Technology Kills The Video Star

It's no secret that the Internet has deeply damaged traditional media when they have directly competed. In the case of music and newspaper classifieds, the Internet provided a superior way to consume content. In the case of radio, listenership held up but advertisers abandoned radio for the Internet. In the case of magazines, the Internet has cannibalized both readership and advertisers. Traditional broadcast and cable video advertising, on the other hand, has not been significantly harmed by the Internet and remains the most valuable form of large-scale advertising. That may soon change, as the emerging technology of real-time bidding has put video at risk of suffering the same fate as other forms of traditional media. 

Performance Marketing Dominates Display

To date, much of the strength in internet advertising has been in performance marketing such as search advertising and lead generation.  Performance marketing provides a tangible return on investment, the ability to purchase at scale and in the case of search marketing, a dynamic pricing regime. These benefits explain why search is the largest form of online advertising. Of course most of the time consumers spend on the internet is spent consuming content, not searching on Google. Yet the "display" ad inventory associated with online content only accounts for 38% of the $26 billion online advertising market, while search accounts for 46%. Display is under-monetized because it lacks the combined strengths of search marketing mentioned above. 

Some display advertising is sold the old-fashioned way, with ad salesmen pitching inventory based on the demographics of the audience that can be inferred from the type of content on their website. The problem is that very few websites actually produce the scale of inventory to make this model work.  Generally, the only way to buy display ad inventory in bulk is through ad networks. Ad networks provide advertisers with very little visibility into the underlying inventory, and are thus generally used by "spray and pray" lead generation players in large categories such as online education and mortgage finance. 

The Real-Time Bidding Revolution 

The real-time bidding (RTB) ecosystem has emerged to solve some of the shortcomings of display advertising relative to search advertising. The move to RTB is being driven largely by the ad agencies, which verifies the value that RTB brings to advertisers. It provides a platform to purchase display inventory at scale and with dynamic pricing. By directly accessing the targeted audience, brand advertisers get less demographic "leakage" and performance marketers get higher click-through rates. RTB should result in better sell-through rates and higher prices for banner and rich media advertisements. 

Where RTB could be truly revolutionary, however, is in the world of video advertising. Currently, advertising on television is the most valuable form of advertising, given its superior medium and large reach. This is the case despite the large amount of demographic leakage that comes from merely inferring who is watching what shows at what times. If advertisers can target ads to specific demographics and the ads can be purchased at scale via a variable pricing model, advertisers should find the RTB model superior to traditional television advertising forcing the television industry to change or to be left behind like radio.  

The art and glamour of producing and selling television advertising will become the science of buying and selling demographics. The art of producing video content to attract a large audience will shift to the science of producing content to attract the right audience against which to sell advertising at the right prices. For all we know, television becomes one giant Demand Media, focused on attracting viewers for shorter periods of time based on certain specific topics rather than conforming to the traditional half hour and hour time slots. It's hard to predict the precise effect on television economics, but it's easy to predict that the effect will be profound. Expect yet another victory of online technology over traditional media.

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6 comments about "Technology Kills The Video Star".
  1. Aaron Hendon from Proceed Media Group , April 20, 2011 at 5:48 p.m.

    In this case the revolution will be televised. It is shocking the degree to which the difference real science can make is still downplayed by TV marketers in favor of the way it has always been done. We have developed a DSP for TV that targets off a panel of 6,000,000 with over 600 demographic and behavioral attributes and measures true ROI to create the backbone of a true RTB model for our clients. It consistently out performs whatever our clients were doing when they came to us and yet the road is slow and long for anyone challenging the status quo. Viva la revolucion!!

  2. Alan Schulman from SapientNitro , April 20, 2011 at 10:17 p.m.

    Well said Tyler.. we are truly living in Advertising's Revenge of the Nerds - when Ideas are being supplanted by Algorithms - and the Plumbing of planning and buying has become more important than the Poetry of writing great narratives for brands.
    As a Creative Director, it saddens me to watch the VC money chasing Scale more than Skill - because what is remembered by the consumer isn't the efficency of Search or Lead Generation, but that which makes us feel... not just think. I'm all for automating operations in the age of application development - as long as we remember that we are still in the Idea business... and Algorithms don't feel - people do.

  3. Chris Stinson from Non-Given , April 21, 2011 at 8:52 a.m.

    It wasn't technolgy, it was too much advertising that first chased many people from radio, then from TV, then from Cable, and now from the Internet. Over saturation Kills.

  4. Max Mead from TubeMogul , April 21, 2011 at 11:10 a.m.

    You’re right on Tyler. Wrt continuing to drive scale, there are some big challenges still. Of course, we have the IAB to thank for VAST and VPAID which have made third party ad serving feasible in-stream in the first place. But not all pubs are on board with the technology or RTB concept yet. Buyers will also need centralized analytics across their RTB /”reach sites”, as well as their direct buys, to understand the reach and frequency equation that’s so important to brand advertisers. Brand safety and transparency will be critical for video to really accelerate in RTB – it’s one thing to be able to acquire media in scale, but that means you need the tools to control and understand the composition of a campaign—including qualitative measures. And importantly, supply isn’t abundant yet. We’ve already started seeing a proliferation of low-cost yet high quality content built for the web, but it’s early days. So I think the Video Star still has some life in it, but it’ll be exciting to see some starlets warming the stage.

  5. Doug Garnett from Atomic Direct , April 21, 2011 at 6:07 p.m.

    Did we forget that Google failed in their years of trying to create an RTB system for TV? Or is there some obscure subtlety I'm missing?

    With Google, it turned out that auction could increase prices instead of decreasing them. Besides, TV already has two flavors of auction systems: the up front and direct response pricing. So if you really consider TVs system, it's much more robust than many.

    But what about measuring action? So far, online video pricing only shows us that the premium charged isn't worth it. Online video ads aren't generating significant actions at a cost effective rate - at least compared with direct resonse television costs.

    So I'm quite skeptical of whether there is anything to be achieved here. And all the RTB system has proven on the web is how much more ineffective web ads are than, say, traditional direct mail.

  6. Bob Kiger from Videography Lab , April 24, 2011 at 3:42 p.m.

    "In the case of music <snip> the Internet provided a superior way to consume content." Superior technology has brought the music industry to it's knees. No matter how you slice it a 99 cent download does not replace a vinyl album, a full CD album, or a feature length video-music production as an income generator for artistry.

    40 years ago MTV opened with "Video killed the Radio Star". Well it didn't kill the radio stars. Talk radio emerged as a dominant media force to this day.

    Video didn't even get a chance to play with Music as an art form after all these years "Video-Music" has never emerged as a commercial industry. We pray for theCOOLTV to follow the lead of Les Garland, MTV/VH1 pioneer who launched "The Tube" too early in TVs digital transition. Timing is a dominating parameter in marketing.

    We contend that a vigorous public debate should ensue about what allocation of the publicly owned electromagnetic spectrum constitutes most efficient long term use of this precious resource.

    Put simply the information superhighway is heading off the cliff if wireless HD content distribution become the norm.

    "The right tool for the right job" [USAF slogan]