With demand for streaming content clearly established, publishers have shifted from testing digital video advertising to bringing ad revenues toward parity with broadcast. Most publishers face two big hurdles to expanding revenues: Providing enough inventory to meet growing demand and fulfilling sold campaigns efficiently.
Both of these challenges result from an imbalance in the digital video ad market supply and demand. When it comes to inventory, premium publishers are typically only selling three to four pre-roll ads per show in digital video, compared to seven or eight in TV, and as such are only making a fraction of the revenues.
Additionally, although they may believe they have reached "sold out" video ad inventory status, most publishers leave money on the table because they simply can't fulfill their ad orders in a timely manner. Think of the situation like this: You go to a shoe store and the clerk informs you the store is sold out of shoes. However, it's not that they are actually "sold out." The real problem is that the retailer couldn't get the shoes delivered from the manufacturer to the store and into the inventory system fast enough for you to purchase them.
A fulfillment glitch -- this is what is happening with digital video advertising right now. In fact, it's not uncommon to go after easy growth first in emerging environments -- broadcasters faced the same problems with TV advertising in the 1970s and early 1980s. However, once more emphasis was placed on workflow fulfillment, broadcasters were able to scale their business because they had fast, easy access to an ample supply of quality TV advertising.
Watching the digital video advertising industry evolve, and comparing it to the growth of TV advertising, we have identified six possible "revenue levers" that can help publishers overcome the supply and demand challenges hindering their ability to achieve substantial revenue growth.
The first three revenue levers -- in-bound marketing, content and distribution -- are solutions designed primarily to find more impressions, which gets more and more difficult as a business matures. In-bound marketing investment and content selection are skills cultivated by publishers within their brand guidelines and depend largely on their available resources -- specifically, time, expertise and budget.
Distribution deals, including ad server capabilities, are also a way to expand impressions by acquisition. Traffic growth is important, of course, but solely focusing on traffic will not get publishers to TV revenue parity. In addition to finding more impressions and growing traffic, now that the video ad market has begun to take shape, publishers should consider improving the ad fulfillment process. Specifically, "fulfillment" includes better ad planning, format innovation, workflow fulfillment, and performance metrics. Let's consider these in more detail:
· Ad planning and innovative ad formats: Publishers should incorporate a portfolio of higher-value, innovative ad formats focused on audience engagement and tailored to the needs of advertiser verticals. Thinking more strategically about what formats specific groups of online viewers will find most engaging takes time and effort, but the reward will be higher CPMs. If that engaged audience can be matched with added competitive value to the brand advertiser, that's an opportunity for enviable growth.
· Workflow process: Givebacks of ad spend can not only mean pure profit gone but also the loss of fulfillment cost associated with the ad spend, which can account for 40 percent of the overall cost. By improving the workflow process for digital video advertising, streamlining post-sales fulfillment from testing to trafficking, publishers can keep ad dollars booked and get their campaigns to market faster, ensuring campaign deadlines are met and eliminating givebacks.
· Performance metrics: When publishers optimize ad loads and experiences, they can generate more inventory opportunities. For different viewing audiences, that may mean additional units or a more effective use of consumers' time, or some combination of these. Ultimately, being informed about ad load tolerance with a mix of experiences means more revenue, while also creating a positive impact on the viewing experience. Additionally, combining more ad loads and optimum ad mix with solid metrics enables better future planning and creates wins for sales and strategic revenue growth.
While not an exact science, publishers who make use of all six revenue levers create a more complete and reliable ad fulfillment and optimization process for digital video advertising, all while opening the door to selling more inventory, more profitably.
Great article Steve.
"combining more ad loads and optimum ad mix with solid metrics" -- This is a challenge for most publishers. While more ads = more revenue is certainly fact for the short term, the increased ad load can have a negative impact on user loyalty, and thus, ad revenue in the long term. Properly balancing ad load and density is a non-trivial task that takes discipline on the part of the publisher, but those working with partners that can provide this insight are bound to reap the benefits.
VP Product, Tremor Media