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Digital Video Grows, But Upsets Duopoly

We like research, especially when it aligns with our own corporate strategy. We invested heavily in digital video several years ago, and have been waiting for the market to catch up. Now, apparently, it has, but in a very lopsided way

Pivotal Research Group LLC is an equity research firm that provides research on media, communications, advertising, Internet, and most other major industry sectors to hedge funds and other major Wall Street players. Its major purpose is to identify industry trends and events. It  recently issued a report based on its analysis of Nielsen’s August 2018 data, showing that over the summer, digital media content consumption continued to grow steadily, with double digit percentage gains in August that mirrored the growth reported earlier in the year.   Consumption of digital content on PCs, tablets and mobile handsets  grew 15% to 34 billion person-hours.

This should mean marketers are happy, but actually they don’t know what to make of the rapid changes in the industry. We went back to the source of the research, Nielsen.  According to the Nielsen CMO Report,

There has never been a more dynamic and challenging time to be a marketer. Since the advent of the internet, fueled by available high-speed broadband and ignited by the proliferation of smartphones, marketers have more access to consumers than ever before. We are awash in data and should be living in a nirvana of actionable insights. The reality, however, seems disconnected from this promise. Over the last 18 months, some of the largest and most influential advertisers in the world have spoken up about their concerns with digital advertising, calling the supply chain “broken” and pointing to high incidence of fraud and lack of brand safety. Subscription video on demand (“SVOD”) services are decreasing reach of traditional marketing mediums like TV and radio. The launch of GDPR in the European Union and related privacy challenges have added complexity to the collection and management of consumer data. Combine this with changing consumer preferences and zero-based budgeting and it’s clear that the job of the CMO has become a more delicate and dangerous catwalk. At Nielsen, our job is to provide the science behind what’s next. 

Digital ad spend has eclipsed traditional channels and we expect that trend to continue. When forecasting the next 12 months, 82% of respondents expect to increase their digital media spend as a percentage of their total advertising budget. By comparison, only 30% of respondents plan to invest more in traditional media channels in the near term.

Google gets the lion’s share of digital media viewing, because of YouTube. It alone showed 20% gains and accounts for 18% of all digital content consumption. If you took out YouTube from the results, they’d only be 12%. Google’s YouTube, Google and Waze combined to account for 32.8% of digital media consumption, up from 29.4% in August 2017. Google-related properties accounted for 56% of the growth in overall consumption of digital content.

Facebook, as you might suspect, is having problems. Even with the inclusion of Messenger, Instagram and WhatsApp, it was down to 14.3% of all digital consumption in August 2018 from 16.9% in August 2017 and 18.5% in August 2016. Pivotal says while the number of core Facebook users was up 7.2%, the average time per person was down 6.7%. Total company-wide usage decline was 13.0%. And now several Direct to Consumer brands, specifically Glossier, which had used Instagram to reach customers, are building their own platforms.

After Google and Facebook, Verizon properties were the third-largest platform of digital content time spent. Including Yahoo, AOL and Tumblr (but excluding MSN inventory), Verizon had a 3.2% share of digital media content consumption against 3.5% in August 2017. No real growth here. Same with Amazon. Looking at all activity — including Twitch and Audible — it was at a 1.8% share against  2.1% in August 2017. Snap is more difficult to judge, because it grew monthly users by 20%, but time on the site fell 23%

 

So, as we predicted, the duopoly may be running out of steam, but digital video is not.

Mobile Video Monetization Strategies

Everyone in the industry is wondering  when mobile video will begin to be monetized properly (by which we mean in proportion to the time consumers spend watching it).As part of our work on the IAB Digital Video Committee, we attended a meeting  to learn what may be holding the industry back from getting the kind of ad rates for mobile video that it deserves. Three different issues emerged from the meeting: how publishers feel about available video formats (often unsuitable for mobile), the state of cross-device measurement (just getting started),  and the unfamiliarity of TV media buyers with the digital video environment.

