Commentary
A Deeper Dive Into 2010 Video Advertising Predictions
- by Tod Sacerdoti , January 18, 2010
Here are my top four non-intuitive predictions for online video in 2010:
1. Largest video properties won't produce any video. By the end of 2010, the majority of the top 10 video properties (as measured by comScore or your preferred third party) will be video companies that don't produce any meaningful amount of video content. This means the top 10 properties will be dominated by video-sharing sites (YouTube), video ad networks like my company, video syndicators (Grab Networks) and vertical video sites (Break.com). Yes, some of these players produce some content, but the vast majority of the views on their properties are generated from content they did not produce.
This is very similar to the dynamics we have seen in display advertising. There, the top 10 properties by reach (as measured by comScore) are all either portals (Yahoo / Google) or display ad networks (Specific Media / Adconion). The power of content and audience aggregation is self-reinforcing, and we will see the same development in the online video category.
2. Stream fraud becomes online video's click fraud equivalent. The large video players have discussed the issues of fake pre-roll, auto-start in-banner video being sold as pre-roll, and the actions of bad actors in the online video business ad nauseum. However, based on our analysis of the business today, stream fraud (running a video advertisement in a way that is counter to how it was sold in the marketplace) is a larger problem today than ever before. In fact, we believe at least 25% of all video advertisements served on the Web are served in a fraudulent manner, and that most of those ads are served by major players on behalf of big-name marketers.
This means the bad actors on both the publisher and the ad network side of the business need to develop anti-fraud technologies to address stream fraud, or they risk losing business to the players that have solved this problem. Furthermore, in 2010, I believe it's the advertisers who will be driving the measurement and anti-fraud conversations -- a first for the video advertising business.
3. Video ad networks will compete more with display ad networks for display advertising. Andy Atherton, CEO of Brand.net, recently wrote that VAST is the panacea for display ad networks to compete in the video advertising business. Unfortunately, his article only demonstrated the industry's vast lack of understanding of the state of the video advertising business today. In fact, video advertising networks sell far more display advertising than display networks sell video advertising, and this gap is widening fast.
Three reasons explain why video networks are increasing their display presence. First, access to display inventory and user data has been almost completely commoditized, and the massive display networks with proprietary inventory, technology or data hold the only real differentiation left in display. Second, most rich-media advertising is essentially poor man's video advertising. Most advertisers would prefer to run video in display placements if possible. Lastly, video ad networks are far ahead of the curve with respect to high-quality inventory, transparency and brand-safe selling -- all of which are the drivers of future display advertising growth.
4. Facebook becomes the No. 2 video streamer in the world. I believe that in the next three years, Facebook will inevitably be the No. 1 video streamer in the world, as measured by the number of total monthly streams. The challenge is getting the timing right. So, I am hedging my prediction that Facebook will be No. 2 by the end of 2010.
Once Facebook gets highly profitable, a scenario that's very close, it will make the decision to host the world's videos in the same way it hosts the world's images today. This is not a cheap proposition: video hosting is more expensive than image hosting, and image hosting is perhaps Facebook's single largest expense. However, there is no doubt that within 12 months after this decision, Facebook will stream more video worldwide than YouTube. People often forget that Geocities used to be No. 1 in personal Web sites, MySpace used to be No. 1 in social networking, and Flickr used to be No. 1 in photos.
Conclusions
My projected 2010 trends will likely benefit some folks more than others, but I think the metatrends of increased video consumption, video monetization and video technologies will help all players. Let me know if you agree or disagree with these predictions, or if there are trends I have missed. I'm looking forward to grading myself on the accuracy of my predictions next year.
Who do you think will be the biggest winners among the video ad networks, and why?
Who, exactly, are the "large number of profitable businesses" in the category?
How can you first say that "at least 25% of all video advertisements served on the Web are served in a fraudulent manner, and that most of those ads are served by major players on behalf of big-name marketers" and then follow it with "video ad networks are far ahead of the curve with respect to high-quality inventory, transparency and brand-safe selling"????
Are you implying that 25% of Yahoo or MSN or Hulu ads are fraudulent, but video ad networks that have repeatedly been cited for poor practices are the ones that are ahead when it comes to transparency?"
You've been drinking too much of your own kool aid, or haven't been reading the trades, or don't believe that the video ad nets are servicing the big brands..... or mean "Brightroll" when say "video ad networks"?? Either way, I still think you've got a problem with that statement.
A few comments, Tod...
Let's begin with your entirely credible statement, "...we believe at least 25% of all video advertisements served on the Web are served in a fraudulent manner, and that most of those ads are served by major players on behalf of big-name marketers."
I don't doubt your math for a moment (I've long maintained that digital is by far the least accountable of all major media), but presumably the fraud you cite raises costs, degrades performance and casts a black shadow over the integrity and future of the entire online video advertising industry. Indeed, the price of fraud (especially when it constitutes at least 25% of the market) comes directly out of your pocket and -- more to the point -- mine.
