For a while, Tubi was the biggest independent name in streaming. The company was still private when it surpassed Crackle and other competitors to become what it claims is the "world's largest" ad-supported service -- a title it backs with an impressive 25 million monthly users and 160 million monthly viewer hours.

Numbers like these made Tubi all the more appealing to potential buyers, and it was eventually snapped up by Fox Corporation (NASDAQ:FOX) in a deal that was announced in March 2020 and finalized in April.

Fox now has its own ad-supported video on demand (AVOD) service, and it's a big one. But there are a lot of players in the AVOD space. Like Fox, ViacomCBS (NASDAQ:VIAC) recently acquired one (Pluto TV, which is ad-based but not strictly on-demand). Streaming media platform company Roku (NASDAQ:ROKU) has the Roku Channel. Tech giant Amazon has an AVOD option through IMDb TV (it's also in the subscription video on demand, or "SVOD," space). Crackle, the elder statesman of the group, is still around as well. Smaller and newer services like the independent Popcornflix and the new effort from media server company Plex, round out the selection. That's a lot of options for consumers and advertisers alike. The question is: Is it too many?

A couple watches TV

Image source: Getty Images.

AVOD's role

Not so long ago, AVOD seemed like an also-ran among streaming strategies. At least among the general public, there didn't seem to be much interest in services like Crackle. The ad loads were too high and the content selection too poor. SVOD services like Netflix looked far more likely to dominate the future of streaming.

AVOD has gotten bigger for a few reasons, but one of the most important is addressable advertising. Being able to target advertising helps AVOD services operate leaner and cut ad loads. At its best, AVOD wins fans among consumers with low ad loads and quality titles for free, then sells the ad space to advertisers eager to target specific demographics. Viewers stream more and more (giving AVOD services more and more information through their viewing habits and accounts), advertisers buy more, and services reinvest in quality content that keeps the cycle going. It doesn't always work this well, but it can -- and that's a big part of what makes the Tubi acquisition so important for Fox.

AVOD services are among those benefiting from the streaming surge that has accompanied the coronvirus pandemic. And unlike the SVOD competition, AVOD services don't have to worry about how subscription costs may look in an increasingly fractured streaming market and at a time when so many are unemployed. In theory, AVOD services should be much better equipped to weather the storm should customers start feeling subscription fatigue. So far, all signs point to good news for AVOD.

Crowded house

With that said, advertising is a complicated industry right now, one that some observers believe is ripe for consolidation. Speaking to MultiChannel's Jon Lafayette, several ad sales and ad tech executives expressed concern over the future of legacy ad tech and overlapping roles at a time when connected-TV advertising is surging and ad-tech acquisitions -- and AVOD acquisitions in particular -- seem to be everywhere. Fox was already involved in ad tech and sales before it acquired Tubi; how much of that is redundant now? We could ask the same question of ViacomCBS and Pluto TV, or even Comcast's Fandango, which recently bought Vudu (a digital media marketplace as well as an AVOD service) from Walmart.

The conflict within companies is one thing. What about the conflict between them? These sorts of services and ad-buying platforms are an increasingly big deal to buyers, but they're also an increasingly big deal to the wide range of companies getting in on the sales side. For years now, Roku has focused on ad sales instead of hardware profits. Other AVOD competitors are arriving from the streaming media and content creation side. Still others have been in advertising all along. This gives ad buyers a lot of options, and it doesn't take an economics degree to figure out how changes on the supply side might affect advertising prices.

Choices galore

So far, there seems to be enough advertising to go around. A huge part of the surge in AVOD is the behavior of viewers. As mentioned earlier, streamers are devouring more and more AVOD content, meaning that ad sellers have more and more to offer ad buyers.

But how many AVOD services will consumers be able to support in the long run? The free nature of the services means that consumers could theoretically use all of them. But checking out each of these AVOD libraries doesn't do as much for consumers as one might imagine, because many of the key titles in each library overlap (for that matter, they often overlap with Amazon Prime's library and Hulu's library, too). There is presumably a limit on how many services consumers will use, even if doing so is free.

AVOD seems like it ought to come with a built-in safety net. Since revenues are based on ad sales, contracts structured with by-the-view incentives (of the sort that Spotify generally uses, and Netflix generally does not) could help ensure that content spending has at least some relationship to revenue. Among other AVOD services, Alphabet's YouTube has a setup something like this: Monetized videos pay out based on viewership, which means that YouTube doesn't have to worry about paying the typical content creator more than that creator earns the company in ads.

But there are plenty of bills that have to be paid no matter who is (or isn't) watching. It's telling that Tubi, arguably the king of this space, has a history of operating at a loss.

For now, no AVOD fallout seems imminent. But there are some big names in AVOD now, and consolidation in ad tech more generally (in AVOD as well as in other connected-TV capacities) looks inevitable. At some point, there are only so many eyes to go around.

Editor's note: This article has been corrected. Crackle is a brand within Crackle Plus, which is a Chicken Soup for the Soul Entertainment company. It is a free service available on a number of platforms.