• by Larissa Faw , November 13, 2017

The video experience is changing in almost every way for both viewers and advertisers since content is no longer constrained by schedules, location, or devices. Today, GroupM' issued its State of Video report examining the rapidly changing dynamics surrounding the consumption of premium video content,

Among the 48-page publication's key findings is that almost none of these changes benefit the original advertisers who helped build the television economy in return for the brand-competitive advantages accruing from reach, scarcity and high barriers to entry.

Now, advertisers -- both traditional and new -- must rethink audiences, and use advanced segmentation. More traditional variations were once the keystones of mass marketing.

"Our observations on the challengers to TV were somewhat predictable," says report co-author Rob Norman, chief digital officer. "The value of video may be higher to consumers than advertisers but it’s clear that advertisers who make platform specific assets for relevant products will be most likely to succeed."

GroupM suggests that all these changes present several opportunities for advertisers. For one, advertisers need to identify and leverage to their fullest extent the still-significant value in scheduled linear television -- particularly big events such as the Oscars or Super Bowl. It may not happen every night as it did in the past, but there are still must-see TV events.

Although sports remain one of these "appointment programming" opportunities, brand marketers need to determine their place in the new ecosystem. Digital programming innovation is paving the way to reduce interruptive advertising and increase watchable branded content. Modern technology has lowered production barriers -- but brands, their agencies, properties and media partners must walk a fine line between enough and too much. It is scarcity that drives value and premium pricing. Over-branded environments lead to complaints about too much commercialism. "We found it frustrating that the legacy TV industry still has no common data pool for its digital inventory," says Norman.

Advertisers must embrace the evolution to addressable and on-demand, and use data and targeting to compensate for declines in reach. In fact, the enhancement of ad targeting -- and eventually, extensive addressability -- will unlock economic value by providing the ability for sellers to “share a spot” between multiple buyers based on the value and relevance of the household or individual as well as transform the geographic precision of delivery.

The report states that marketers have to grapple with hypothetical questions such as “At what point does airtime become more valuable to 30,000 restaurants with capacity than to one brand of detergent?” 

Also, advertisers must explore new forms of content and new channels of distribution like YouTube and Hulu. Despite significant concerns about brand safety, these platforms can't be outright dismissed by advertisers.

Although it is hard to generalize about media unit pricing, an average 16% drop in supply appears to have fueled reciprocal 16% price inflation. This suggests extreme inelasticity of demand and lack of substitute media.

“We might wonder why access to 16- to-24-year-olds via online video can be so abundant, yet not dilute the price advertisers are willing to pay for impressions on linear TV,” says report co-author Adam Smith, GroupM's Futures director. The problem is not quantity. The answer must lie in other matters, such as quality, saliency, and transparency.

 "If there is one great unknown, specifically as it relates to advertising it’s the share of total viewing of ad supported programming in addressable and OTT environments," says Norman. "This may be the single most valuable future video asset."

The report takes an in-depth look at trends, including changes in consumption habits by age and generation; the evolving economics of television; addressability and the application of data to linear and over-the-top TV audiences; changes with live sports and other appointment viewing; the competition in video brought by digital entrants; an examination of the dominant online video market in China; and measurement issues that must be addressed in today’s cross-screen environments. The report is part of GroupM's This Year, Next Year series.  

The full report can be accessed here.