So why don't you name names? Who are you protecting, and why should I pay the equivalent of an additional fraud tax for your silence and complicity? After all, this ain't exactly the House of Un-American Activities. If you have evidence of fraudulent (criminal) behavior, why don't you -- as an ethical business person -- alert the authorities and shout it to the world? I for one would like to know which major players and big-name marketers are cheating me so I can avoid them and take my business elsewhere.
Then you predict that the video ad networks will compete with the display ad networks for display advertising. That may be true, but consider the larger question: Why would anyone in their right mind want to replace the brain-dead online display model (already characterized by overpriced sub-$1.00 CPMs and performance levels of statistical zero) with a rich-media, more expensive variation of the same foolishness? Why would anyone spend more to wind up in the same coma?
Replacing a static online display advertising model with a streaming video display advertising variation on the same effete theme is just another in a long litany of digital tallest-midget competitions, and an even quicker route to the poor house for participating publishers and content players alike. In the illustrious words of Chief Inspector Jacques Clouseau: "I have devised a plan guaranteed not to fail." Talk about a race to the bottom.
Perhaps the answer to my question above is self-evident in your citation of systemic fraud. I guess if someone's gonna make money from nothin' it might as well be the online video ad networks instead of their static kissing cousins, the display ad networks. Talk about fraud.
Let's get real. Anyone who wants to explore a serious online video advertising alternative (one that actually works for a change) should drop me a line.
In response to Jeff's comments, I couldn't agree more with the need to "raise the flag" on these issues. I have written extensively about this issue and named names in my own posts, and will continue to do so until these issues are solved. I have included some links below to articles that I have written or been quoted in that are addressing this issue. Feel free to contact me at tod@brightroll.com directly if you want further information.
Furthermore, in response to The Digital Hobo, your comment is correct. I should have qualified my statement that "(some) video ad networks are far ahead..." My statement was too general and in contradiction to my prior projection. As with display, it is hard to make a statement that applies to all networks as the range of sophistication across the category is too broad.
http://adage.com/webvideoreport/article?article_id=129849
http://www.todsacerdoti.com/2009/04/15/is-this-good-for-your-brand-part-two/
http://www.adweek.com/aw/content_display/news/agency/e3i74b60625ee3a45655f63ad81113ed59e
In response to Jeff's comments, I couldn't agree more with the need to "raise the flag" on these issues. I have written extensively about this issue and named names in my own posts, and will continue to do so until these issues are solved. I have included some links below to articles that I have written or been quoted in that are addressing this issue. Feel free to contact me at tod@brightroll.com directly if you want further information.
Furthermore, in response to The Digital Hobo, your comment is correct. I should have qualified my statement that "(some) video ad networks are far ahead..." My statement was too general and in contradiction to my prior projection. As with display, it is hard to make a statement that applies to all networks as the range of sophistication across the category is too broad.
http://adage.com/webvideoreport/article?article_id=129849
http://www.todsacerdoti.com/2009/04/15/is-this-good-for-your-brand-part-two/
http://www.adweek.com/aw/content_display/news/agency/e3i74b60625ee3a45655f63ad81113ed59e
I defintiely agree about the Facebook video hypothesis. I would just add that the cost equation raises an important follow-up question: would the dramatically increased overhead for video hosting put pressure on Facebook to monetize video traffic much more quickly than a feature like photo galleries?
Their ability to generate that revenue effectively may depend heavily on the breadth of premium content partnerships they line up, but in the longer run, Facebook may also be able monetize individual users' video better than YouTube (i.e. better metadata tagging tools, easier ways to create 'verified' user accounts, like Amazon's 'real name' reviewers). Whatever happens, we have a very exciting year to look forward to.
Hi Tod,
I think your 1st point: "Largest video properties won't produce any video". Is already true in broad strokes. Although Youtube and its competitors may engage in the occasional self promotional production activity, the views for these account for a relatively negligent percentage of their total views.
Regarding point 4: "Facebook becomes the No. 2 video streamer in the world". At the rate Facebook's user community is growing it's easy to predict they'll move to be #1 of anything.
The issue with Facebook is that as long as content is difficult to access via search it isn't really very accessible, not to mention that the hosted content isn't useful to a broad audience. Sure I'll check out a video of my baby niece but I don't intend to embed it on my site, nor do I have any reason to share it with an audience outside my family. I base my argument on the Flickr vs Facebook paradigm you mentioned. Facebook may have more images stored, and the sum count of eyeballs they all get may be greater than those on Flickr, but where do you go when you need an image?
At any rate thanks for an insightful read.
I'm curious as to your perception of video usage in ecommerce in general, and product videos in particular.
Any predictions on the subject?
Cheers,
Mike
@treepodia
http://blog.treepodia.com