Adap.tv's Q4 2013 State of Video Industry Report

2013

2013

Q4 STATE OF THE

VIDEOINDUSTRY

+

Video grows programmatically

across screens.

SOI_Q3_2013_final.indd 1 10/17/13 2:09 PM

US Video State of the Industry 2013 Q4 I 3

Video grows programmatically across screens.Explosion in spending, dramatic shift to premium and increasing focus on cross-screen highlight 2013 in video.

Executive SummarySpending by buyers of online video advertising increased for the fourth year in a row. More than 90 percent of agencies reported some level of increased video ad spending, with an average increase of 28 percent. Brand advertises showed similar levels of interest in video, with more than 85 percent increasing spend, but the average increase from advertisers directly was a whopping 65 percent more than in 2012.

Additionally, the Q4 2013 State of the Video Industry report reveals:

• DRAWING FROM TV, DISPLAY BUDGETS: Brands say growing video ad spend is pulling from TV broadcast dollars; display jumps into the target zone as well.

• MORE INVENTORY, RISING PRICES: Publishers say video CPMs have risen seven percent year over year, and their video inventory availability also has increased by more than a third.

• 2X PROGRAMMATIC: Programmatic, or automated, video ad buying, defined as buying from exchanges and DSPs, has roughly doubled since our last report.

• TV & MOBILE, TOO: 60 percent of both brands and agencies plan to apply programmatic buying to their cross-screen planning and buying – including both mobile and linear TV – in the next year.

• MOBILE MOVES: Mobile video continues to explode: 7 out of 10 agency buyers said they’re buying mobile video today; 43 percent of brands are buying mobile video.

• APPLES VS. ORANGES: Measurement continues to be an obstacle for both buyers and sellers, but there are differences among the constituents on why exactly.


Up, up, and away—the growth of video advertising.Investment into online video advertising has surged since Adap.tv and Digiday’s first look at the space in 2010. That year, brands and agencies projected increases of 75 percent and 99 percent in their video ad budgets, respectively, albeit from a smaller base. Respondents representing the leading media and marketing companies in the industry have indicated a sustained and still-accelerating increase since those initial numbers.

This past year, brands were more aggressive with their video ad spend than other buyers, increasing their budgets by an average of 65 percent from 2012. Advertising networks and DSPs, upped their investments by more than half in both 2012 and 2013. Agencies increased their budgets less dramatically, from a projected 25 percent in 2011 to 45 percent in 2012 and 28 percent this year. In total, these numbers indicate a significant, year-over-year shift of investment into video across the board and align closely with projections within other industry forecasts.

From the sellers’ perspective, the growth in CPMs—bucking the historical trend in display pricing—is also positive. Some 92 percent of video publisher respondents say their CPMs have increased by an average of 7 percent. Publishers have responded appropriately, with nearly the same percentage (93 percent) saying quantity of video inventory also has increased by more than a third (36 percent on average).

The outlook for the next year is even more promising, with both agencies and buyers overwhelmingly saying that their video budgets are on the rise. With the advent of automated technologies to streamline the buying process as well as live and on-demand content continuing to flood onto digital, mobile and other connected screens, 2014 is poised to bring even more buyers into the marketplace.

Change in video ad spending from the prior year. Anticipated video spending increases 2014.

Yes No

91%86%

9%14%

Brands

Agencies

65%53%

36%56%

Brands

Publishers

DSPs

Ad networks

Agencies83%

73%67%

86%

88%85%

81%

58%50%

59%47%

201220112010 2013


Australian Video State of the Industry I 3US Video State of the Industry 2013 Q4 I 5

Follow the video ad dollars—distinct point of view from brands.Over the past several years, video buyers have changed their perspective quite a bit on which channel is most likely to fund the growth of video advertising. Initially, the largest number of ad buyers—31 percent—painted a bull’s-eye on broadcast budgets. Notably, broadcast was cited 10 times more than cable in 2010 as a likely source of shifted-to-video budgets. This year, agencies and brands say that out-of-home and search are the most likely channels to have budgets shifted to video, exploding to 42 percent and 26 percent of respondents, respectively. Broadcast budgets are less likely to be targeted than in 2010, but are still one of the top candidates of a spending shift. Cable budgets are seeing the pinch as well, but display advertising—once perceived as the most likely to experience a decline—seems safe for now. Over the last four years, the inclination to invest incremental marketing budgets into video advertising has increased by 60 percent.