You may already know that ZEDO pioneered a format called InArticle, which later was reinvented by Teads as “outstream video.” While this format has been highly successful for us, we know it is not for everyone, and we  heard two publisher panelists (Meredith and Weather Channel ) say that they will never run out stream because they don’t like the user experience on their sites. They talked about 15-second preroll as preferable, although they admit that most advertisers send them 30-second spots. These publishers are pushing back at agencies and brands who try to use existing TV creative, esp. 30-sec spots, on mobile  have pretty good statistics on completion rates, and they feel shorter is better. In fact, one attendee suggested five-second video, just to get the brand’s name in front of the audience without offending it.

Because there is a relative scarcity of pre-roll another format publishers are testing for video is mid-roll, Facebook is rolling these ads out right now to see how well they are accepted.

At ZEDO and ZINC, we are testing our own version of pre-roll, as well as a new format we call “polite Swipe Up.” Our objective with our formats, which achieve high visibility and engagement, is not to antagonize site visitors. In the Digital Video Committee, several publishers complained that group M’s demand that all Ads be 100% viewable means that they waste inventory and annoy viewers by upping the frequency of ads while trying to  achieve those viewability numbers.

The issue of cross-channel metrics also came up in the meeting, because marketers are only beginning to be able to follow consumers from device to device and from home to work. Before investing in digital video, they need more assurance that they are following the same customer from display to video to TV.

And then there is the “people problem.” TV media buyers often don’t buy digital video, or want to pay less for it, because they don’t know how to buy it. This is such an industry-wide problem that IAB is preparing a Digital Video Guide and a curriculum, and will hold workshops and classes to educate media buyers. The guide will be introduced during the Digital New Fronts, and the education programs will begin shortly thereafter.

 

 

 

 

Good-bye :30 Spots, Hello Digital Video Creative

Seriously? Digital  is now the second biggest advertising market and we’re still using 30-second spots? Has anyone really thought this through?

The research on whether people will watch video online, and for how long, is in. While we used to think two minutes was the outer limit, we now know that it’s over five for a good story, especially on a tablet. Younger people have moved from TV to digital in large numbers, and even little kids reach for the tablet before the TV. In theory, this could change the delivery of advertising, allowing for both longer and shorter ads, and unleashing new powers from creatives.

To keep up with their customers, brand advertisers are shifting their metrics from CTRs to completion rates. Completion rates are not a function of time; they’re a function of good story telling. A good story keeps people engaged and produces more brand recall than any 3o-second spot ever did. If we get away from the limitations caused by time, we’ll be a lot better off. Without the temporal limits of TV, we can tell different kinds of stories.

Mobile is a great place for video ads. Buzzfeed founder Jonah Peretti once said that his site was for the bored at work, bored in line audience, and those are the people who will watch a video that tells a good story, even if it’s conceived and even executed by a brand. In fact, IAB just did a study of video watching on mobile devices:

 many respondents said that they’re watching more video on mobile devices than they were a year ago, including 50 percent of those surveyed in the United States, and 42 percent in Canada, New Zealand and South Africa.

They’re not watching 30-second clips, either. In fact, 36 percent of respondents said they watch videos that are five minutes or longer on a daily basis. (That’s not a majority, but it’s more than just a tiny sliver of the audience.)

The IAB says that viewers in China are particularly open to watching movies and TV episodes on their phones. In addition, 37 percent of respondents in China and 35 percent in Singapore said they’re watching less TV due to watching more mobile video.

We suspect that next year publishers will be seeing many new in-app and in stream formats that don’t look like 30-second spots.

 

Does Video Advertising Work?

The consensus forecast in the ad industry is that video advertising has been the big opportunity for 2015. Although “cord cutting” is not increasing as quickly as some trend spotters have predicted, we have now bred a generation of adults who have never been connected by a cord . Millennials simply never order cable in the first place; they use their TVs, if they have them, as giant displays for Chromecast or Airplay.

We’ve known for a while that Millennials also watch TV on their mobile devices, and that they were willing to watch videos longer than two minutes.  In fact, this year all other market segments seemed to go mobile at once. For a while the ad dollars didn’t follow the viewer behavior, but now Adexchanger’s Data Driven Thinking columnist says, “…based on… discussions with major brands, agencies and advertisers, TV advertisers hope to shift roughly 30% of their $70 billion TV ad budgets to digital video by 2015. That would increase the US market to $21 billion, up from $6 billion in 2013.”  Based on information half way through the year, the actual numbers will be bigger.

