SERIES 

The automation of ad sales – The Video Opportunity

The simultaneous rise of video advertising online and programmatic trading could open up new and largely untapped revenue streams for publishers, industry-watchers and key players in the technology sector say. Jo Bowman concludes her three part series on the rise of programmatic.

By Jo Bowman

While publishers’ online offerings have tended to attract tactical campaigns, new formats and video in particular – coupled with the kind of targeting and efficiency that programmatic trading can deliver – could start to attract branding campaigns that have previously gone into television.

“Brand is a massive opportunity for all of us,” Google UK’s David McMurtrie said. “In the digital market, we’ve really done a very bad job of attracting brand revenues into online. The marketplace for digital is still very much performance led, and brand mostly goes into TV.”

Online advertising, he said, was a $50 billion market globally, with much of that investment going into search and retargeting. Brand investment, meanwhile, was worth $200 billion. “Even a fraction of that revenue will make a pretty big difference,” McMurtrie said.

While banners and search have been able to give advertisers visibility and click-throughs, what they have lacked is the ability to give consumers the emotional experience that’s so important in brand-building.

The rise of online video is changing that. A Gartner report from the US indicates the extent to which video viewing is taking place on screens other than a television, saying online video viewing time was overtaking time spent with TV in the US. YouTube recently reported that mobile devices accounted for 40% of all access to its online videos libraries — an important indicator of consumer usage preferences. “As consumers increasingly look to access TV programming on any device at any time, other obstacles are presenting themselves, including the wrenching apart of TV advertising models and economics,” Gartner researchers said. “Programmatic advertising sales and buying will rapidly help resolve that issue.” The consultancy sees television advertising seen on television sets being traded programmatically – US$3 billion of it by 2017 in the US alone. But there are opportunities here, too, for print and online publishers.

Andrew Moore is the European MD of SpotXchange, an online video advertising marketplace. He said the ability to trade online video inventory programmatically has “huge significance”. “When you think about online advertising, it’s usually performance advertising, predominantly display, and ROI is about low CPMs and flooding market with inventory,” he said. Branding investment by advertisers has gone to out-of-home and television.

“TV as an industry has been incredibly successful and continues to be so, but as a result they tend to be slower at adopting new technologies and innovation. Publishers outside of broadcasting tend to be much more comfortable with change … what I believe we’re seeing is a great deal of innovation coming out of non-broadcast publishers and for those guys, it means they can try to engage with a whole new set of buyers and they can talk about their inventory in a different way. It’s a competitive advantage; it means they can be early adopters and really take advantage of this fast-growing part of the industry,” he said.

“We see a very strong correlation between effective targeting and effectively building brands.” While broadcast television can target a particular audience according to broad ratings categories, such as households with children, much more granular targeting based not just on demographics but also interests and intent is possible with online. “Now we’re seeing strong adoption of programmatic video, which means that video is very much the channel for attracting brand spend into the programmatic space,” Moore said.

Rising tide

Adap.tv, a division of AOL Networks which has just launched a programmatic trading platform for online video, says that not only is spending on online video advertising rising, so too are the returns for the publishers hosting it. It says that more than 90 percent of media agencies reported some level of increased video ad spending last year, with an average increase of 28 per cent, and more than 85 per cent of brand advertisers increasing their video spend, many of them buying directly rather than through an agency or other third party. Growth in CPMs is also positive, going against broader trends in revenues from display. The company reports that 92 per cent of video publishers say their CPMs have increased by an average of 7 per cent, increasing the quantity of video inventory being made available.

Programmatic trading is an automated system by which software rather than people put together deals that match advertisers’ wish lists and budgets with publishers’ inventory and consumers. It is largely – and often entirely – driven by audience data, which guides advertisers and agencies on the value of a particular consumer to their brand and, therefore, what they’re willing to pay for each impression.

“Data is becoming more important and everybody’s collecting it, from the publishers to the brand themselves, and it’s all leading to better-informed buying decisions in terms of being able to pinpoint your audience,” said Tim Cain, managing director of the Association of Online Publishers (AOP). “Being able to do that gives brands more confidence that they’re able to select people with the right characteristics, and then there’s the efficiency angle as well of course, being able to do that programmatically.”