A different picture of imminent budget shifts emerges when we narrow the scope and examine brands from last year and this year:

While brands said that video is an incremental addition to their overall spending, more than two-thirds say that another piece of their media mix will be affected by their video advertising ambitions. Most notably, TV broadcast dollars are most likely to experience a shift in budget, while display jumps into the target zone as well. Search appears less of a target for brands, likely because it is a good way to draw attention to online video, as well indicate how well offline advertising is performing.

Anticipated video spending increases 2014.

Agencies + Brands: Which budgets will most likely be tapped to fund video advertising?

Brands up close—budget shifts into video 2012–2013.

3%26%

Online display

21%31%

Broadcast

16%23%

Print

3%3%

Direct response

16%10%

No other category

11%3%

Cable

26%3%

Search

42%3%

OOH

2010

2013

33%26%

No other category

31%19%

TV Broadcast

30%32%

Display

19%29%

Print

10%13%

Cable

6%3%

Direct response

5%0%

Search

3%3%

OOH

2012

2013

33%26%

No other category

31%19%

TV Broadcast

30%32%

Display

19%29%

Print

10%13%

Cable

6%3%

Direct response

5%0%

Search

3%3%

OOH

2012

2013

3%26%

Online display

21%31%

Broadcast

16%23%

Print

3%3%

Direct response

16%10%

No other category

11%3%

Cable

26%3%

Search

42%3%

OOH

2010

2013


42%No shift.

45%

11–20%. 9%

All other amounts. 4%

1–10%.

Looking still more closely at how much broadcast budgets could shift in the coming year, it’s important to note that this year 42 percent of all video advertising buyers said there had been no change in their broadcast spending whatsoever. So, while they say a change is likely in 2014, it may not necessarily come to fruition. Furthermore, the largest group of buyers says the decline was 10 percent or less of their broadcast budgets. These numbers will continue to fluctuate as buyers examine their efforts in TV, digital and mobile video, and how that translates into a media mix that adapts with the rapidly converging nature of those worlds.

That video ad spending will indeed disrupt traditional advertising practices, however, is nowhere more evident than in brands’ emerging reliance on programmatic ad buying. In just the past two years, brand patronage of programmatic video channels such as exchanges and DSPs has roughly doubled, as direct to publisher purchases have declined by 15 percent. However, with the rise of private marketplaces, additional opportunities are becoming more prominent for buyers looking to source directly from publishers through automated processes.

Even for agencies, often the most savvy and forward-looking buyers, programmatic buying is up substantially, but in this case, publisher relationships have also strengthened. This is not anachronistic: there are just more places where online video is available for purchase, and agency buyers are becoming more familiar with all of them.

Looking ahead, programmatic buying still has substantial room to grow. More than a quarter of brand and agency respondents still say they have no experience with programmatic buying, and fewer than 30 percent of brand buyers have thus far patronized either an exchange or DSP. They know that there is quality therein, though: nearly half of buyers believe that premium video inventory is available via those programmatic purchasing channels. The understanding that premium inventory is there indicates that automated buying will continue to gather steam, and will be deployed to transact all different kinds of video inventory.

75%

61%From an ad network

78%Direct from a publisher

28%

11%From an exchange

21%

11%From a DSP

18%

0% *not asked

From an agency trading desk

68%

2011

2013

Programmatic morethan doubles in 2 years.

85%

82%From an

ad network

73%Direct froma publisher

34%

19%From an

exchange

36%

19%From a DSP

22%

0% *not asked


86%

2011

2013

Programmatic patronagenearly doubles, but publisher relationships have strengthened.

75%

61%From an ad network

78%Direct from a publisher

28%

11%From an exchange

21%

11%From a DSP

18%

0% *not asked


68%

2011

2013

Programmatic morethan doubles in 2 years.

Brands: How do you buy video ad inventory?

