An eBook from the editors of OTT’s Advertising Problem · PDF fileOTT’s Advertising Problem. ... of dollar signs, ... of that chicken-and-egg treadmill entirely and are subscription-only

An eBook from the editors ofMarch 2017

Introduction

OTT Advertising Prepares for a New Chapter

How OTT Providers Are Targeting, Tracking and Timing Ads

Sponsored Content The Move to Server Side Ad Insertion

OTT Ad Delivery Case Study: Hyundai’s ‘Skip’ Ad

What Advertisers Are Saying About OTT

Programmatic, Social, VR and the Future of OTT Advertising

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OTT’s Advertising Problem

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OTT’s Advertising Problem // March 2017 //

An eBook from the editors ofshare:

Introduction


How OTT Providers Are Targeting, Tracking And Timing Ads





It’s no secret that the OTT video market is exploding. With relatively new, heavyweight entrants like DirecTV Now and HBO Now, alongside increasingly powerful players like YouTube and Amazon, the space appears positioned to gain significant traction in the years ahead.

But the market for advertising in the OTT space is still very much in a state of flux. Ad blocking, fraud and measurement metrics are ongoing issues for providers of ad-supported online video content and brand

advertisers alike. Further, newer technologies ranging from programmatic advertising to virtual reality promise to create further complexity.

With the industry now hunting for results in the form of dollar signs, is time running out to fix advertising’s OTT problems?

This Fierce eBook will break into the OTT advertising market in five parts. Read on.

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Introduction







Compared with the paid, subscription video-on-demand (SVOD) services that dominate the over-the-top (OTT) market today (Netflix, Amazon Prime, HBO Now and so on), ad-supported video-on-demand (AVOD) and live services have floundered, mainly because they tend to lack compelling, premium content that justify viable ad rates. However, market shifts indicate that 2017 could be a bellwether year for advertising’s role in the OTT video ecosystem.

The first generation of ad-supported services has suffered because of two main issues: The sheer cost of content acquisition and a lack of standardization for ratings and measurement for digital content.

The acquisition issue is perhaps the biggest obstacle, and it can be encapsulated in a sentence: Netflix spent $6 billion on content in 2016—a chunk of investment that advertising alone could never recoup.

The issue is circular: Without the right, differentiating content, consumers won’t watch, and without eyeballs, providers can’t charge viable ad rates. And without a working monetization model, it’s impossible to invest in differentiating content in the first place. Many of the most successful OTT services have opted out of that chicken-and-egg treadmill entirely and are subscription-only.

“Online video advertising as a pure-play strategy is broken because the CPMs are so low,” explained Dan Rayburn, principle analyst at consulting firm Frost & Sullivan. “For the premium content services, the content acquisition costs are so high that you can’t pay for it based on a CPM model alone. Consider that Microsoft shelved plans to do a live service to the Xbox, because it realized it couldn’t make its content investment back—even though it’s the No. 1 non-pay-TV device connected to the TV in American homes.”

YouTube is the one looming exception in the ad-supported market to date—and it gets by based on its sprawling volume.

“YouTube, of course, has a massive ad-supported online video business that has been growing

OTT Advertising Prepares for a New ChapterBy Tara Seals

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Introduction







healthfully according to our calculations,” said Forrester Research analyst Brandon Verblow. “However, even YouTube falls short of Netflix in terms of downstream bandwidth consumption, and its estimated ad revenue is only a small fraction of traditional TV ad revenue.”

In fact, “about 75% of YouTube content can’t be monetized—it’s user-generated, gets no traffic or is of bad quality, so no one will advertise,” Rayburn said. “Its sheer scale is what it relies on.”

Joel Espelien, senior research analyst at The Diffusion Group, noted that YouTube is a “different animal because it really has relatively no content costs. We’re talking about things like Minecraft videos that someone uploads.” (Of course, it’s worth noting that YouTube recently launched its own streaming live TV service for under $40 per month.)

The end result is that the OTT advertising market is like a barbell—weighted on both ends, with nothing in the middle.

“It’s a good time to be HBO and Netflix, and short-tail content is doing okay,” explained Espelien. “And meanwhile YouTube is fine. But the guys in the middle, who want to make a service and or create their own video channel and brand and then try to sell ads around it—that’s a tough row to hoe. Those people are struggling to eke out an existence and many of them will not, because there’s not a bonanza of money. But really high-end content—or a crazy big platform—that works.”

