Real-time ad overlays are transforming how publishers monetize streaming video. This technical guide walks through building a production-ready overlay system.

Architecture Overview

A robust overlay system consists of several key components:

Overlay Composition Engine: Renders graphics onto video frames
Decision Service: Determines what overlays to show and when
Content Management: Stores and serves overlay assets
Tracking & Analytics: Measures overlay performance
Synchronization: Coordinates timing across distributed systems

Choosing Your Composition Approach

Server-Side Composition

Server-side composition (like AdStorm's Swirl) offers several advantages:

Works on all devices, no client support needed
Prevents ad blocker interference
Consistent rendering across platforms
Reduced client-side computation

However, it requires substantial server infrastructure and adds latency to the pipeline.

Client-Side Composition

Client-side overlays use HTML/CSS rendered on top of video players:

Lower infrastructure costs
Easier personalization
Interactive capabilities
Faster iteration cycles

The trade-off is limited device support and vulnerability to ad blockers.

Building Server-Side Composition

Video Processing Pipeline

Here's a simplified architecture using FFmpeg:

Input Stream → Segmenter → Overlay Compositor → Packager → CDN

Implementation with FFmpeg

A basic overlay composition looks like this:

ffmpeg -i input.mp4 -i overlay.png \\
  -filter_complex "[0:v][1:v] overlay=10:10" \\
  -c:a copy output.mp4

For live streams, you'll need to process in real-time:

ffmpeg -i rtmp://input \\
  -i overlay.png \\
  -filter_complex "[0:v][1:v] overlay=10:10:enable='between(t,5,10)'" \\
  -c:v libx264 -preset ultrafast \\
  -f hls output.m3u8

Dynamic Overlay Switching

To change overlays in real-time, use a control socket:

ffmpeg -i rtmp://input \\
  -filter_complex "movie=overlay.png[overlay]; \\
    [0:v][overlay] overlay=10:10:enable='gte(t,5)'" \\
  -control_socket /tmp/ffmpeg.sock \\
  -c:v libx264 -f hls output.m3u8

Send commands via the socket to update overlays without restarting the stream.

Optimizing for Low Latency

Reduce Processing Time

Use GPU acceleration: FFmpeg supports NVENC, QuickSync, and other hardware encoders
Optimize encoder settings: Balance quality and speed with presets
Pre-process overlays: Resize and optimize graphics ahead of time
Parallelize: Process multiple renditions simultaneously

Segment Duration Strategy

Shorter segments reduce latency but increase overhead. For live overlays, 2-second segments offer a good balance.

Scaling Dynamic Ad Overlays with Distributed Processing and Caching

Distributed Architecture

For high-scale deployments, distribute processing:

Load Balancer
 ↓
[Compositor 1] [Compositor 2] [Compositor N]
 ↓              ↓              ↓
 └──────────────┴──────────────┘
                ↓
          CDN Distribution

Caching Strategy

Cache composed segments when possible:

Static overlays can be cached indefinitely
Time-based overlays cache until expiry
User-specific overlays require session-based caching

Client-Side Implementation

HTML Overlay Layer

For client-side overlays, position an HTML div over your video player:

<div class="video-container">
  <video id="player" src="stream.m3u8"></video>
  <div id="overlay-layer">
    <!-- Overlay content here -->
  </div>
</div>

<style>
.video-container {
  position: relative;
  width: 100%;
  height: 100%;
}

#overlay-layer {
  position: absolute;
  top: 0;
  left: 0;
  width: 100%;
  height: 100%;
  pointer-events: none;
}
</style>

Synchronization

Keep overlays in sync with video playback:

const video = document.getElementById('player');
const overlayLayer = document.getElementById('overlay-layer');

video.addEventListener('timeupdate', () => {
  const currentTime = video.currentTime;
  
  // Show overlay at specific times
  if (currentTime >= 30 && currentTime < 35) {
    showOverlay('lower-third');
  } else {
    hideOverlay('lower-third');
  }
});

Overlay Decision Logic

Rule-Based System

Define overlay rules based on context:

{
  "overlays": [
    {
      "id": "sponsor-slate",
      "trigger": "content_start",
      "duration": 5,
      "priority": 10,
      "targeting": {
        "content_genre": ["sports"],
        "geo": ["US", "CA"]
      }
    },
    {
      "id": "lower-third",
      "trigger": "time_based",
      "start_time": 30,
      "duration": 10,
      "frequency": "once_per_session"
    }
  ]
}

Machine Learning Optimization

Use ML to optimize overlay timing and selection based on engagement data.

Tracking and Measurement

Impression Tracking

Fire tracking pixels when overlays appear:

function trackImpression(overlayId) {
  const beaconUrl = `https://analytics.example.com/impression?
    overlay_id=${overlayId}&
    session_id=${sessionId}&
    timestamp=${Date.now()}`;
  
  // Use navigator.sendBeacon for reliability
  navigator.sendBeacon(beaconUrl);
}

Viewability

Ensure overlays are actually visible:

const observer = new IntersectionObserver((entries) => {
  entries.forEach(entry => {
    if (entry.isIntersecting && entry.intersectionRatio >= 0.5) {
      trackViewableImpression(entry.target.id);
    }
  });
}, { threshold: [0.5] });

observer.observe(overlayElement);

Best Practices

Performance

Optimize asset sizes—overlays should be under 100KB
Use WebP or AVIF for images
Lazy load overlay assets
Monitor processing latency and set alerts

User Experience

Keep overlays non-intrusive—avoid covering critical content
Limit frequency to prevent fatigue
Ensure overlays are accessible (WCAG compliant)
Test across devices and screen sizes

Reliability

Implement graceful degradation if overlay service fails
Monitor error rates and set up alerts
Have fallback overlays ready
Test failure scenarios regularly

Conclusion

Building a robust overlay system requires careful consideration of architecture, performance, and user experience. Whether you choose server-side or client-side composition, focus on reliability, low latency, and accurate measurement.

With the right implementation, overlays can create incremental revenue without degrading the viewing experience.