The future of Video Advertising

The State Of Online Video Advertising

by Giselle Abramovich
Senior & Strategic Editor

Online video advertising–any video content a brand creates to influence consumer purchase–comes in all different forms and on many different platforms. But no matter how or where you serve it, it is poised for explosive growth during the next couple of years.

Marketers appear to understand. According to recent figures from the Internet Advertising Bureau (IAB), 75 percent of U.S. senior executives plan to shift their budgeting from television to digital video ads.

“As it gets harder to reach people with conventional television advertising, many on the TV buying side are seriously looking at digital video for the first time, creating a huge growth opportunity for the market,” said Keith Eadie, VP of marketing at video ad-buying platform TubeMogul, in an interview with CMO.com.

The biggest driver of online video advertising? Consumers, who are watching tons of video online via social media. According to comScore, consumers watched 48 billion online videos in July. Another driver is marketers’ adoption of real-time bidding, which is poised to account for 24.7 percent of video spending by 2014, according to the Internet Advertising Bureau.

“Audiences are no longer confined to their televisions and are increasingly being driven online for content, and accessing that content from a wide landscape of devices,” said Campbell Foster, director of product marketing at Adobe Video Solutions, in an interview with CMO.com. “These technological changes are not only impacting consumers, but are altering the way marketers and advertisers reach their target customers. They’re turning to increasingly sophisticated technologies that help them connect with their audiences in a customized manner to ultimately drive purchase decisions.”

Pre-, Mid- And Post-Roll Ads
Video ads shown before, in the middle, or at the end of a piece of video content are leading the pack, according to eMarketer. The majority of these ads are served on premium platforms, such as YouTube and Hulu, and consumers are recepetive to them. After all, they’re just like television commercials, only shorter.

According to data from video ad network Rhythm NewMedia, premium video content has the highest in-stream video ad completion rates, with completion rates of 75 percent or higher. In addition,research by TubeMogul in partnership with interactive video ad serving company Innovid found that interactive ad formats are becoming more popular. When first introduced, interactive formats were just 7 percent of the total marketplace; now that number has more than doubled to about 15 percent.

“We also expect interactivity in video advertising to become more mainstream,” TubeMogul’s Eadie said. “According to research we recently released with Innovid, adding interactive elements to an ad–such as local showtimes and Fandango links on a movie trailer–doubles purchase behavior without compromising completions or clicks.”

Video Advertising And Social Media
Social media has had a huge impact on brands’ video strategies. Videos are a social form of content. Adobe’s U.S. Digital Video Benchmark Report found that in terms of daily average engagement (defined as likes, shares, and comments), video content currently provides twice that of nonvideo content. During the past year, video engagement jumped from a 42 percent share to a 70 percent share, showing that Facebook users are rewarding companies that have invested in video content.

And it’s not just pure advertising, either. Brands are creating video content specifically for social to tell their brand story. Take McDonald’s, which has a series of videos that introduce consumers to its suppliers for lettuce, potatoes, and beef.  The “Dream Come True” episode (potato farmer) has more than 1.5 million views on YouTube,“Field To Fork” (lettuce) has almost 1.4 million views, and “Raising Cattle And A Family” has exceeded 1.5 million views. These stories use sight, sound, and motion to pull at viewers’ heartstrings. That’s 4.4 million views in total for the three-part video series.

According to Adobe’s video report, in the first quarter of 2012, video viral reach share was 55 percent, and by the fourth quarter that year the number had grown to 77 percent. “This shows that more engaging video content has a better chance of going viral on social media and beyond,” wrote Joe Martin, marketing analytics manager for the Adobe Digital Index team, which put out the report. “The result of viral media should produce a return on investment (ROI) of higher quality content to an increasingly engaged audience.”

Real-Time Bidding
According to the IAB, real-time bidding (RTB), or automated buying, is the “bright star” for video. RTB is expected to account for 24.7 percent of video spending by 2014. Clark Fredricksen, eMarketer’s vice president of communications, is also bullish on programmatic’s potential to grow the video advertising market.

“More video is being bought and sold using programmatic or automated buying,” Fredricksen told CMO.com. “However, at the moment, even though ad networks have more targeted reach and lower prices, most brands are still more comfortable placing a video ad on a premium video site where they will have brand-safe content and good placement. If you look at comScore data, content sites like Hulu and YouTube have the majority of the video ads.”