One example of a troubled player on this front is Verizon Communications’ mobile-first Go90 service, according to Rayburn. “They have a huge number of people working on Go90 and it’s free—but no one watches it,” he said. “The fact is, everyone is competing for OTT ad dollars and eyeballs, and some of these services just won’t make it because they don’t have the content.”

New Models in the WorksThis first generation of ad-supported OTT approaches is poised for change, because that middle no-man’s land is being filled out with services that are experimenting with hybrid models. Hulu for instance last year axed its ad-only tier in favor of a low-cost, subscription-based, ad-limited tier.

“This provides some stable level of income via subscriptions, as long as they keep consistent market share, and then the advertising allows a bit of padding to generate incremental income,” explained Glenn Hower, senior analyst at Parks Research. “We’re seeing fewer and fewer solely ad-supported services.”

Forrester’s Verblow said that growth in OTT advertising will require the migration of traditional TV content to digital platforms—something that hasn’t been available in large amounts in any kind of ad-supported OTT. There are, however, indications that that this is about to change.

“Traditional TV providers control much of this content, and they’ve been cautious about making

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Introduction







their programming available outside the lucrative TV bundle,” explained Verblow. “Even if many viewers want to cut the cord, they may not follow through as they realize they cannot get all the content they want.”

Things are changing though. Dish Network’s Sling TV has been offering streaming TV for more than a year, and AT&T recently joined the fray with its launch of its DirecTV Now OTT service, and there are several other noteworthy services along these lines.

Most recently, Google’s YouTube launched its own live TV service with dozens of channels, as well as the Big Four networks, for under $40 per month. Hulu is expected to launch a similar offering. Also helping matters is the fact that CBS content—one of the last Big Four TV network holdouts on live-streaming—is now slated to appear on the upcoming Hulu live

streaming service and could also start appearing on other OTT services. CBS content is already on the Sony PlayStation Vue service.

Armed with a stable of professional, premium video,

these services can, in theory, command viable ad rates. Indeed, an object lesson could come from the TV Everywhere world, where content providers offer those with pay-TV subscriptions the ability to watch content online.

“Professional production-value premium content does attract higher CPMs than a Minecraft video,” Espelien said. “If you look at NBC’s TV Everywhere app, it’s now running ad blocks that are similar to what you get on regular TV—there are 120-second breaks several times during the show, and there’s no ad-skipping. They also generally have a pretty good idea of who’s watching. They’re not yet doing eyeball scans, but they can resolve where I am down to my zip code, so they can be a little targeted. That’s new—last summer during the Olympics all you got was generic national ads for McDonalds, etc. Recently I’ve noticed that local ads have started to appear, indicating that they can generate enough revenue off that online view to treat it like traditional advertising.”

As for pure-play AVOD services from smaller players, the path is less clear. Hower said that one of the models being tested is custom content packages.

“In the short-form space, there’s a move towards sponsorship and branded models, which has a few implications,” said Hower. “This allows creators and advertisers to have a mutual level of control over how the brand is presented and how the messaging comes across. It also allows advertisers to build one-on-one relationships with creators and influencers—giving

“Professional production-value premium content does attract higher CPMs than a Minecraft video.”

—JOEL ESPELIEN, SENIOR RESEARCH ANALYST, THE DIFFUSION GROUP

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them a hands-on relationship with how their message is delivered and who it’s coming from. This approach is a lot more resource-intensive, but there’s anecdotal evidence that it’s creating better engagement.”

In contrast, in a typical insertion model, brands buy 15 or 30 seconds of media time, and the platform, whether it’s YouTube, Hulu, DirecTV Now or something else, places the ad depending on its own parameters.

“I think going forward, we’ll see a lot more experimentation in the OTT space,” Hower said. “It’s full of so many different services now and the

churn rates are high—so providers have to move beyond generating market share so they are looking at retention and building value. And from that standpoint, we’ll start seeing OTT 2.0—how do we sustain our businesses now? Advertising will be a key discussion point.”

The Need for Better MeasurementIn theory, OTT services are counting unique viewers, measuring time spent watching and tracking demographic info on age and location. But none of them are doing it the same way.

“A full 10 out of 10 advertisers are using Nielsen

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Introduction







ratings to evaluate the value of content on linear TV,” Hower said. “But in the digital space, where you have metrics like unique viewers and time spent viewing, each evaluation technique has its own little quirks.”

