confirmed that SGAI is the best solution for certain challenges. For instance, a joint customer of THEO and Google faced some challenges with their previous SSAI-based ad-insertion solution. By combining our technology with Google's through this client case, we identified SGAI as the optimal solution. Leveraging the capabilities of Google Ad Manager, we developed a powerful SGAI solution that we continuously innovate and refine, aiming to create next-level ad experiences to meet the evolving demands of the streaming industry.

Conclusion

Server-Guided Ad Insertion (SGAI) can revolutionize streaming monetization by merging the strengths of CSAI and SSAI. It combines CSAI's personalization and scalability with SSAI's seamless delivery, providing a superior ad experience that boosts viewer engagement and satisfaction.

SGAI delivers smooth transitions, innovative ad formats, and cost-effective scalability, meeting the demands of modern streaming. At THEO, we are at the forefront of this innovation, working with customers to enhance ad delivery and improve viewer experiences. 

References: 

1. Reference: Over-the-top (OTT) TV and video revenue

2. Reference: Advertising revenue of free ad-supported streaming TV (FAST) services

Other relevant resources: 

Webinar: The Future of Viewer Engagement and Monetization

Solution: Server-Guided Ad Insertion (SGAI)