Why video advertising needs a third way

Days before Oovvuu streamed its first documentary in April 2007 we were close to quitting. The path ahead looked treacherous so we jotted down the reasons we thought we might fail. We stopped at 100.

  1. Content owners won’t sell us online rights
  2. No-one will watch online. They love TV
  3. Broadband is too expensive, especially on mobile
  4. People prefer to watch in groups, not alone
  5. How will we measure viewing online?

But we took the leap and nine years later, Oovvuu is partnered with 35 broadcasters as well as IBMAmazon and Google YouTube and we are pioneering the use of artificial intelligence to stream video to audiences globally.

We have learned a lot. We have visited 59 cities and spoken to 55,000 people. We’ve been heckled, dismissed as mad but we’ve kept sharing our findings and floating a vision for what comes after TV.

At the same time, a billion people have been on their own journey. New devices, cheaper connectivity and increasing content availability driven by Oovvuu, Netflix and others have delivered unprecedented choice and convenience.

The result is that the video industry has arrived at a sweet spot for streaming. But as we have arrived, we have found one mountain remains to be conquered.

Jotted at #13 on our list was: “Advertisers will never buy video ads – they are too in love with the TV model.” Squeezed in next to it, was: “Yes, but if history is any indication, the money will follow the audience. The Q will be when?”

That when feels a lot like it needs to be soon. Let’s set the scene.

The world does not have a video content problem. Content is flooding online. If a show’s not in the cloud already, Oovvuu and our partners IBMGoogle and Amazon are working to get it there. Even the world’s previously intransigent TV bosses are waking up.

The world does not have a consumer demand problem. A billion people consume long form video daily. Every industry report shows online viewing is a tide – assisted by simplified distribution by Oovvuu’s partners OoyalaBrightcove and others.

The world does, however, have a major video monetisation problem. Digital has overtaken TV in spend but like every newborn, the new market is wobbly on its legs and suffering growing pains.

The rush to over-claim: Publishers and media buyers are so keen for video to succeed they make claims they cannot substantiate. “If we had 10 times the inventory, we’d sell it 10 times over,” is a common refrain. Oovvuu’s experience worldwide is direct sales teams are only able to sell around 10% of the ad inventory created. Let us know if you have had a better experience.

Under-estimating complexity: Standard display advertising is basically two dimensional (volume and demographic). Video adds duration (engagement). That means quality becomes a consideration. Suddenly, the 2D model is 3D and 4D. Add tablets, the sunset of Flash, differing durations by device, app traffic v website traffic, conflicting analytics, ad loads, ad frequency, revenue per stream, VAST, VPAID and you have a multi-dimensional sell that ad ops teams are not trained for.

Programmatic’s failure: As viewing soared and direct sales stagnated, programmatic seemed the solution. Sales teams seeking simplicity said: “Sure, the CPMs are awful but some dollars are better than none.” Only it has been a false dawn. Oovvuu’s experience is that 70% of programmatic ads fail, mainly through time outs. And direct and programmatic sales combined sell only 30% of available inventory.

Circling sharks: Google have been one the biggest supporters of programmatic. I wonder how many publishers have really questioned why? Have you tried to extract the data from Google’s DoubleClick to assess yields? Who other than YouTube is being able to use this data to raise CPMs? Anyone?

Fear and loathing: Agencies have made good on the promise to shift TV budgets to video, but complexity is hamstringing their ability to sell at scale. Agencies have blamed publishers, and vice versa, resulting in frustration, distrust and bruised relationships. They are in a vicious circle with each demanding more accountability from the other, resulting in paralysis analysis.

Over-thought solutions: Publishers have tried to bypass agencies and gone direct to clients, offering elaborate ‘only available here’ video sales solutions; branded players, full-page video takeovers, sponsored or native video content, ad selectors etc. It has made the complex system even more so. It’s been a false economy.

The platforms have snapped up the opportunity

Make it simple, stupid: Google (YouTube) and Facebook simplified ad products and dropped prices. Why worry about CPMs when you don’t invest in the content? So what if it’s a pre-roll on a beer pong clip or a mid-roll in an Oscar-winning Aleppo doco? Or even whether it is true. Dollars have flooded to them.

Simplicity has become the default: Basic products, high volumes and low prices have made Google and Facebook the default buy for agencies. 50c in every ad dollar already goes to them. The Guardian predicts it will be 71c inside three years. Some project even worse. An analyst from Morgan Stanley writing in the NY Times predicted it will reach 85c by the end of Q1 this year. To prove the point, in February 2017, Facebook delivered a US$8.881 billion revenue quarter.

Frenemy at the gates: Business logic suggests Google and Facebook will soon bypass agencies and court big advertisers directly. Business Insider reports: “The threat of disintermediation by the Google and Facebook duopoly is a going concern for advertising agencies”. WPP boss Sir Martin Sorrell says Google is a “frenemy” but will still spend $5 billion with them this year. That makes Google the world’s largest ad agency’s largest media partner.

It’s nearing a decade since Oovvuu penned its 100 questions: Content, technology and consumer demand are booming. Monetisation is at a crossroads. Oovvuu believes the market needs A Third Way. The alternative is an end of life scenario for many content creators and publishers.

It is now clear that direct sales cannot achieve the scale needed to compete and programmatic is (most likely fatally) flawed. The market is primed.

Even the sales heads at the world’s biggest media companies are beginning to catch on. Dominic Carter, sales head at News UK, opined: “The ad tech businesses are basically saying, it’s OK to just target audiences, it’s irrelevant about context and content, it’s irrelevant for aggregators and distributors to turn around and say it doesn’t matter about the accuracy of the story — it does. And that’s where the unique opportunity is for publishers.”

That’s clearly what Oovvuu does, but we cannot turn the tide alone.

We believe the world’s biggest agencies must draw down on the failures of the past and join forces to create underwrite video advertising for professional content.

  1. WPP (London) US$19 billion
  2. Omnicom (New York) US$15.3 billion
  3. Publicis (Paris) US$9.6 billion
  4. Interpublic (New York) US$7.5 billion
  5. Dentsu Aegis (Tokyo) US$6 billion.

What is The Third Way?

For the first time in a decade, advertisers, ad agencies, publishers and content creators have most to gain by supporting each other. The industry must collaborate to build a sustainable new $70 billion video economy for all. We already know the model. Broadcast TV knows it as the upfront and it sustained that industry for half a century.

Artificial intelligence takes the upfront to a new level. Ads can be matched to content and matched to audiences and publishers in less than a second on a global basis, and based on Oovvuu research, ad efficacy can be reported in eight seconds – and therefore optimised in-flight.

Three steps

  1. Agencies should commit an initial $100 million in video ads and ring-fence it for publishers and professional content worldwide. This will give content owners the confidence to make programming and give publishers the security to promote it.
  2. Publishers must coalesce behind a single AI-driven delivery and measurement metric which everyone can trust. This is something Facebook has failed atSo has Twitter. The convergence of video and AI – driven by Oovvuu and IBM – enables this for the first time.
  3. AI also means programming can be targeted to the right audiences with accuracy at speed and at scale. This means audiences can get the content they want and advertisers and agencies can reach the eyeballs they want.

Progressive agencies like WPP, Havas and Dentsu have taken the positive first step of launching venture arms offering ads for equity to drive better solutions. We hope others will follow suit. Video’s $70 billion ad future is up for grabs. Who wants it?

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