The coronavirus is proving a double-edged sword for the burgeoning advertising-supported video-on-demand business, as rising streaming video usage is offset by concerns around a collapsing ad market.

As Americans experiment with new streaming services during the coronavirus isolation period, ad-supported video-on-demand, or AVOD, platforms stand to see a bump in exposure. Recent survey data from Kagan, a media market research group within S&P Global Market Intelligence, showed increased interest in AVOD services such as Facebook Inc.'s Facebook Watch, Crackle, Roku Inc.'s ad-based platform and ViacomCBS Inc.'s Pluto TV.

But in order to see a long-term benefit, these platforms must first survive the pandemic and the resulting slump in advertising. Analysts note that some AVOD services — notably those owned by deep-pocketed parents — are better positioned than others to weather the downturn.

Interpublic Group of Cos. Inc.'s research unit MAGNA recently adjusted its forecast for advertising revenue, pushing it down almost 8 percentage points across all media in 2020. The firm now expects total ad revenue to decline 2.8% year over year versus a previous projection for growth of 6.6%. While MAGNA still expects digital video advertising to be 8.4% over 2019, the figure is down sharply from 14.2% projected growth prior to the coronavirus outbreak.

These are ominous signs for AVOD platforms, Needham analyst Laura Martin said in an interview. Those platforms may get welcome increases in usage and exposure, but "the question is whether they have the balance sheet to survive," she said.

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Major subscription video platform operators such as Netflix Inc. and vertically integrated platforms such as The Walt Disney Co.'s Disney+ or ViacomCBS' Pluto TV have the access to capital to weather a protracted advertising slump, but smaller AVOD platforms may have difficulty staying afloat, she said.

Beyond services owned by large corporate parents, Martin also likes Roku's position, as she believes it benefits from a strong content licensing model and has a balance sheet to survive the downturn. Moreover, based on the usage increase seen during New York's "Snowpocalypse" of 2016, another period where a large group of consumers was forced to shelter in place, Martin believes Roku could benefit from a bump in connected TV usage as high as 61%.

To view Kagan's full March 27-29 coronavirus flash survey, click here.

It is unclear how long the increase in usage will last once users begin leaving the house for work and other entertainment options, said Dan Rayburn, streaming media consultant and principal analyst for Frost & Sullivan. Many stand-alone AVOD services lean on inexpensive licensed content to fill out their libraries, like network reruns and older movies, and those are often less attractive to consumers than big-budget originals or new release films.

"This business is about content. Content is king. We've been saying that for years as an industry," Rayburn said in an interview.

But others believe services that can weather the downturn could emerge in a better position than before. While advertisers will pull back during the downturn, when they return, AVOD platforms will have a lot more pricing power with increased engagement, Moody's debt analyst Neil Begley said in an interview.

Begley expects advertisers to flood back into the market as soon as there is an end in sight for the isolation period, potentially driving up AVOD revenues.

That curve on the return of business is unclear, however. MAGNA forecasts 11.4% growth in digital video advertising in 2021, and it expects total media advertising to grow by 2.5% in 2021.

Fitch Ratings expects a slower return to normal, said debt analyst Patrice Cucinello. Her firm is looking for total advertising to drop in the mid- to high single digits in 2020 and remain compressed with a drop in the low to mid-single digits in 2021. That longer tail of recovery would be challenging for advertisers of all stripes, especially smaller pure-play AVOD platforms, she said.

"This is really a widespread closure of everything," Cucinello said in an interview, explaining Fitch's less optimistic outlook for advertising. "Small and medium business are going to be severely impacted. Some may never come back."