Agencies: How do you buy video ad inventory?

Agencies + Brands: If broadcast budget contributed to video spending, by how much?



The growth of private marketplaces, which provide unique advantages and protections for both buyers and sellers, could accelerate transaction of premium inventory through programmatic means beyond RTB. Currently, only 27 percent of brands and 29 percent of agencies say that they buy video through private marketplaces, but of those who say they do not, more than 20 percent say they’re going to seek them out over the next 12 months. If that trend holds, nearly half of buyers are likely to have at least tested private video marketplaces by this time next year.

Upfronts, Newfronts and the advent of cross-screen.The TV Upfronts seem to be the best venue to spotlight the power of video across screens. 77 percent of video ad buyers attended them, and a majority (65 percent) said they were specifically looking for cross-screen inventory. A minority— 14 percent—said they purchased only online video inventory at the TV upfronts, while slightly more buyers (21 percent) said they were there to purchase only TV inventory. Conversely, while a majority of buyers did not attend the Digital Newfronts, 22 percent of those who did attend said the event made them realize the importance of locking up premium inventory in advance. A majority also said that it heightened their awareness of how much creative inventory exists in digital.

There are several indications that these proportions could begin to shift towards digital in 2014. First, 75 percent of video publisher respondents who have broadcast ownership said that they also attended the TV upfronts. Digital video sellers are participating in traditional TV advertising selling. Buyers seeking cross-media synergy are there. As buyer demand for cross-screen inventory grows, these high-profile events will enable broadcasters to showcase TV, web and mobile video inventory effectively, and their selling strategy will need to adapt accordingly

In your experience, is premium inventory available via programmatic environments?

48%

44%Yes

24%

I have no experience with programmatic buying.

13%

32%No

8%We don’t buypremium inventory 0% *not asked

31%

Brand

Agency

All video buyers: Did you attend the 2013 Digital Newfronts?

77%

23%

Yes No

Publishers: Do you make your most valuable video inventory available for sale via programmatic environments?

66%

34%

No Yes

Amongbroadcaster-based,this is 50/50.


Silos are still in place outside of broadcast, however. Only 36 percent of digital sellers—roughly corresponding to the 35 percent of broadcast-based video seller respondents—transacted with TV buyers this year. Unsurprisingly, video sellers with broadcast businesses are leveraging their existing relationships with TV buyers. This may indicate a significant opportunity for digital- or print-native video ad sellers—significant room to grow their video revenue by tapping into TV buyers.

Access to TV buyers isn’t the only advantage broadcast-based digital video sellers seem to have: while only 34 percent of our total publisher respondents said that they make their most valuable inventory for sale in a programmatic environment—fully half of broadcast sellers do.

Digital video agencies are increasingly specialized, and the “TV group” of buyers in this pool is shrinking. In 2012, 55 percent of agencies told us that their video inventory was purchased by the TV group. In our most recent survey, only 6 percent of respondents said that it was the TV group that currently buys online video for their agency. The lion’s share of purchasing—70 percent—still occurs in the digital group, but fully a quarter of online video is bought by a cross-platform group..

Mobile momentum.As for which platform is bridging the digital divide, clearly it’s mobile: 70 percent of agency video buyers say they’re buying mobile video today, more than double the number that were buying mobile video on iPad (30 percent), and considerably more still than on smartphones (45 percent) in 2010. Currently, 43 percent of brands are buying mobile video.

Mobile video buying trends.

70%Buying mobile video today.

30%

Buying mobile videoon mobile phones. 45%

Buying mobile video today.

Buying mobile video on iPad.

43%

17%

Buying mobile videoon mobile phones. 25%

Buying mobile video on iPad.

Agencies 2013 Brands 2013

Agencies 2010 Brands 2010


Availability of mobile video inventory is a big part of this story. In this survey, 68 percent of video publishers said they’re producing mobile video, compared with 57 percent in 2010. However, two-thirds of publishers told us that the Web continues to draw the highest investment among all the various platforms on which they publish, but investment in mobile video, specifically smartphones (17 percent) and tablets (10 percent) is substantial. One publisher commented that “video is platform agnostic,” while another said that “cross-device support” drives investment, not any individual platform.