For instance, YouTube’s standard for counting a unique view is that a viewer watches a video for 30 seconds. In contrast, Facebook uses a three-second standard, according to Hower. Also, it’s worth noting that Facebook recently admitted that it miscalculated the level of video viewership on the social network, inadvertently inflating the platform’s average viewing time. These incidents don’t exactly instill confidence in advertisers.

“Everyone does measurement differently, and no one wants to work together,” Rayburn said. “Sony, Twitter, Google and Facebook are not going to get together to share engagement numbers in a standardized way.”

This lack of standardization also extends to knowing how to track viewership across linear TV and digital viewing. “The idea with some of this, like the NFL’s deal to show Thursday night games on Twitter, is to reach a younger audience that may not be watching it on TV,” said Rayburn. “But how do you know they’re not watching on TV?”

To really make a go of OTT advertising, marketers will need to develop screen-agnostic planning and execution to reassemble the audiences that fragment across these screens. “Going forward, it will be important to track innovations such as audience-based

buying, whether ads are targeted to specific users or whether ads are interactive,” Verblow said. “These are the factors that have the potential to generate incremental value and the ones that should really matter to advertisers and content providers.”

An example of this is the fact that content providers and advertisers are looking to incorporate social data into their measurement approaches.

“Snapchat has an analytics API, Facebook has an API—so there’s more granular data available out there,” Hower said. “But none of this talks to each other. Advertisers are trying to get to that point where they know what viewers are not only watching, but also commenting on, what ancillary content they’re visiting on YouTube and so on. The Holy Grail is incorporating social, video chat, TV, digital video into a full profile of what an individual viewer is watching, and how. It’s a jigsaw puzzle with a billion pieces, and we’re not there yet.” l

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Perfecting the Media Experience

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Introduction







The OTT video market continues to undergo dramatic changes, but according to three top executives in the space, the advertising opportunity remains strong. That’s because targeting technologies are relatively robust, customers generally watch ads, and experiments are relatively simple to conduct.

Indeed, identifying viewers to match them with ads is easy at Hulu for one simple reason: Since the service requires paying subscriptions, it literally knows where its audience lives.

“The information you have about them (the customers) is pretty bulletproof because they’re giving you money,” said Peter Naylor, senior vice president of ad sales for Hulu.

Hulu also asks viewers what kinds of shows they want to watch. And since it’s an on-demand service, it can assume more viewer interest in whatever’s playing than any linear service could.

Naylor added that about 80% of Hulu ads are targeted

How OTT Providers Are Targeting, Tracking And Timing AdsBy Rob Pegoraro

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Introduction







on traditional criteria—“demo, geo, gender, genre”—with 20% booked using programmatic targeting that calculates a spot’s real-time value and matches a buyer. “It’s a material part of the business, and it’s growing,” he said.

It’s not perfect: Hulu viewers have complained on Twitter about seeing Spanish-language ads. “It could potentially be a multicultural marketer,” Naylor said of those gripes, adding that viewers may have had somebody on their account watch a Spanish-language show.

OTT services without a database of paying subscribers must rely more on external data sources such as Google’s ad-targeting services.

“We’re able to lean into a lot of the work they’ve done around geographic targeting, demographic targeting,” said Jamie Wilkinson, general manager at VHX, which provides a white-label OTT platform to third parties.

Wilkinson added that VHX, which he co-founded before Vimeo’s purchase of the firm last spring, can also combine viewership data from across its partner networks for a better understanding of viewers.

Not The Same Old TV AdsThe results of this data-driven market can sometimes look much like the commercials that populate traditional linear TV.

“The majority of the ads you see on our network also run on linear TV,” said René Santaella, senior vice president of global ad strategy and operations at Crackle, Sony’s ad-supported streaming service, in responses forwarded by a publicist. Hulu’s Naylor said as much: “The majority of our ads are things you can see on broadcast and cable.”

He added that although Hulu can target ads down to Zip codes, many advertisers don’t bother. “A lot of our geo-targeting is multi-state,” he said, noting that Hulu’s biggest category of advertising is automotive.

Hulu touts a reduced ad load in its flagship subscription product, and Sony’s Crackle is also experimenting with fewer but more valuable ads.

Said Crackle’s Santaella: “You don’t want to hit the same viewer over and over due to over-targeting.”