These budgets are big enough that we must now begin to measure how well digital video advertising works. The rating system for TV, GRPs, hasn’t been a good measurement for quite a while, although we didn’t have any reason to complain about that before digital advertising unlocked the power of actual data. When TV first came on the scene, GRPs measured who was watching a show, and thus you’d know who was watching the ads. But since 1999, when Replay TV first introduced the DVR with its ability to skip ads, GRPs have become less and less an accurate measure of whether a TV ad led to a sale.

We hope that with the tsunami of ad dollars to mobile video, we won’t make the same mistake we did with digital display — turn it into a platform for performance advertising and drive publisher revenues down through the floor. It has taken us more than a decade to recognize that brand lift is a valid objective for online advertising. Now, with mobile video, we should come around much faster to realize that the best way to measure online video ROI might be against TV ROI, which is an apples to apples measurement. TV, of course, has been justified for its capacity to produce brand lift as well as just performance. Digital video, executed well through formats like our inArticle video,  will do the same.

 

 

Internet Ad Revenues Post Huge Gains

While ad tech companies themselves are still merging and their IPOS may not be doing too well, the industry they enable is doing just fine. PwC US has just released its latest half year study of Internet ad revenues, an they’ve hit yet another new high, now at $23.1 billion. That’s up 15% from last year’s first half., which was $20.1 billion.  IAB released the study at the beginning of Q4, traditionally a strong time for advertising revenues. That means Q4 will probably beat Q2’s $11.7 billion.

Realistically, there’s nowhere to go but up, because mobile revenues alone have increased 76%, and they’re just beginning to take off. They’re at $5.3 billion now, and that’s before advertisers really develop mobile strategies and figure out how to measure their results. Another promising sign is the recent shift of TV dollars to video. Right now, that shift looks like a cross-channel or cross-platform strategy, but it will change further as large networks unbundle from the cable providers and become apps, with their own strategies for attracting those elusive cord-cutters. Or in the case of Millennials, people who never even had a cord to cut.

So we predict that 2015 will be the year of  “Mobile. Digital. Video.”

And a recent AOL Platforms study seems to agree with us, citing the following trends:

  • VIDEO AD GROWTH IS IMPOSSIBLE TO IGNORE.
    Advertising spending on online video increased for the 5th consecutive year, and buyers claim spending will grow across the board in 2015. Publishers are reaping the benefits of diversified selling channels, inclusive of programmatic.
  • DRAMATIC SPENDING SHIFTS FUEL THE DIGITAL VIDEO REVOLUTION.
    Agencies and brands are increasingly tapping into broadcast and cable TV budgets to fund their digital video ad spending.
  • PROGRAMMATIC IS OVERTAKING PUBLISHER-DIRECT BUYS.
    Brands and agencies are moving away from buying direct from publishers and ad networks, in favor of buying through exchanges and DSPs. With 60 percent of their budgets going to programmatic channels, brand advertisers are most aggressive with their spend reallocation.
  • DATA-DRIVEN, PROGRAMMATIC TV HAS ARRIVED.
    Video buyers are already running data-driven TV campaigns, evidenced by the 40 percent of brands adopting the practice. Brand budgets for programmatic TV buying are predominantly coming from traditional TV spending, not from digital or incremental spending.
  • VIEWABILITY VEXES BOTH BUYERS AND PUBLISHERS.
    Brand buyers and sellers cited ad viewability as the most problematic issue for them, compared to verification/placement and bot fraud, which ranked lower. Only 25 percent said they are up to speed on these issues, indicating a need for additional education.

A key driver of the mobile video revolution is social media revenues, which includes advertising delivered on social platforms, including social networking  and social gaming websites and apps. Advertising on social media sites and within gaming apps and platforms increased 58% over last year, and will continue to rise.

Interestingly, search advertising is underperforming growth in the rest of the Internet advertising business, perhaps because it is the most mature category of online advertising and also the least interactive. Still, it’s a pretty encouraging set of reports to take us through Q4.