According to TubeMogul research, digital video viewership peaks during prime time–just like TV. Software-driven buying lets brand advertisers take control of their budgets. In addition, it simplifies planning across screens because there’s no trying to keep up with various different relationships (publisher, ad network, vendors), Eadie explained.

“We are just beginning to see what is possible as we enter a data-driven age where creative and media strategy are influenced by technology,” Eadie told CMO.com. “One simple problem is the shortage of data scientists with a creative or marketing background to fill the jobs this new era creates–people who can unify technology with the art of advertising.”

Mobile
Consumers’ growing dependence on their mobile phones is having a significant impact on video consumption on mobile. According to eMarketer, mobile search spend in 2014 will increase by $2 billion, and spending on mobile banners will increase $1 billion–all of which means we can safely say the mobile shift is happening—for consumers, publishers, and content providers, as well as advertisers, said Ujjal Kohli, CEO of mobile video ad network Rhythm NewMedia, in an earlier interview with CMO.com.

Kholi warned that marketers need to have a video strategy specifically for mobile because a one-size-fits-all approach won’t work. Consumers have different habits on different devices. While someone leaning back on his couch with a tablet could watch a long video, for example, someone who’s waiting in line at the grocery store would probably appreciate a shorter ad.

“Mobile video is a unique and powerful environment,” Kholi told CMO.com. “But there is a lot to get right. Alignment to premium content in which ads are served becomes incredibly important. Consumers are only receptive to advertising when they acknowledge a fair value exchange. This means high-quality, relevant ads in front of the premium content consumers crave.”

Consumer mobile adoption trends will continue, Kholi said. And more publishers will start to get it right in terms of content production and monetization for digital. Currently, mobile devices account for 10 percent of global online video plays.

“The rise in smartphones and the desire to view short-form visual content on the go–recent statistics put video at 51 percent of mobile traffic–means that more people will be creating as well as consuming video content,” said Scott Monty, global head of social media at Ford Motor Co., in an interview with CMO.com. “And brands will continue to fine-tune their storytelling capabilities so that purely visual media will be front and center.”

The Future For Video Ads
The big picture is that consumers will continue to spend more time on digital devices, such as tablets, phones, and desktops. And the amount of time they spend viewing videos via their devices will grow as well. The growth in viewership is sure to contribute to increased spending on video-based formats during the next three to five years. Indeed, video is one of the fastest-growing categories online.

Set-tops boxes, such as Apple TV and Roku, may also one day have a big impact on the video advertising market, eMarketer’s Fredricksen said. As set-top boxes become a larger part of the video experience for consumers, brands will start to follow. Already we’re seeing rapid growth in use and time spent with set-top boxes and game consoles including XBox, so it will be interesting to see how that area pans out.

Also of interest: how marketers will use the second and third screens to attract TV viewership–services such as Netflix and apps such as the ESPN app and HBO GO (which can be used on smart TVs). “The growth of over-the-top viewing could have real implications for the ad business as well,” Fredricksen said. “It could mean that big screens are shifting from big to small for certain activities, but not as much as we thought in the past.”

TubeMogul’s Eadie said he expects that top media companies will increasingly unveil private marketplaces, which let marketers buy and optimize across directly brokered inventory. He also forecasted that interactivity in video advertising will become more mainstream. According to recent TubeMogul research, adding interactive elements to an ad–such as local showtimes and Fandango links on a movie trailer–doubles purchase behavior without compromising completions or clicks.

And as this landscape continues to evolve, Adobe’s Foster sees more personalized digital programming and ads prevailing. In other words, brands will be able to reach targeted audiences with more relevant content And they’ll be able to do so at more affordable prices than traditional television advertising. This will be a win for advertisers and consumers.

“As there becomes increased consumption with online advertising, marketers will begin to rely on the cross-platform viewing habits of individual, anonymous users gathered by TV programmers, operators, and third-party technology providers to effectively target their messages,” Foster said. “In the future, it’ll become easier for consumers to watch their favorite shows from any device, as Twitter and Facebook account logins will be standard by 2014–further simplifying the process.”