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 IBM, Google 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 Ooyala, Brightcove 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.