Connected Devices
For many digital publishers, mobile and tablet page views have surpassed online page views, and video views have done so or are quickly following. Add in connected TVs and online video may end up having the smallest usage of the digital video market. The challenge is that the video advertising market for mobile and tablet is currently much smaller than online video; connected TV advertising is absolutely tiny in comparison to either online or mobile. In addition, the technology to enable immersive connected device experiences is different from that of online video with specialized players across the mobile, tablet, and TV ecosystem. To the extent that online video networks cannot lead in mobile or connected TVs, they may find themselves unable to grow revenue as quickly.
Authentication and Aggregators
While most major media companies have experimented with on-demand content in digital video, authentication from cable providers such as Comcast, aggregators (Hulu, YouTube, etc.), or subscription services (Netflix, Amazon Prime, Hulu Plus) could prove to be a more profitable replacement for television than digital video advertising is today. Authentication plays pose a threat to digital video networks because they are in line with how major media companies and distribution outlets have built their sales teams and could replicate the tonnage of TV. For now, the most used authentication properties like HBO Go are advertising-free, but a successful replication of the cable bundle across advertising-supported properties that effectively cuts out ad networks or limits their inventory would be a limit on growth.
Programmatic & Private Exchanges
The rise of programmatic buying in digital is not as likely to impact premium video rates as it has premium display rates due to market dynamics. There will be winners in public exchanges for remnant video inventory, typically in low-end content as well as interstitial and in-banner video where ad rates will compress. However, the convenience of programmatic as well as dedicated programmatic budgets at some digital agencies will likely spur the use of private exchanges for premium video inventory. Private exchanges may limit inventory or dis-intermediate networks that do not provide an additional value- add to agencies such as Tremor’s VideoHub. A typical publisher buy could look like this: A direct sales team sells $2 million upfront to an agency with specific guaranteed inventory at a $20 CPM while they also make $2 million of non-guaranteed inventory available at a $10 CPM to be bought throughout the year via programmatic buying and a private exchange. This could limit the network selling at a $15 CPM from accessing the volume of inventory required to grow its business.
Video-Centric Agencies
Advertising agencies take many forms, and separate units may be set up for online display, search, online video, mobile, mobile video, tablet, tablet/print, and so on and so forth. However, there is an overarching trend of ‚video is video is video,‛ which should bode well for digital video networks as specialized video buyers with a focus on brand
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advertising will be less susceptible to market confusion or ‚too good to be true‛ pricing from less reputable ad tech companies. It should also lead to more up-fronts a la television, which has many additional benefits than just revenue.
GRP-based buying and measurement
To enable consistent planning and reporting across traditional TV buys and digital video we expect that buyers will demand tools that enable planning and measurement of digital video on traditional TV metrics such as gross rating point, where the audience reached is validated by a third-party such as Nielsen or comScore.
Video Viewability
Similar to the movement in display advertising around viewability of ads, we anticipate that viewability of video ads will become paramount, particularly given the increased CPM’s. A group of video technology companies called the Open Viewability Consortium (OpenVV.org) has traction in solving viewability for the entire industry. UPDATE 06 AUG 2013 (source: www.brightroll.com) -- Video Viewability Initiative OpenVV Quadruples Membership -- 15 new companies join the effort to move the digital video industry closer to an open viewability standard:
The roster of new companies joining OpenVV include 24/7 Media, Adap.tv,
Adconion Direct, Blinkx, Brainient, DataXu, DG, Extreme Reach, Media6Degrees, Meetrics, Mixpo, Nielsen, PointRoll, SourceKnowledge and
TRUSTe. These companies join founding members TubeMogul, BrightRoll, Innovid, LiveRail and SpotXchange in the effort to create an open standard for video viewability:
24/7 Media
“24/7 Media is joining OpenVV because we recognize that our industry needs a standard for measurement of digital video advertising viewability. With this standard, advertisers will continue to expand their investment in video advertising and publishers will be able to monetize their premium content at a fair price.” Rob Schneider, SVP Corporate Strategy and Platform Development
Adconion Direct
“Adconion Direct fully supports the OpenVV consortium and the development of an open and transparent approach to viewability measurement for video. We believe that viewable impressions for both video and display are essential to providing the highest standards of advertiser solutions, and OpenVV is paving the way towards effective industry measurements and future video advertising success.” Michael Parkes, SVP of Sales
Brainient
“We are very pleased to be part of this industry defining initiative. We will be integrating these metrics into our reporting over the next few months to give our customers key insight into the quality of their interactive video ad placements.” Anna Tracey, COO
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DataXu
“As one of the founders of Open RTB, DataXu believes in the power of industry collaboration to solve big, thorny problems that are best solved by multiple parties in the ecosystem working together. The concerns surrounding viewability must be addressed with a standard measurement framework and OpenVV is committed to moving the industry forward.” Mukund Ramachandran, GM of Video Advertising Solutions
