Mobile video has been growing steadily for years but it is now close to justifying the hype that it generated throughout the years. Mobile video ad spend in the U.S. more than doubled from 2013 ($720 million) to 2014 ($1.5 billion) and will reach $6 billion in 2018, representing about half of the total online video ad spend.
The growth in mobile devices, broadband coverage and 4G services, device screen size and video consumption on mobile devices are the first obvious drivers. Other, less obvious drivers relate to the way users consume video on mobile. More and more of users’ time on mobile is spent in applications (86 percent of users’ time in mobile in 2014).
Since in-app video inventory is usually more engaging and can be coupled with more data, it is usually valued higher than mobile web video inventory. More users are watching video on tablets than on smartphones, which is another contributor to the bottom line since we are seeing that tablet video ad inventory is usually 30-50 percent more expensive than smartphone video inventory.
Another interesting driver is the democratization of video
production and distribution. Some of the most beautiful, professionally
produced videos I have seen lately were created with smartphone video cameras. Talented individuals are creating niche category mobile video hubs, “unbundling” YouTube and other large, more general video hubs. Mobile sharing is easy and intuitive and has immediate, powerful distribution potential across multiple, viral channels.
This significantly increases the rate of growth of video “inventory” – potential ad slots for the more expensive video ad units – pre/mid/post-rolls. I say “potential” because most user-generated content is not ripe for ad monetization. Video
ads are usually a brand awareness play and the big brands behind the
ads prefer to have their brand associated with premium content.
The democratization trend does produce a lot more
cat-walking-on-piano videos, but it also generates more professionally
produced video content, at scale, contributing more inventory that is relevant for pre/mid/post-roll demand.
Multi-channel networks such as Maker Studios (acquired by Disney) and Fullscreen also assist in the production and distribution of quality video content for brands. As these entities seek to branch out of YouTube, they also look to significantly increase their mobile footprint. Competing new environments, like the up-and-coming Vessel
platform, are built primarily for smartphones and tablets. In time,
these tectonic shifts will translate into a spiked surge in mobile video inventory.
Large, classic publishers such as Yahoo and AOL also understand the potential of video and are investing significantly in producing, partnering and syndicating video content (Yahoo’s Brightroll acquisition and various video content partnerships) and building video infrastructure (AOL’s acquisition of Adap.TV, Facebook’ acquisition of LiveRail and RTL’s investment in SpotXchange). They also understand that users’ attention is shifting to mobile, especially to applications. However, while their traffic shifts from desktop to mobile – it mostly shifts to mobile web, and apps still account for a small portion of their mobile inventory.
And so publishers are trying to compete on users’ attention by reimagining themselves in mobile environments. This will no doubt be including a mobile-specific video consumption experience. Better mobile-specific
content and environment, along with first-party data that these large
publishers can apply for targeting in their properties and beyond will
contribute to increasing CPM rates.
Facebook and Twitter are already there, at least in terms of in-app user experience and native display ad monetization. Video advertising is definitely next. Social and communication apps such as Snapchat and Tango are generating tons of video content and have figured out creative, relatively user-friendly ways to monetize it.
Increased standardization around this medium, better
measurement capabilities (mostly around completion rates and viewable
impressions but also TV-specific metrics such as GRP that provide a
familiar benchmark for TV buyers) and increased targeting capabilities
beyond device ID and lat/long (and with more video
inventory, more refined targeting executions will be possible at scale)
will go a long way in helping brands and agencies identify the right
KPIs and quantify value. These understandings will lead them to allocate
more dollars to a standalone mobile video budget item.
More sophisticated, video-specific
pricing models will make it even easier for advertisers to not only
better calculate their ROI but also shift the risk to the publisher
side, making them even more open to this medium. Cost per thousand views
(CPMV) will enable brands to only pay if their video
ad was actually viewed by a user. Cost per Completed View (CPCV) takes
it even further in minimizing the risk for advertisers who are only
required to pay for an ad that was viewed in its entirety by a user.
Views and especially completion rates are arguably
indicators of engagement, but they are not easy to implement and require
some market education. However, based on what we are seeing, these
metrics and related pricing models assist to allay concerns among
advertisers still new to the mobile video medium and, in my mind, will become the norm in the not-so-distant future.
Finally, the way mobile video ads are sold also affects the evolution of this medium. Online video
is still mostly sold through direct channels, as publishers prefer to
secure the high CPM rates that they can command for such premium,
in-demand inventory.
The largest brands and agencies work with video
exchanges, but these marketplaces are considered less premium channels.
Publishers are concerned about Real-Time Bidding (RTB)-based buying
triggering a race to the bottom, resulting in low prices and
sales-channel conflicts. This is especially true for mobile video, leading to a reality in which mobile video exchanges are having a difficult time getting their hands on premium inventory.
This will still be the case this year. However, with the
development of more premium programmatic platforms such as private
marketplaces (a private, more premium version of the current open
exchange model) and programmatic direct (the automation of the current
direct sale process), we are seeing that publishers are feeling more
comfortable directing more of their premium ad inventory, including video, into those automated platforms. This change of perception is key to unlocking the true potential of online video in general and mobile video in particular.
The combination of increase in (premium) inventory, higher prices,
clear KPIs for advertisers and publishers and the rise of more
efficient, automated marketplaces to facilitate trade is guaranteed to
take mobile video advertising to the next level.
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