Last year, that ad-subsidized site rolled out a reduced-advertising product, Break Free, that pares the ad load down to just five per episode during its original series. The idea is binge-watching-friendly ads: Each of that small group of advertisers can continue telling its story over succeeding episodes.

Hulu has been conducting its own experiments to

“It’s a material part of the business, and it’s growing,”

– PETER NAYLOR, SENIOR VICE PRESIDENT OF AD SALES, HULU

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see what formats resonate better with viewers. “We’re totally open to accepting 5, 7, 37, 83 [seconds],” Naylor said of the ad lengths Hulu can support. “Bank of America gave us a sequential ad; you’d see three ads from Bank of America, but it was a story.”

Viewing Platforms And Effectiveness“The vast majority of our audience viewing occurs on closed platforms on gaming consoles, streaming boxes and mobile apps,” said Crackle’s Santaella.

Hulu enlisted Kantar Millward Brown to measure the effectiveness of its ads; in a study posted in October, that firm found that OTT ads beat PC and mobile ads for brand awareness and brand favorability, while mobile ads did better at advancing purchase intent.

Naylor said Hulu’s ad completion rates are above 90%, which makes it easier for the company to bill only for fully completed spots. Viewers also have the option of fleeing ads: The premium for ad-free viewing is $4 above the service’s usual $7.99 “limited commercials” monthly option.

Crackle relies on Moat’s viewability analytics to track ad completion—nearly 100% on smart TVs, Santaella said.

What’s Next?The future of online video is so open that people can’t even agree on how many screens viewers will watch at once—if virtual-reality takes off, two will be the default for VR regulars. The growth of over-the-top services

that aim to displace traditional cable and satellite subscriptions opens other possibilities.

Hulu, for instance, is readying a live TV service for launch this spring and now has a VR app.

VHC’s Wilkinson expects more live-streaming across the company’s partner networks, which will in turn call for different ad formats. “I would expect a different kind of user behavior around live streams versus on-demand,” he said, suggesting that those viewers would be more accepting of pre-roll ads.

And as all these viewing platforms add interactive features that invite viewers to lean back less, you can expect more ads inviting you with some clickable call to action. Said Hulu’s Naylor: “That won’t be the measure of success so much as the new normal.” l

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Sponsored Content

TV consumption is making a clear migration from broadcast and classic managed IPTV platforms to over-the-top (OTT) delivery. Meanwhile, advertising is an integral part of video monetization strategies for broadcasters and other video content providers. Though primary screen advertising has long been optimized, the art of making money while delivering video content to consumers on connected devices is still evolving. Traditional content providers are accustomed to linear TV monetization models. But the internet is an unmanaged network with unclear paths to monetization. In addition, an inherent tension exists between delivering a premium OTT viewing experience – complete with start-over and time-shifted TV functionality – and monetizing streaming video offerings and services.

In the Pay TV domain as well as modern syndicated content, the majority of services today rely on client-side advertising insertion. In brief, the client device stops playing back the content, sends out a VAST request, gets a response, loads the asset, and then restarts playing back the content. There are challenges with this approach, including ad blockers, latency (going from playback of one asset to another can cause problems such as stitching

problems, resolution changes, loss of playback buffer, etc., negatively impacting the viewing experience) and development considerations (implementing client-side ad insertion requires developers to use many SDKs on the client devices).

These challenges are causing many broadcasters to move to server-side advertising insertion (SSAI). SSAI is, in a way, a return to the origins of online advertising, because the material – both content and commercials – arrives as a single stream from a single source. The difference is that the advertising is no longer static. It is dynamically inserted before the video stream is delivered. Commercials are personalized for each individual stream at the moment of delivery. The video ecosystem as a whole is now moving in this direction. Ad blockers are resolved, latency is mitigated by a move to the edge of the network, and development efforts are consolidated.

In addition, end users do not experience video buffering, freezing, blocking, spinning wheels and other viewing interruptions. It is especially important when streaming live content to deliver a consistent quality of experience so audiences do not feel they have missed something vital. This consistency and

reliability increases audience engagement, which ultimately increases viewing time and market share.

The challenge of monetizing OTT video content will only continue to grow as viewership on multiscreen devices is expected to increase going forward. Market research shows that to optimize revenue opportunities for streaming video, advertising needs to be targeted to the individual user and delivered in a way that enhances the quality of a viewer’s experience. Personalizing ads reduces the consumer desire to employ ad blockers and increases the value of the overall video streaming experience.