DG
“Our industry has the momentum now to bring brands, advertisers and agencies increased accuracy and relevancy to their campaigns, as we shift from served impressions to viewable impressions as a standard currency for online video advertising. If the goal is to create parity between TV and Online Video this joint initiative is the next step in ensuring that, together, we are able to meet the challenges of increasingly complex campaigns with the most sophisticated campaign management tools across all screens.” Mike Caprio, VP of Video, Broadcast & Connected Devices
Extreme Reach
“Our clients want standardized video viewability metrics and a methodology that’s consistent across the industry, from online publishers and networks to video ad serving platforms. We’re pleased with the momentum of OpenVV and very happy to be able to offer the standardized approach to viewability that our clients prefer.” John Roland, CEO
Media6Degrees (m6d)
“We are proud to join our fellow industry leaders as a member of OpenVV. The industry is in desperate need of an open viewability standard that prevents disreputable companies from taking advantage of brands by delivering misleading measurements. This consortium will help lead the industry through the necessary legwork to achieve legitimate standards.” Alec Greenberg, VP of Media Operations
Meetrics
“As a company that specialises in visibility tracking, we welcome the OpenVV standard to overcome the fragmented video ad inventory due to incompatible technologies. Having the OpenVV standard will help drive knowledge and adoption with clients in order to meet the rising demand for tracking video ads.” Anant Joshi, Director of International Business
Mixpo
“We strongly support the motivation behind the OpenVV initiative. Raising the awareness of off-page inventory and the need for a standards-based measurement of viewability is vital to the video advertising industry.” Brian Cohee, SVP, Data and Systems
Pointroll
“Advertisers find video incredibly appealing, because it allows them to engage online consumers with dynamic, and even interactive content. Of course, these ads are only effective when seen. With growing investment in online video, viewability is page 36 of 70 Jefferies US Internet Team, Jefferies Equity Research, [email protected] Please see important disclosure information on pages 67 - 70 of this report.
one of the biggest concerns. We are glad to be a part of OpenVV to solve the issues with ad visibility and develop a standard that helps all advertisers, agencies, and ad companies.” Mario Diez, CEO
SourceKnowledge
“We believe open standards like OpenVV lay a solid foundation of transparency and trust with advertisers and are critical to the advancement of the online video advertising industry. We are excited to join the OpenVV community and contribute to further developing the open viewability standard.” Stuart MacDougall, CTO
TRUSTe
“TRUSTe is excited to do its part in helping realize viewability as a new standard for the world of digital video. We look forward to and welcome all efforts to further transparency within online advertising, and think OpenVV technology is a great beginning towards developing an open source standards-based technology offering.” Kevin Trilli, VP of Product
YouTube MCN’s and YouTube Sales Policies
YouTube Multichannel Networks (MCN’s) such as Machinima, Maker, AwesomenessTV, FullScreen, etc. are among the fastest growing entities in digital video. These companies sign independent YouTube creators to contracts to manage, promote, and sell advertising around their channels, not unlike the way ad networks work with publishers. However, their connections with these content creators tend to be deeper and longer lasting than a traditional ad network contract or technology relationship, and the individual creators are much smaller and less capable of selling advertising in a scalable fashion. Ad networks such as Tremor or YuMe have generally been blocked from working with creators without forming an MCN due to third-party sales policies on YouTube that limit ad sales to the first-party and YouTube’s sales team itself, although these policies often have exceptions or are otherwise highlighted by larger YouTube publishers. The downside of MCN’s is that their business is very dependent on YouTube where CPM’s are pressured, while the market may be getting more crowded, thus creating competition for creator contracts. Each MCN is also investing in O&O brands and sites (which we believe also represent great opportunities for ad networks). We think that it is worth watching how MCN’s and YouTube’s sales policies develop, as well as how CPM’s on YouTube compare. Currently, YouTube monetization is at an approximately $2-3 CPM (YouTube inventory sold onGoogle’s AdX has $8-10 CPMs, with YouTube taking ~30% and preferred partners receiving $5-7. This compares to $12-15 CPMs for networks, and mid-twenties for big video publishers such as Hulu or VEVO.
Strategic Deals / Up-fronts / Non-IO Business
For the vast majority of video ad networks, their business lives and dies on the RFP process followed by media buying agencies where direct salespeople compete for a piece of an RFP that may range anywhere from $25K to perhaps $1 million, typically done on a quarterly basis. This process does not lead to the best revenue visibility, and perhaps only 50% of a quarter’s revenue will have signed contracts to run at the start of the quarter. The RFP pipeline may only have a little visibility one or two quarters out, absent qualitative information from sales relationships at the agency. This lack of visibility (and predictability) makes not only revenue projections difficult when evaluating one’s top 10 or top 20 customers, but it also provides difficulty in establishing the correct relationships
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with publishers whom the network may overpromise resulting in actual losses (if the promise is contractual) or reputation losses (if the promise is implied). As more and more advertising gets bought upfront, either on an individual company basis or in the market as a whole, the video network should benefit financially.
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