Online video is considered one of the most promising online advertising channels, with a forecasted ad spending of $1.67 billion in the U.S. by 2013 (according to JupiterResearch). Over the years, a seemingly endless procession of start-ups has entered the space, with myriad solutions touting inventory creation, ad management tools, and optimized functionality. Judging by projections and innovations, the in-stream space is the place to be, but that still doesn't necessarily guarantee monetization.
Let's face it, despite the hype, in-stream advertising has not lived up to expectations. So we, as an industry, need to take immediate action -- or online video and in-stream advertising risk going the way of Second Life.
Fortunately, on April 20, the IAB officially announced the release of the Digital Video Player-Ad Interface Definition (VPAID), just shortly following the announcement for the Digital Video Ad Serving Template (VAST). Thanks to these two major guidelines, 2009 could be the year when in-stream advertising standards are set and adopted, making video the star of digital advertising that many have predicted it to be.
Taming the Wild West
With any emerging market, the key is to increase supply and demand in order to achieve an optimal equilibrium point. To find that balance for in-stream, we need to increase premium ad inventory on the publisher side while growing budgets on the advertiser side.
However, this requires technology standards that allow for greater efficiency and scale. Non-standardized in-stream is like the Wild West with no sheriff -- it's an unpredictable landscape, with complexities and challenges for video publishers and advertisers alike. From trafficking inefficiency through ad-serving incompatibility to non-unified tracking and reporting, running an in-stream campaign is an inefficient process. If we don't solve these problems, we will never manage to increase supply and demand, reach a high equilibrium point, and fully tap into the opportunities available in online video.
To address these complexities, several video technology vendors have released new, proprietary solutions to streamline processes and communications between video players and ad servers. Essentially, these new solutions allowed video platforms, publishers, and networks to work together through a single integration, thus increasing scale and reducing costs. However, due to the lack of standards, they still remain closed to each other and don't allow publishers, networks, and advertisers using different solutions to work together. This is analogous to mobile carriers not allowing subscribers to make out-of-network calls.
Into the great wide open
What we really need is to create a standard open space where each video publisher could work with any network or ad-serving vendor in an efficient and scalable manner. Similarly, every advertiser should be able to serve and track its in-stream ads across any video publisher while maintaining full control over the campaign, as well as consistency across channels using agency ad servers such as Eyeblaster, DoubleClick, or Atlas.
Fortunately, this is achievable -- at a reasonable rate and without a large monetary investment. But it requires cooperation and alignment from everyone in the space. Without adopting standards, agencies will continue to have less control, face barriers to making on-the-fly changes, and be forced to maintain communication with each publisher separately, causing them to receive different reports and a foggy view of ROI.
There's a new sheriff in town
Adap.tv, Panache, and several other key video players have already implemented VAST, but the overall adoption rate is too slow -- and we can expect that the adoption rate for VPAID will be even slower. Conversations reveal that leading players have motivation to adopt the IAB guidelines, but in most cases the timelines are undefined and the sense of urgency is absent, literally stalling the standardization process.
Each video publisher, network, platform, and technology vendor should be working toward standardization and contributing its part by adopting both VAST and VPAID as soon as possible. The expected return on this small investment is huge, and lack of urgency poses the only risk. The ability for agencies to run in-stream ads in a scalable manner, re-gain control over campaigns and digital assets (just as agencies have in display), and obtain unified reports for in-stream alongside the rest of their digital spend will increase online video demand for advertisers.
If we remain at the current state, where not enough dollars are flowing into digital video to increase momentum, we'll continue to face an uphill battle. The shifting of dollars from TV to digital channels is a key variable in the movement of in-stream video advertising. And with more premium content available, publishers will begin to sell more premium inventory, thereby reaching new benchmarks, increasing revenue, and improving online growth.
With VAST and VPAID now published, there is a small window of opportunity to build momentum and reach the required mass of IAB compliant solutions that would open up the online video space. Better scalability and higher profitability are right around the corner. It is our new frontier.
Ronnie Lavi is manager of product planning and business development at Eyeblaster.