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The Move to Server Side Ad Insertion

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Introduction







The Hyundai ad starts out like many other car commercials: From a back-seat perspective, we see a young man behind the wheel of an Elantra rolling down a tree-lined street. YouTube’s usual skip-ad button appears at the lower right corner—but before you can think to click or tap it, the driver reaches back to give it a whack himself.

Then he repeats that gesture, growing frustrated as the button doesn’t respond. Through the windshield, we can see a mother and a daughter looming in the street ahead—which is when the car beeps and brakes itself automatically. A voiceover lauds the Elantra’s pedestrian-aware automatic-braking feature—and then the irked driver gives the skip-ad button one more tap.

The “Skip” ad, created for Hyundai by the Huntington Beach, Calif., agency Innocean Worldwide, shows the creative possibilities of video ads in an online medium

that’s already developed its own cultural quirks. It also demonstrates how, on this stage, audience metrics can quickly indicate whether the ad did its job or if it has already been forgotten.

Fun With The FormatThe Korean car maker came to Innocean with a tough request: Make us something memorable about the new Elantra that shows off one of its key safety features—and conveys that message inside the 15-second duration of a YouTube pre-roll spot, copywriter Jeff Barry said in an e-mail.

“We gave a couple of parameters and guidelines,” said Monique Kumpis, Hyundai Motor America’s senior group manager for brand marketing and advertising. “But the main thing was, ‘how do we draw them in quickly and get them to stay?’”

Barry and his colleagues took inspiration from an earlier ad that poked fun at YouTube’s skip-ad feature: Geico’s “Unskippable” pre-roll ads.

The Martin Agency’s spots, AdAge’s 2016 campaign of the year, mocked the tone and style of 1970s TV ads as well as YouTube’s skip-ad button by blurting out the sales pitch in the first few seconds. They then taunted the viewer by noting that it was too late to skip the marketing bit of the message, then turned the rest of the

OTT Ad Delivery Case Study: Hyundai’s ‘Skip’ AdBy Rob Pegoraro

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Introduction







clip into a bloopers reel of sorts.

“We took a step back and looked at the process by which viewers engage with and ignore pre-roll advertising,” Barry said. “Most people click ‘skip ad’ without a second thought in order to get to their content as fast as possible. So we decided, why not do it for them while stopping them in their tracks with a jarring visual, all while breaking the fourth wall.” (“Fourth wall” is theater jargon for the invisible but assumed barrier separating the stage or set from reality. Anytime somebody in a show or an ad stops and speaks to the camera, they’re breaking the fourth wall.)

Measuring Its SuccessInnocean’s ad ran mainly on YouTube from April through August of last year, a logical spot given that site’s support of the skip-ad button—a feature of Google’s TrueView format, launched in 2010, that lets the viewer ditch the rest of the ad after its first five seconds.

Google got to charge more than average: 79% of viewers watched the ad to completion over the first two weeks, which Barry said beat the 55% average completion rate for 15-second TrueView clips by almost a quarter. It racked up a total of 10 million impressions on YouTube and elsewhere.

From Hyundai’s perspective, that completion rate was “far beyond our normal,” Kumpis said. “We loved it, because it made such better use of the medium.”

The ad also earned critical approval too. In October,

“Skip” won a bronze award in the “Video - Online Commercial” category at the Interactive Advertising Bureau’s MIXX awards. In an e-mail, the jury chair of that contest, 72andSunny partner and executive creative director Matt Murphy, offered a single-sentence summary of what made the ad resonate: “Life is full of distractions, including the button that allows you to SKIP THIS AD.”

Lessons LearnedThis Hyundai ad stands out not only for having some sport with a YouTube advertising trope, but also for simply not being a cut-down version of what runs on TV.

“Creatives, they want to take their 30-second spot and cut it down to pre-roll,” Hyundai’s Kumpis said. That’s not a good idea, especially in a medium as fundamentally twitchy as online video. “If they’re going to stay with you for your advertising, it has to be for a reason,” she said.

“Smart digital marketers embrace that consumers have more control than ever and therefore must use storytelling in an engaging way,” Murphy said. “Realizing that consumers have the attention span of a goldfish, great online videos must grab your attention quickly.”

“What this taught us was that each medium should be treated individually,” said Innocean’s Barry. “A TV ad should not just be rehashed for online content, but instead, we should pay close attention to how each medium is perceived by viewers and consumers.”