A study by researchers IHS for SpotXchange says demand for programmatic video will be a core driver of online video in Europe over the next five years, with revenues growing, on average, 77 per cent a year, reaching €626.5 million in the ‘Big Five’ European markets alone. The researchers predict that the programmatic trade in video advertising will move from infancy to maturation in five years; by 2017, one third of all European online video advertising revenue will be generated programmatically, up from 4.6 per cent in 2012. Variation in legacy market structures, the availability of data and the cultural mores in marketing in each country mean that the pace of growth in programmatic video trading online is happening at different rates. IHS says that the UK is the most advanced of the Big Five, and will remain the largest programmatic market in 2017, closely followed by France. The agency puts programmatic’s share of online video trading this year at about 24 per cent, up from 9 per cent in 2012 and rising to 39 per cent by 2017, with a value of €224.5 million. “The UK is the most advanced programmatic video market in Europe in terms of revenue and maturity of ecosystem. Unlike other European countries, the technology side of the market is dominated by international players. Market development is sustained by good availability of third-party data.”

At the AOP, Cain said the appeal of online video for advertisers and their agencies in the UK was in the targeting that data makes possible. “Rather than a kind of broad-based brand campaign, they’re able to be more selective. We’re seeing, potentially, projected growth somewhere around 15 to 20 per cent in brand advertising over this year among our membership online. Potentially it could be bigger, because we know a lot of advertising has been performance-driven, direct response advertising. The percentage of brand spend that goes online is still a small proportion … but people are consuming more video online and are more comfortable with it. Clearly, the more opportunities there are online and opportunities to reuse TV content, or repurpose it, then you’re going to see more branding online.”

Google’s McMurtrie said precise targeting, along with impressive new formats – he suggested lightbox units in which video played when the user hovered over it – and meaningful measurement, would all help draw branding money into digital. Combining metrics familiar to TV buyers with the accountability of digital media would enable TV buyers to start looking at digital TV with fresh eyes, he said.

Much of the trade in online video advertising is focused on pre-roll video that, after a few seconds, consumers can opt to shut down, and mid-roll ads that briefly interrupt consumers’ chosen viewing. Other emerging video formats that gel with print publishers’ online content include video units that sit between blocks of text, and self-activate when that section of the page reaches the centre of a consumer’s screen, shutting off when the section leaves the screen.

Gartner recommends print publishers make greater use of the video opportunity not just in advertising units but in the provision of other content. “Newspapers offering content via image and video-based social networks such as Vine, Pinterest and Instagram are focusing on showcasing their ‘digital personality’ as well as promoting material sections such as fashion, food and user-generated content,” the consultancy says.

Loud and clear

Despite the automation that programmatic trading affords, and buying based largely on data, the role of the sales team is still important, and perhaps more so with programmatic video than with display. And, as with all programmatic, there are advertiser reservations to address about the suitability of the advertising environment, and reassurance that their brand won’t end up alongside content they deem inappropriate.

“What’s very important for brands and one of the problems they’ve had previously is where their brands have appeared,” said Tim Cain at the AOP. There’s concern about the suitability of the environment, particularly through programmatic buying. There’s a lot of inventory in the long tail of the web … and some of that has been the wrong kind of content, things like gambling or porn or things that are just not in tune with the brand.”

To this end, the Digital Trading Standards Group (DTSG) – a UK group comprising representatives of the entire digital display advertising market, including the AOP, ISBA, the Institute of Practitioners in Advertising (IPA) and the IAB UK – has launched UK Good Practice Principles, aimed at minimising the risk of display advertising misplacement. Their industry-wide standards use content verification tools to bring greater transparency to the digital ad market, providing marketers with more control over where their clients’ content appears.

“The more that some of those long-tail environments drop off as a result of greater controls, it’ll give brands more confidence that the inventory they’re buying is suitable and isn’t going to be appearing in the wrong place,” Cain said. “It’s natural to think that, over time, and given the growing amount of time consumers are spending with their devices … there’s no reason why you wouldn’t want to be in that environment if those kinds of controls are in place.”

He said growth in branding and video spend online would help compensate for the slowdown in traditional online. “If you look at the amount of revenue that online takes in from all media spend, obviously that rate of growth is slowing down – it can’t keep sustaining 50 per cent growth or whatever, but brand advertising, share-wise, on the internet, there’s still plenty of headroom for that to grow.”

Click here to read the first article in Jo's series and here to read the second.