Peering Into The Future Of Digital Video In 2012
As we approach the end of 2011, I am drawn to the crystal ball to peer into the future of digital video advertising and make predictions about the coming year. However, before I do, I think it is important to reflect back on my 2011 predictions from a year ago and see how well I fared.
1. Social gaming companies continue their onslaught and embrace video advertising. Grade: A
That “sound of inevitability" I referred to last year turned out to be exactly that. Put simply, social gaming companies have been the single largest contributor of net new video advertising inventory in 2011 and were the primary reason for the aggressive scale growth on a unique user basis. Additionally, social gaming companies are causing industry wide reductions in CPMs as their high volume/low cost inventory strategy is simply overwhelming the low volume/high cost strategy of many video producers. As I said before, if you are a CPG advertiser, this is the Holy Grail: efficiently priced, audience-targeted and day-parted media that is essentially audience replacement for daytime television.
2. Public companies drive consolidation as they grow out of the recession. Grade: C
Although there are a fair number of examples of public company consolidation, including Adobe/Auditude, and Yahoo/Interclick, among others, the reality is the majority of the companies who matter remain independent. I had incorrectly assumed that by the end of 2011 there would be more acquisitions both by traditional digital sellers (i.e. Google, Yahoo, Microsoft) and by younger companies in the digital video space that would go public (i.e. Hulu, AdConion, BrightCove). The silver lining in this failed prediction is that nearly all the independent companies that matter are worth significantly more year over year.
3. Mobile video advertising becomes the most-sought-after new ad format. Grade: B
Mobile video advertising has exceeded my expectations on nearly every measure, however I believe it is a bit of a stretch to consider it the most sought after new ad format. Given the fact that online video is at least ten times larger -- perhaps as much as 20 times larger -- in terms of ad spend, I believe the most-sought-after new ad format has to be some of the more innovative interactive pre-roll units we are seeing in the market. If the mobile video ad business had grown more this year, I would have been more comfortable confirming this prediction as accurate.
4. A second video-specific company reaches the 100 million unique-user mark. Grade: C
Of all my predictions, this was the one I was most sure of. The video ad aggregators are continuing their onslaught on the video ad market and the majority of all video ads are now served by aggregators. However, the 100 million mark remained elusive with YouTube still the king at 161 million uniques and BrightRoll (my company) coming in second place at 85 million uniques in the most recent comScore rankings. There is no doubt the 100 million mark will be crossed in 2012 but I had expected it to happen earlier.
So, here are the new predictions for 2012:
1. Aggregators (networks/exchanges) will further their lead in the video ad category, serving nearly 75% of video ads.
A little known fact in the video ad category is that Q3 2011 was the first quarter in history where the top ten ad networks served more video ads than the top ten publishers. Networks have been taking share from publishers, particularly portals and broadcasters, consistently for the last few years and the trend is likely to continue for the foreseeable future. The difference in 2012 is that the deal sizes are much larger and the networks are able to offer products and services that individual publishers simply cannot offer, only furthering the network advantage. As a result, I am predicting networks will continue to gain share and will approach 75% of all video ads served by the end of the year.
2. Real-time bidding (RTB) in video advertising will become commonplace, both empowering and disrupting the existing publisher, network and exchange ecosystem.
RTB is my favorite topic of discussion these days because nearly everyone is underestimating the significance of this revolutionary technology. There is almost no part of the ecosystem that will not be impacted by RTB, yet the exact impact is sometimes hard to predict. The big winners will be the players that own platform technology that drives RTB for buyers and sellers. Other winners will be buyers who use RTB (even if they leverage other companies’ technology) and the largest publishers who will quickly soak up the majority of the demand. The clear losers will be publishers who choose not to participate in the real-time economy, although the “slow death” strategy often works better than digital pundits expect.
3. Mobile video ad inventory will become comparable in size to online video ad inventory.
Quick, guess what is the largest mobile video advertising site in the world? If you guessed YouTube, you are wrong. There are multiple mobile gaming properties such as Angry Birds, Words with Friends and others that have more global video ad inventory than YouTube. Mobile apps are uniquely designed to benefit from video ads: they are full screen, have high engagement and many logical places to insert ads, such as between gaming levels. Mobile video ad inventory is growing faster than any video content category in any medium in history. The only question is: How big it can get in 2012?
4. Audience measurement will become a hot button industry issue as video ad campaigns at scale are scrutinized for in-target delivery.
Most media buyers and clients don’t realize the simple fact that sites like Oprah.com or ESPN.com rarely index more than 65% to a specific gender (male/female). As a result, when they buy video advertising and measure delivery with comScore or Nielsen, buyers think a 50% to 65% delivery within a target gender is bad. This is one of the most fundamental problems facing the video advertising industry today. Publishers, data vendors, ad networks and measurement companies all have an enormous incentive to educate the buying community that hitting a 65% in-target audience delivery (say, male ages 13-34), as measured by comScore or Nielsen, is actually a real achievement. This is an area where nearly every part of the ecosystem is overselling. Therefore, as dollar figures increase expect to see a lot of those over sellers taken to the mat.