“Consider the medium,” Kumpis advised. “People have other things to do.” l

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The rise of online video has given marketers a collection of new devices and platforms to reach consumers on—and brands have responded by moving more ad dollars to digital video marketing. However, digital video is just one piece of the marketing puzzle.

“We never see digital video being a thing and TV being a thing. We always want to approach it as a

holistic story,” said Bill Davaris, chief creative officer at the advertising agency Madras. At Madras, it’s called “always on” marketing, though others refer to it as omnichannel marketing. The idea is to craft a single consistent message and deliver content around that message to different devices and platforms. And it’s possible only through leveraging the vast amounts of data that’s available in the online world about consumers and their behaviors.

Using Data to Drive ResultsThanks to digital advertising technologies like data management platforms, programmatic buying platforms that have largely automated much of the processes of media buying, and closed-loop analysis that marry sales data with marketing data, brands are better able to target audiences and measure the performance of a campaign than they ever could on linear TV.

“Data is incredibly important—it informs everything we do,” said Trish Cox, VP of advertising and brand at T-Mobile, a mobile carrier that is a major advertiser in the United States. “We can’t create unique content that drives engagement without first knowing how that video is being consumed. It always goes back to our consumer focus.”

There are a number of ways that data can be used to

What Advertisers Are Saying About OTTBy Kendra Chamberlain

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inform marketing. First-party data from a brand’s own platform can be married with third-party census-level or sales data to help further define audiences. Data management platforms help brands better understand their target audiences and how and where to find them; and programmatic ad selling and buying enable brands to target or re-target those audiences across inventories in real time.

And data also enables brands to carefully track how well a specific ad format, for example, or an entire campaign, is performing. “It’s really a more sophisticated model,” said Andy Ladden, another chief creative officer at Madras. “You’re almost able to track [the campaign] by IP address, and you know this user saw a banner ad here, they saw a social video there, they were on YouTube, and by the sum total of that, you can see what’s working, and what’s the right mix.”

The OTT PlatformsThere’s no shortage of digital ad inventory online, and the world of online video is only growing, from ad-supported OTT services, to social video networks like Facebook and Snapchat, to TV networks’ digital video initiatives such as TV Everywhere services or direct-to-consumer OTT platforms. This spectrum of OTT platforms offer marketers new channels to reach consumers on.

“Video platforms like YouTube and Facebook are hugely important,” Mark Aikman, general manager of marketing services at Mercedes-Benz USA, said. “Both of those are mobile, and we are also thinking through

the incredible amount of mobile video that’s being consumed, and adding in new partners for us to be able to reach those new consumers.”

Each of those social video platforms have their own quirks—for example Facebook ad creative needs to be able to deliver a message without sound, while Snapchat video ads need to look best in a vertical orientation. And brands also can tailor the content of the ad to the platform or device that it’s being seen on. “If we’re delivering a network message across all channels, we’ll develop unique and meaningful creative for each audience—sports vs. gaming vs. travel—to highlight what’s most important for that user,” said T-Mobile’s Cox. “The content should look and feel different, and be created accordingly, depending on where it’s being consumed, whether it’s for social, native or pre-roll.”

YouTube, however, is its own beast, thanks to its massive global audiences, an entire generation of premium online video content producers, and the fact that YouTube is one of the top search platforms online. Today, it’s not uncommon for brands to establish their

“Video platforms like YouTube and Facebook are hugely important.”

— MARK AIKMAN, GENERAL MANAGER OF MARKETING SERVICES, MERCEDES-BENZ USA

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own YouTube channels where longer-form marketing content and even branded entertainment content can be found.

Mercedes-Benz, for example, offers a host of longer-format videos on YouTube. “On our YouTube channel, you’ll find a number of video brochures that are really long format pieces of content that really help a shopper understand the vehicles,” Aikman said. “We are also producing a tremendous amount of entertainment-based video content.”

The early days of YouTube advertising were mired in concerns over the quality of user-generated video that ads were running against, but the sheer scale of online video left brands wanting more. In Davaris’ words, brands are “absolutely addicted” to impressions. But impressions aren’t really the end game anymore.

Lots of impressions “doesn’t necessarily lead to a successful campaign, it doesn’t necessarily lead to more sales or brand loyalty,” Ladden said. “So that’s what brands and agencies are struggling with now, to link it back to business results.”