But while it’s all well and good to claim video neutrality, buyers differentiate between Web and mobile inventory to a greater degree than do sellers.

And even within the mobile video ad category, buyers make distinctions between smartphone and tablet inventory. Sellers who are able to make the distinction between the two—and target accordingly—may be able to command a premium for whichever platform interests their buyers in the future.


Publishers: Screen drawing biggest total investment over the past 12 months?

66%On the web.

17%

On tablets. 10%

On connected TVs.

On gaming consoles.

6%

2%

On smart-phones.

Do you delineate between Web and mobile inventory?

59%

69%

41%

15% 16%

Yes No Do notbuy mobile.

Buyers

Sellers

Do you delineate between smartphone and tablet inventory?

39%

53%

61%

35%

12%

Yes No Do notbuy mobile.

Buyers

Sellers


The future is video on all screens.Roughly 60 percent of both brands and agencies plan to apply programmatic buying to their cross-screen planning and buying—including both mobile and linear TV—over the next 12 months.

But leveraging their video messaging across multiple screens in pursuit of their customers is only part of the story. Measuring the effectiveness of the mix will become increasingly important to marketers who have more choices than ever on how to spend their dollars on digital.

One brand in the financial services category has given this a lot of thought. Asked what will be the biggest change in video advertising over the next 12 months, they cited the need for a better way to track video effectiveness, beyond the click-through and completion rate:

“A single third-party ad-serving vendor that’s accepted by all video players would be a start, or I could live with all video players having identical methodology and definitions. But how would I handle attribution? All the discussion is around audience measurement, which is great, but delivery is not a success metric.”

Video advertising is considered a strong branding medium, but as this buyer suggests, attribution is still the Holy Grail. The measurability of digital, if done right, should enable marketers to better understand the relationship between branding and conversions. It’s that “done right” phrase above, however, that gives buyers and sellers alike pause.

Do you plan on including programmatic in your cross-screen planning and buying within the next 12 months, inclusive of mobile and linear TV?

60% 59%

26% 27%

15% 14%

Yes No Do not do cross-screen planning

or buying.

Brands

Agencies



Apples to apples: still a long way to go.While many believe that measurement should be table stakes, buyers and sellers agree the industry is not there yet. The inability to consistently measure reach, targeting and performance across platforms and devices is a shared point of frustration between buyers and sellers.

Audience guarantees online were expected to be a game-changer for the “TV-ization” of online video. Yet some 65 percent of brands and 70 percent of agencies say that existing measurement standards do not satisfy their need for audience guarantees.

Buyers complaining of the inadequacy of standards are about equally divided on why they find them lacking. Slightly more agencies say they lack confidence in audience measurement methodologies generally. Brands are more likely to cite cross-screen audience measurement. The deeper in they go, the more brands want to go beyond age and gender in characterizing the audience they reach with online video, and yearn for the industry to coalesce behind a consistent measurement methodology.

Publishers, for once, agree completely with their customers, and broadcasters among video ad sellers, are least satisfied of all constituents with the state of video measurement.

Do existing measurement standards satisfy your need for audience guarantees?

70%65%

30%35%

No Yes

Brands

Agencies

If not, why not?

38%

36%

Lack of support for cross-screen measurement of audience.

34%

Lack of confidence in audience measurement methodologies.

13%

15%

Lack of support for deeperaudience measurement

beyond age/gender.

13%

15%Lack of consistency between

alternative methodologies/providers.

40%

Brands

Agencies


Their reasons differ, however. Broadcasters—used to reaching a large, general audience—are less worried about moving beyond age and gender distinctions, and more concerned about being able to differentiate between platforms in a cross-screen world. Also, while buyers are much more suspicious of the methodologies of the measurement standards, sellers feel that the lack of consistency is more problematic and needs to be addressed in the near future.

Looking forward.

Publishers: Do existing measurement standards satisfy your need for audience guarantees?

73%

81%

27%19%

No Yes

Broadcasters

All respondants

If not, why not?

44%

63%

Lack of support for cross-screen measurement of audience.

