Online video advertising has grown 100 per cent each year for the past three years and shows little sign of slowing down. At the same time a new way of trading this media is emerging. The days of long lunches and 'Don Draper' deals are slowly being replaced by discussions about floor prices, optimum bid strategy and server locations.
The rise and rise of video advertising
The most recent IAB / PwC report on online ad spend shows that online video advertising doubled year on year for the past three years, and now accounts for 10 per cent of online display advertising.
In part this is because consumers are increasingly making use of Sky, BT and Virgin technology that allows them to fast-forward through TV programmes. There is also a shift to the second screen as people prefer to watch programmes when they want, rather than when they are scheduled on TV.
Commercial catch-up services are attracting more of the TV spend as advertisers see the value in online video. Media owners are also seeing the importance of investing in the production of high quality video content as this area grows.
Another factor behind the phenomenal growth figures is that the video advertising industry has made significant strides in developing tools and services that make video advertising easier to track and measure. This gives buyers more control so they can really start to understand how to target their key audiences.
At the same time, the ability to allow ratings points online and on TV to be bought together are being developed. This technology will make the process for buying advertising space for video easier as the traditional distinctions between television and online video start to blur -- audiences are becoming much more sophisticated and they are increasingly demanding access to content on multiple devices.
The new landscape of 'programmatic buying'
Many terms creep into 'advertising speak', but this is one that could well be here to stay. Very simply, it allows agencies to buy one ad at a time and optimise impressions in real time. Price is based on the competition for a particular audience and can be changed based on the campaign's performance. Scaling up, the programmatic process makes it easy and efficient to buy and sell hundreds of ads. Video inventory is a valuable commodity, and as well as making the process straightforward for agencies and advertisers, the auction model ensures that media owners get the best price.
To make things more TV-friendly, the ability to buy via the more traditional TV-based upfront system is now possible. This makes the process more efficient and cost-effective for publishers, agencies and advertisers.
To put this into perspective, media has been traded in the same way for the past 50 years, rooted in the early days when the Madison Avenue way of doing business dominated. The ad agency and the media owner negotiate a deal over a long lunch, with the price at which they finally arrive being influenced by the industry standing of each party and the strength of their contacts, as well as the business relationship between them. Once agreed, the media space is booked and campaign goes live.
There is no denying that this way of doing business is fun -- and generates results. However, there is a lack of transparency into the areas of a campaign that are working well and the places where investment is being wasted.
It's not rocket science
With programmatic buying, both buyers and sellers can set the terms of each deal. Publishers can assign minimum floor prices for their inventory and advertisers and agencies can specify their maximum bid price. Unlike TV, specific groups of people watching the same programme can be targeted. For example, rather than one ad going to the entire Coronation Street catch-up audience of one million (many of whom will not be part of the target group), more suitable ads can be served based on the age, gender and interest of the audience.
As well as simplifying the process of buying media, today's technology allows campaigns to move the focus from price to value because programmatic buying reduces the inefficiencies created by mass-market advertising. Rather than being centred on buying spots for as little money as possible, advertisers and agencies can now concentrate on the most cost-effective way to reach the right audience.
While the new more scientific approach is pivotal, the success of any campaign still relies heavily on creative. More than ever, strong and innovative visuals that capture the audience's imagination quickly are essential. Sir Martin Sorrell has been quoted as saying, 'the application of technology is now as important as the big idea'.
RIP Don Draper
Online media is increasingly being traded in this programmatic way -- with automation it is now quicker and easier for agencies and advertisers to reach the right audience, and for media owners to optimise the revenues they earn from their inventory. In the process, consumers see ads that are more relevant to their interests.
These are early days but, whatever the long term outcome, it seems likely that the future is going to becoming more automated. The Don Draper era of doing business is slowly starting to change. In its place the head of technology, with their ability to pinpoint an audience and ensure that they get the right message, is building momentum.
Video ad facts
- Online video adspend doubled in 2011 (Source: IAB / PwC)
- Online video adspend now accounts for 10 per cent of all online display advertising (Source IAB / PwC)
- 86 per cent of people watching time-shifted TV shows fast-forward the ads, but TV remains the most memorable form of advertising (Source: Guardian)
- 26 per cent of people in the UK now do most of their TV viewing 'on-demand' thanks to Smart TVs and catch-up services such as BBC iPlayer, 4oD and Sky Go (Source: YouGov)