FAST Return On Investment in Advertising

The Importance of Keeping Costs in Check and Opportunities for Improvement

In today’s ever-evolving digital landscape, having a tier of Free Ad-Supported Television (FAST) channels has become an increasingly popular model for media businesses, especially for programmers and streaming platforms. This model allows users to access content or services at a lower barrier to entry, drawing cord-cutters or cord-nevers who have stayed outside of the Pay TV ecosystem.

Since FAST channels offer no direct monetization from subscriber fees, ensuring that advertising revenue is efficiently maximized becomes crucial. A well-balanced approach to managing costs and optimizing advertising efforts can lead to better Return On Investment (ROI) and profitability. Let’s explore why/how keeping costs in check is essential to FAST success, and what improvements can be made to enhance the ROI of free ad-supported models.

Strategies for Improving the ROI of Free Ad-Supported Tiers

1. Improve user experience

The free ad-supported channel model works by monetizing content through ads. The content owner must therefore ensure that they pick the best distributors (including OEMs) who can reach the right audience while having critical mass. The distributors who own the user experience need to build and support a tech stack that will allow the FAST programmer to optimize and monetize ad inventory from a varying sales portfolio. In turn, the FAST programmer and the distributors must curate the ad load to enhance the user experience. High-quality, relevant ads can increase engagement, leading to more involved users. However, inefficient ad placements, such as too many and/or repeated ads, will drive users away – the exact opposite of what the programmer and distributor both want.

User experience is a central concern when delivering ads on FAST platforms, and incorporating user feedback to fine-tune ad content and format can help prevent negative user experiences. For example, if users express frustration with the frequency of ads or the types of ads being shown, the platform can adjust targeting strategies, reduce the ad load, or offer users more control over the ads they see. With this in mind, FAST programmers and distributors should strengthen user communication feedback loops, tooling, and transparency and align on mutual goals, like optimal fill rate and establishing a feedback loop, to monitor success against those goals. This could include using verification tools and implementing fraud detection algorithms.

Effective targeting, including Contextual and Behavioral targeting, is one of the most powerful ways to boost ROI in an ad-supported model. By understanding user behavior, preferences, and demographic data, platforms can serve personalized ads that are more likely to engage users. When ads are relevant to the audience, users are more likely to engage with them. As distributors collect more data about users, it can then be used in predictive analytics to further refine targeting, ensuring that the ads are not just reaching eyeballs but delivering engagement.

2. Optimize ad demand to maximize revenue

Because the free ad-supported model relies primarily on ad revenue, effective ad demand is essential. A FAST ad stack should be able to interface and connect optimally with programmatic demand. Programmatic advertising automates the buying and selling of ads through algorithms, ensuring that ads are served to the right audience at the right price. This involves working with several supply and demand distributors (like SSPs, DSPs, or ad networks) that provide the best rates and ads for the audience while allowing platforms to connect with a wide range of demand distributors and optimize the revenue they earn from each ad impression. By leveraging real-time bidding (RTB), platforms can dynamically choose which ad to serve based on factors such as bid price, ad performance, audience data, and more. This increases the efficiency of the ad process, reducing waste and increasing the overall ROI, and this goal is aided by the Ad Creative ID Framework (ACIF). Released by IAB Tech Lab in 2024, ACIF introduced the concept of the Universal Ad ID, which ties ads to a single Registered Ad Creative, enabling better decisioning, accurate frequency capping, and easier post-campaign reconciliation and measurement.

Exploring alternative revenue streams in addition to advertising can also complement the free ad-supported model and improve ROI. For example, offering alternate options with distributors such as ad-free experiences, sponsorships, brand placement, shoppable video ads, or pause ads can generate additional revenue without negatively impacting the user base, and will become more widely available in RTB later in 2025 with the Tech Lab CTV Ad Portfolio release, coming out of the Ad Format Hero initiative. Incorporating sponsorships and brand distributorships into the ad-supported model can provide lucrative, direct deals with advertisers, allowing for more controlled ad placements that maximize revenue without sacrificing user experience. Moreover, implementing features like ad-skipping options for video ads or allowing users to choose the types of ads they want to see can create a more positive environment and reduce churn. Using automated systems to select the right ad inventory based on real-time bidding can help in allocating ad placements more efficiently, ensuring that ads are only shown to the most relevant audiences. This helps advertisers avoid overspending on irrelevant impressions and ensures that each ad impression has a higher chance of converting into valuable user actions.

3. Minimize the cost of content production, delivery, and ad tech stack

For ad-supported services, content and ad delivery distributors, such as content delivery aggregators and ad servers, play a critical role in cost efficiency. Optimizing the infrastructure that delivers both content and ads can significantly impact costs. For example, the FAST programmer can work with different content aggregators and ad servers to balance costs and quality, while ascertaining the right mix that works best for them. They also need to keep a close eye on revenue per user (RPU) and work only with those distributors that are maximizing profits.

For most of the FAST programmers, producing content is the biggest cost, so they need to invest in their best-performing content Genres. Content is king, and it needs to be tailored to audiences’ ever-evolving preferences and needs to be relevant and engage the audience. FAST programmers must strategically curate their content, aligning with audience segmentation and catering to niche audiences who drive unique value to advertisers. Real-time data analysis can be leveraged to monitor performance across multiple distributors and adjust, as necessary. Continuous monitoring and analysis can help identify which content & ads are working, which are underperforming, and where opportunities exist to optimize. By utilizing this data, FAST distributors can shift spend to the highest-performing content and further enhance the ROI.

Driving Sustainable ROI in Free Ad-Supported Models

Maintaining ROI in the FAST channel model is crucial for long-term success, especially as advertisers and platforms face increasing competition for user attention. Managing content and ad spend efficiently, optimizing ad delivery, adding new ad formats, balancing ad load, and continuously refining strategies can help ensure that costs are kept in check while driving significant revenue from advertising.

Businesses can maximize their ROI in these free-tier advertising models by focusing on the user experience, integrating data analytics, leveraging programmatic solutions, and exploring new monetization strategies. With the right balance between content, ad spend, and user engagement, companies can continue to provide valuable content to users for free while turning their ad-supported tiers into highly profitable revenue.