25%

Lack of confidence in audience measurement methodologies.

19%

6%

Lack of support for deeperaudience measurement

beyond age/gender.

14%

6%

Lack of consistency betweenalternative methodologies/providers.

22%

Broadcasters

All respondants

Conversely, publishers say that mobile and programmatic are going to be big drivers for them in 2014:

Buyers have many words to describe how video is going to shift in 2014:


Spend grew and programmatic flourished across screens for video advertising in 2013. What’s next?

• Big events: One would think that the Super Bowl would extend its dominance at attractive audiences and advertisers, but it’s the Winter Olympics that both constituents are looking forward to most from a revenue and branding perspective.

• Buyers focused on inventory and measurement: They want more of the good stuff (aka premium inventory) via programmatic channels and otherwise, and they want to know how it’s working relative to their TV buys.

• Sellers focus on mobile: Surveyed publishers seem to hope that 2014 will at long, long last, be “the year of mobile”—mobile video, anyhow. Their ability to deliver the right mix to buyers will be key.

• Growth of programmatic will continue to soar: Between industry data from Magna Global and others, and the consistent pace of growth recorded by this survey in the past several years, we expect to see programmatic video extend its reach into video, across Web, mobile, and most exciting for 2014, television screens alike.

Methodology.For two weeks in late September and early October 2013, Adap.tv and Digiday polled its opted-in base of leading digital media and marketing pros for their impressions of changes in online video buying and selling. This survey pool is always enhanced by the inclusion of sponsor contacts, but owing to the acquisition of Adap.tv by AOL, this access included a very large pool of seasoned advertisers, making this survey the most extensive ever with more than 900 participants. Additionally, this survey’s comparative set spans the longest time period of any Digiday State of the Industry Surveys of advertising practices with emerging media, as it goes all the way back to the Fall of 2010. We thus have the rare advantage in the world of fast-moving digital media and marketing of four full years of industry experience and attitudes to consider in making our observations. Participants were offered the incentive of full study results and being entered in a drawing to attend a Digiday Summit or their choice of e-tablet (one recipient each). Agency and Trading Desk participants constituted 43 percent of participants (390), followed by 25 percent video publishers (227), 19 percent advertisers (171), and 14 percent Ad Networks, DSPs and SSPs (128).

US Video State of the Industry 2013 Q4 I 13

Who took the survey?

Agency/trading desk43%

Ad networkDSP/SSP

13%

Brand/advertiser19%

Video content publisher25%


About Adap.tv.Adap.tv, a division of AOL Networks, is transforming the way video advertising is bought and sold. Adap.tv’s video intelligence platform, Pathway, helps many of the world’s largest brands, agencies, publishers and ad networks intelligently, effectively and safely plan, buy and measure billions of video ad trades programmatically every month across web, linear TV and mobile video.

Headquartered in San Mateo, California, Adap.tv has US offices in Chicago, Los Angeles and New York, and international offices in Australia, India, Japan and the UK.

For more information, please visit adap.tv, or follow Adap.tv on Twitter @Adaptv, Facebook at facebook.com/adaptv and LinkedIn at linkedin.com/company/adap-tv.


Digiday: the authority on digital media, marketing and advertising.Digiday is a media company and community for professionals who work in the digital media, marketing and advertising industry. Our mission is to connect the industry with insightful analysis and perspective, as well as each other. We provide key insights and information through our online publications and conferences that cover the changes, trends—and why they matter. The focus is on quality, not quantity, and honesty instead of spin. We cover the industry with an expertise, depth and tone you won’t find anywhere else. The entire team at Digiday is driven to produce the highest quality publications, conferences, and resources for our industry. See Digiday.com to read or subscribe to our publications or for information on events; join Digiday LinkedIn or Facebook groups; follow us on Twitter @Digiday; or tune into live-streamed and archived video coverage of our events on our Vimeo channel.

For more information about this report, please contact Katherine Ryan, [email protected].

Australian Video State of the Industry I 3US Video State of the Industry 2013 Q3 I 11US Video State of the Industry 2013 Q4 I 15


Adap.tv's Q4 2013 State of Video Industry Report

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