Blurring Lines Between Digital and TVTV networks have also entered the digital video fray, and marketers have been eager to participate in digital advertising through TV networks’ OTT properties. “We’re realizing that some TV channels have really powerful digital platforms that are very influential,” Davaris said. “A big reason why a client might go with a CBS is because the way CBS also helps through

their digital platform. They have a very influential and powerful digital platform.”

Networks also now typically offer TV and digital media inventory as a package. And those packages are particularly important for big live tent pole events like the Super Bowl. “As a large advertiser, we are going to media upfronts with networks, and digital streaming packages are often a part of that,” Aikman said. “Fox has live stream [inventory] that comes along with your Super Bowl buy, for those people that may not be watching it directly on the TV,” he added.

But brands are quick to point out that while digital ad dollars are growing, traditional linear TV is still the top platform for delivering marketing messages. “Television is still an important part of the marketing mix,” Aikman said. “This was one of the hottest years in the television upfronts in a while.” l

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As the OTT advertising market matures, many in the space expect the service to more fully meld into the wider marketing industry—and to collect a range of new technologies and platforms along the way.

“Unified planning, buying, measurement and attribution are still lacking, but as these data-driven systems mature we will see investment across online video grow at rapid clip,” said Ashish Chordia, CEO and co-founder of Alphonso, a company that tracks what people are

watching on TV in real-time and sells mobile advertising technology. “The OTT advertising market is truly an extension of broadcast TV. We should think of OTT as we think of network, cable and addressable TV ads. In fact, thinking of OTT as a form of addressable TV ads is a great lens to see what is in the future for TV ads. In less than three years, i.e., by 2020, we will not be talking about OTT, programmatic, addressable and linear TV as different things.”

Indeed, it makes sense for digital video advertising to be seen as a complement to linear TV investment. Research firm eMarketer expects that U.S. digital video ad spending will see double-digit growth annually through 2020. TV ad spending will grow much more modestly, at rates ranging from 2% to 2.5%, but will remain dominant, with total ad spending reaching $77.17 billion in 2020, more than quadruple the $16.69 billion for digital video.

However, as Chordia indicates, there’s still work to do when it comes to enabling cross-screen engagement—and it’s here that ad platforms are working overtime to make it happen.

“Almost everyone recognizes the value of having a unified video marketplace for building campaigns across video on demand, OTT, mobile, social—but there’s a lot of inertia in terms of creating standards for measurement across those platforms,” said Jay Prasad, chief business officer at

Programmatic, Social, VR and the Future of OTT Advertising By Tara Seals

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VideoAmp, another ad-tech company that sells software to marketers for cross-platform advertising. Others in the crowded space include TubeMogul and Marin Software. “Right now, doing things cross-platform is an inefficient process, because you have one system for TV, one for mobile, one for social video—and there’s a lot of walled garden stuff. Our goal is to make that all seamless.”

Ad-Tech EvolvesPart of the solution may be addressed by programmatic (algorithm-determined) advertising, which is already becoming the de facto digital standard. “Programmatic ads have already taken over the space in OTT and online advertising. All the major OTT and online video providers do some form of programmatic—be it open, private market or some other combination to manage inventory, price, etc.,” Alphonso’s Chordia said.

Programmatic advertising will grow 31% to account for 58% of expenditures in 2017, faster than all other digital channels, according to Zenith Research’s Programmatic Marketing Forecasts. Zenith is an advertising agency that is part of the multinational French Publicis Media advertising and public relations company.

At first programmatic marketing was often used to reach target audiences as cheaply as possible, with little regard for the quality of the sites in which the ads appeared. It is now being used in conjunction with data segments to target individuals in intelligent and creative ways, identifying those most likely to be receptive to a brand’s messages and encouraging them along the path to purchase, often in premium environments.

Overall, programmatic ad spending grew from $5 billion in 2012 to $39 billion in 2016, according to Zenith Research, at an average rate of 71% a year. It’s also starting to spread into the “traditional” media—some television, radio and digital out-of-home platforms already offer automated and data-driven trading of inventory.

“Programmatic buying of digital media has become the norm in major markets, and is aggressively following this path in smaller markets,” said Benoit Cacheux, global head of digital and innovation at Zenith. “We believe that the growth of programmatic will continue to be fueled by improvements in the quality of media available in programmatic environments—especially private marketplaces—and the greater availability of programmatic mobile media, as well as the sophistication provided by ad tech solutions such as data management platforms and connected ad tech stacks.”