 

Shifts in Viewing: Video Consumption Up, TV Down

How appropriate that Nielsen’s new Cross-Platform Report is called “Shifts in Viewing.” You would have to be insensate not to know that people are consuming  more digital video. We know it because our video content publishers are seeing rapid upticks in traffic. In summary, the report says that although TV viewing has declined, most sharply among young people, not only has digital video viewing gone up, but the total time people spend interacting with has increased. Therefore, as Nielsen says charitably, we should not look at this shift as a game with winners and losers, but instead as an opportunity for everybody. Opportunity indeed. This must be what newspapers were told when news moved online twenty years ago. I’m not sure the opportunity here is for TV stations as much as it is for advertisers, who now have a solid new channel, mobile video, through which to reach those customers who have disconnected from TV. And according to Experian Marketing Services, that number is now 7.6 million households — up 44% in the past four years. But not having TV reception doesn’t faze them. fact, year over year among the younger 18-34 demo media consumption has grown four percent overall, two percent among Hispanics, eight percent among Blacks, and ten percent among Asians.  That’s because the young are looking at TV-like programming on their phones and tablets..  Nielsen says, “We are seeing year over year overall growth in digital use of sixteen percent among persons 18-34 with fifty-three percent growth in digital video viewing. ” But the truth is that not only the young are increasing the amount of video they consume online. Fast growth is also reflected in the 35-49 group, and the 50-64 demographic is surprisingly the fastest growing group of digital video consumers. Digital video consumption in this group  increaed 60%. TV viewing is down in every age group. And we look for that trend to continue, because this report shows that the highest increase in number of hours spent consuming video are spent on either time-shifted TV or mobile phones. Once the time-shift pattern was established, it became only a matter of time before video shifted online, and especially to the smart phone. As a culture, we’ve made a shift and we won’t be going back. Indeed, as phone screens get bigger, we expect video viewing on mobile phones to increase even faster.

TV Ad Dollars Can Easily Shift Online in 2013

A snarky Ad Age columnist, Dave Morgan, has said that marketers will have a tough time shifting 10-20% of their TV ad dollars online as they’ve said they wanted to:

With the upfront looming, and increasing pressure to be innovative, many advertisers and agencies today are in a headlong race to shift and diversify their TV ad budgets, taking greater advantage of multiplatform-platform “video.” And why not? TV advertising is expensive and campaign reach is declining thanks to audience fragmentation.

However noble and well-intentioned, however, the expectations of many of these advertisers and agencies are unrealistic, particularly those calling for 10% to 20% budget shifts out of TV into digital video. That’s because, you see, 97% of all video viewing in the U.S. still occurs on TV. Yes. Whether the data is from Nielsen, Pew or eMarketer, all agree that only a small fraction of video viewing in the U.S. today occurs on devices other than the TV.

Yes. And no. Because this data is misleading.

First,  reach in the old sense of the word — mass markets — doesn’t even exist on TV these days. To reach the consumers major brands need to reach, they already need to diversify channels and platforms. When they say they are shifting TV ad dollars, they may mean they are going for integrated or converged campaigns across TV, print, and digital. That’s what they ought to be doing, because the new research says recall is much better in converged campaigns, as are conversions.

Second, the digital video audience skews younger and better educated than the TV audience, which means a more powerful consumer is watching video online. And that same consumer might be watching video on multiple screens simultaneously, which Nielsen has just begun to measure.

Third, Morgan may be thinking that creative dollars have to shift. But they don’t. We have high impact formats, especially InArticle Video, that allow advertisers to take standard IAB creative units and insert their already produced TV ads into those units. When a viewer mouses over the ad, the audio begins to play, and if she clicks on the ad, it expands to full screen. This format is the most engaging in the industry today; the statistics on completion and viewability are off the charts.

So a blanket assertion that there is nowhere to advertise with video dollars online, or that its reach is not comparable, is failing to see the forest for the trees. Digital is global, which is automatically greater reach, and it is on 24/7, rather than in a specific time slot. Digital video ads should be as good as TV, they will be as good as TV, and in terms of the old standards of reach and frequency for the dollars, they have TV beat by a mile.

 

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