13.4 million Australians watch video online each month. Programmatic buying helps planners reach this audience, extending their reach and enabling more effective targeting, using richer data and real-time results. It seems only one factor inhibits the growth of this practice – the availability of inventory.
The growth of online video
Australian consumption of online video is on the rise, with increasing market penetration of tablet devices, smartphones and connected TVs. Driven by rich datasets and programmatic platforms, the opportunity for precise targeting increases as the divide between conventional TV and online blurs.
In part, the growth is driven by the adoption of new devices – such as smartphones and tablets – suited to the consumption of video. Increasingly though, connected TV's are also having an impact, driving viewing for video on demand services.
Households from Q3 2012 to Q3 2014:
- With a tablet rose from 22% to 45%
- With an Internet cable TV rose from 18% to 29%
Time spent watching video on the Internet has risen from 5:18 hours to 7:30 hours from Q3 2013 to Q3 2014.
On average, each month we spend:
- 7:30 hours watching video on our PC or laptop
- 1:56 hours watching video on our smartphones (8:48 hours amongst teens)
- 1:47 hours watching video on our tablets
Of tablet users under 45, more than half use it to watch video at least once a week.
It's not just about online
The digital video ad market in Australia reached $196 million in 2014's financial year, up 76 percent from the previous year. Whilst that accounts for just 2 percent of the total Australian advertising market, it's already half-way to the value of the pay-TV market.
However, programmatic trading isn't confined to online video. It can operate effectively wherever customer data can be collected and advertisements can be appropriately served. That means we'll soon be seeing tailored campaigns reaching viewers through television set-top boxes. In Australia a deal between Adap.tv (owned by AOL Platforms) and MCN will deliver a private programmatic trading platform for advertisers looking to reach Foxtel's viewers. It will mean planners can reach pay-TV audiences in the same way they reach online video audiences, but with a broader inventory and a greater share of the viewing audience.
TV consumers already spend more than eight hours per month watching playback TV on their big screen TV. This, combined with new video on demand (VOD) services, will see more and more content that, with the right set-top devices could be included in future programmatic buys, whether the television content is delivered across cable, off-air or over the Internet. At the moment, though the free-to-air (FTA) television industry has yet to unite in providing a standard in the same way as, for example, Freeview owned jointly by the UK's major TV companies has. If the big players here can unite in the same way the door will swing open for programmatic buying to have a bigger influence, helping to protect FTA companies' revenues from online competitors.
Consumers want advertising
A recent report, "Online and on demand" from Screen Australia , showed that most VOD viewers are reticent to pay for content, preferring ad-supported services. Even though half of Internet-connected Australians watch professionally produced VOD content online, this trend has only shown prominence in the last two years.
80% of VOD viewers use ad-supported video services.
Only 37% use subscription, non ad-supported VOD services.
This rise in connected viewers, responsive to advertising, shows the enormous potential for programmatic in the online video space.
Planners want video
The brand-building power of video is well known. That's why television has always been such a popular medium for advertisers. Now, with more devices and connectivity, digital video is quickly becoming a popular choice amongst media buyers. The AOL IAB 2014 Australian State of the Video Industry report showed that in 2014, video ad spend increased 34 percent and is expected to rise by an additional 37 percent this year.
In 2013, much of the advertising spend on video came at the expense of print advertising. In 2014, as planners shifted from experimental dabbling to accepting online video as a vital part of their media mix, the budgets have shifted from a variety of sources, but most noticeably from FTA television – their video budgets grew through advertising budget reallocation from a variety of sources , but most noticeably from FTA television. Two thirds of buyers said they'd taken money from their FTA TV budget to fund their digital video advertising.
Inventory is the stumbling block
One of the biggest issues the online video industry faces is the scarcity of premium inventory. Among media buyers, almost two thirds consider the shortage to be an issue, with 89 percent concerned specifically about the limited availability of long form content.
While this is bad news for planners, the shortage has an upside for publishers, for whom the scarceness is resulting in higher yields. Almost two thirds of publishers said their CPMs have increased in the last 12 months with an average increase of 25 percent.
Programmatic trading helps cope with this shortage and benefits all sides of the transaction. Publishers can easily see which of their inventory units is selling and which is providing the greatest return. On the other side of the equation, advertisers gain greater visibility into precisely what is available and exactly how much it is and can then plan their campaigns accordingly.
Programmatic video ad formats
One of the advantages of video advertising is the interactivity of the creative that digital provides. All of the formats below can already be traded programmatically:
• In-Stream - Pre/mid/post-roll advertising within a video player
• Skippable - As above but with the option to skip (popular on YouTube)
• VPAID - Interactive In-Stream ads.
• In-Banner Video - A video ad served within a display placement i.e. 300x250
• Overlays - A display ad that typically appears at the bottom of a video player
The Programmatic challenge
One of the major stumbling blocks the video advertising sector faces is the complexity of the programmatic advertising. There are so many ad formats available, numerous ways to message the audience and a wealth of behavioural and demographic data on which to base advertising decisions. It's a big step forward for many media planners: understanding the interplay between all these factors to make purchase decisions, then effectively fulfilling the campaign whilst tweaking changes based on early results. A lack of expertise and a lack of supporting systems and processes are two of the biggest obstacles highlighted by agencies when it comes to the programmatic trading of digital video.
A major issue marketers are faced with when running digital campaigns is that of measurement. How can one measure the relative impact of video and television when both require using different reporting methods and metrics to determine success? Fortunately, Nielsen's Online Campaign Ratings now provide comparable metrics between online and TV, just one day after the launch of a campaign.
Digital video rewards planners with significantly more data than conventional television. Marketers now have the information as to who watched their ad, how engaged they were, what they did next and if they bought. As systems and processes become more sophisticated, it is becoming increasingly possible to track the influence of video throughout the buying cycle.
This means planners can now see how online can be used to extend the reach and frequency of FTA campaigns and make changes to the digital campaign based on real time analytics.
The viewability challenge
When is a video ad not a video ad? When it's not seen. The standard for a video impression in Australia has recently followed the United States definition, 50 percent of a video advertisement needs to be on a screen for at least two seconds before it can be counted as "viewable." Programmatic systems need to be able to identify the likelihood that an impression will be "viewable" before the ad is served – buyers need to see the likely impression rates at the planning stage, not be hit with a post-campaign report showing half of their planned hits were not viewable.
The problems of ad-fraud are not unique to online video although, given the inventory shortage, perhaps there's a greater risk that planners will search harder for publishers to meet their reach targets. The higher CPMs for online video also attract the fraudsters who create "fake views". Their methods range from non-human traffic (bots), to hiding the video player outside of page margins to even resizing it to a single pixel. These views are disguised by muting the ad and allowing it to auto-roll. Fraudsters then count these unwatched plays as valid views and collect money for these "impressions". The industry is working hard to build software that detects and blocks this type of activity. This is a big advantage of using a programmatic platform, particularly when it uses software that can highlight potential fraudulent inventory. The wealth of reporting data also means its easier to spot sites that are underperforming, which could be the result of ad-fraud. Fortunately, the domination of several large publishers in Australia means ad-fraud is less of an issue than in markets with a more diversified media.
The influence of online video will continue to grow as consumption increases across multiple devices. Planners who embrace the change, seamlessly planning campaigns across all screens through a single programmatic platform, will reward their clients with better outcomes. For agencies, the investment in programmatic technology will provide a rapid ROI, meeting the demands of an increasingly sophisticated clientele, looking to better analyse their broader media mix, often with their own rich data sets to aid in planning decisions.
Mitch Waters is ANZ Managing Director of Adap.tv, owned by AOL Platforms