But programmatic advertising is just one piece of a larger puzzle. For example, sales of virtual reality equipment are poised to grow as the price point of headsets dip below $100. More publishers are creating exclusive content for the format, and brands are now realizing the value

“Programmatic ads have already taken over the space in OTT and online advertising.”

— ASHISH CHORDIA, CEO AND CO-FOUNDER, ALPHONSO

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of developing these experiences. Overall, VR is moving from a format owned by the gaming and entertainment industry to one that holds promise for the automotive industry, travel and tourism, consumer packaged goods and retail.

“What VR has going for it is that it’s immersive,” Prasad said, noting that the main VR metric is how long someone is “gazing” at the ad—it’s called the gaze-through rate. “Whether it’s a ball game or watching Shark Week, the ad experience is immersive as well. This is a youthful, tech-oriented segment, they watch very little linear TV, and they’ll appreciate an awesome VR creative in a game they love.”

And, Prasad added, VR ads can be mixed with ads in other formats: “You can create a bucket of those exposed to a VR ad, and then can have a follow up—like offering a store locator or call-to-action on mobile,” he said. “It’s a potential great first touch point, and a doorway to a potentially long engagement exposure. You can sequentially serve the creative: Three VR ads, three on desktop, four on mobile. You’re with them across screens.”

Another hot space to watch going forward is social video. Research from Brightcove, which provides online video hosting and player technology, shows that three-quarters (74%) of global consumers connect watching a video on social media to their purchase decision-making process, demonstrating why brands are so enthusiastic about video on social platforms.

The opportunity is not lost on the social networks themselves. “While YouTube is the largest provider in the OTT space when it comes to video advertising, with share up to 30-40%, Facebook is certainly not too far behind. They have big plans to evolve by shifting their focus from mobile-first to video-first,” said Anupam Gupta, chief product officer at 4C Insights, another company working to aid marketers with multi-screen advertising products. “Combine that with Facebook’s infrastructure, targeting (people-based marketing), measurement and creative intelligence capabilities, and they are making their way to becoming the most advanced

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video platform out there.”

The theory is that if the live video push within the social media space continues to grow, as it is expected to, opportunities around live ad formats will also come into play. This is already starting: For instance, the only ad format that Snapchat offers is video.

“More people viewed the VMAs on Snapchat than linear television and the company recently announced a deal to debut BBC’s Planet Earth II on its mobile platform,” said 4C Insights’ Gupta. “So, I view Facebook and Snapchat as the next-gen video platforms that have a lot of growth potential.”

And to keep up with the advertising momentum being seen on social media, these platforms also will look to add more long-form content.

“Take Disney, who is already catching on to this trend by creating a Snapchat channel that will allow long-form content tailored to their target audience to be seen by Snapchat’s 150 million active daily users—where 60 percent of these users fall into Disney’s target audience,” Gupta said.

Refocusing On The AudienceIn all, brands, content owners and platforms are looking to keep up with what YuMe executive Michael Hudes calls “liquid audiences,” which are dynamic in nature, moving fluidly throughout their day between different devices and across multiple screens.

“The ‘content first’ paradigm that has dominated the content and marketing worlds has been massively subverted over the last five years,” explained Hudes, who is the chief revenue officer for YuMe, another ad-tech company. “We now need to begin with thinking about the ‘audience first’—their unique characteristics, behaviors and motivations—and build content and marketing campaigns around these attributes. It’s not just the prioritization of the audience that has shifted: audiences today are more dynamic, fluid and ever-changing.”

He added: “The net effect is that if we align brands with the specific and targeted audiences they want to reach, we will continue to see online video ads that are more personalized, targeted and optimized to meet key brand objectives: engagement, consumer favorability and brand recall metrics.”

To be clear, brands are seeing OTT video drive sales today: A study YuMe did last September found that the power of video is that it’s actionable. In fact, the study found that 66% of digital video viewers took action after seeing a digital video ad, either by sharing, engaging with the brand or buying products. In addition, video ads were shown to be nearly twice as effective in driving purchases than image or text ads.

“All of this could be a renaissance for the creative agencies,” VideoAmp’s Prasad said. “It’s not about repurposing the creative over and over, and just re-sizing it. It’s saying, ‘I have 16 platforms, and I can plan a sequential campaign across all of them.’ The thinking process becomes, ‘what should I say and when?’” l

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