The numbers used to analyze the video ad market can be cut in many different ways.
According to the IAB, video ad spend on desktop totalled US$2.0 billion, or 7% of digital ad spend, in the first half of 2015. The peak body also listed mobile video spend, a figure of less than US$300 million for the period, in its H1-15 Internet Advertising Revenue Report.
Yet we know more than this is being spent on digital video. The IAB’s report doesn’t capture ads sold in over-the-top (OTT) TV content, programming which can be delivered via desktops as well as a range of other connected devices. Data from The Diffusion Group in April forecasts ad revenue from OTT TV will reach US$8.4 billion in 2015, a number well below broadcast TV’s expected $60 billion haul.
Long-range forecasts, however, tell very different stories about the fortunes of video ad spend categories. According to The Diffusion Group, by 2018 broadcast ad revenue will drop to US$47.5 billion, while OTT will grow to US$31.5 billion. At a device level, the forecasts for desktop versus other connected devices tell very different stories.
Amidst all the forecasts, two things remain clear. Firstly, despite changes to the way video is consumed, the importance of video in brand advertisers will continue to drive growth in overall video ad spend. And secondly, as spend shifts to advertising delivered in digital streams, media companies’ monetization strategies must evolve to capture what will remain the largest source of ad dollars, even if it’s no longer delivered on broadcast TV.
What follows are the trends we expect to shape the video ad sales market in 2016.
Desktop in decline
For the first time, decline will come to digital. According to the IAB’s Internet Advertising Revenue Report, overall desktop spend has already peaked, as budgets are reallocated from desktop display to follow viewers on to mobile. With the report showing 31% of digital spend on mobile in Q2-2015, despite it accounting for upwards of 60% of content consumption, this shift will accelerate in 2016 as advertisers catch up. Video, on all devices, will be the beneficiary of this shift.
Broadcast TV spend will hit its peak
An election and Olympic year, 2016 will see broadcast TV ad spend peak before being supplanted by the monetization of unicast, or digitally-delivered, streams. Ad spend reports will record a decline in TV by the end of the year, but broadcasters are well on their way to monetizing their content via a range of digital delivery points. With many different devices and aggregators in the market, it won’t be uncommon for these monetization points to number upwards of 20 for legacy broadcast businesses. After all, to the viewer, “watching TV” simply means watching programming of a certain length, by the time they sit down to consume.
“Programmatic”, as a term, will die
The automation of ad spend began with the concept of programmatic buying, but has evolved to become much more. Automation platforms are now used as the pipes for direct buys, tying exchanges and direct sold together across screens. As TV – both broadcast and unicast – enters the automated realm, the term programmatic will die on the vine as the market recognizes it as a poor descriptor of machine-aided monetization. All major media companies will own cross-screen data flows by the end of 2016, and automate video ad sale via inventory management platforms to achieve the synergies and efficiencies inherent within.
The wall will fall, or shrink
With web giants exerting increasing influence on publisher monetization, concerns about being disintermediated from their audiences, advertisers and data are on the rise among publishers. These concerns center around audiences being drawn away from publishers’ inventory, as the web giants actively create data pools and build ecosystems that compete directly with publisher interests. Flexible platforms that gives media companies the control to maintain direct relationships with their audiences and advertisers, as well as the ability to leverage first and third party data, will win favor in 2016.
Measurement standards will unify across devices
The unification of standards across desktop and mobile will occur next year. Many publishers are already developing sites with Google’s Accelerated Mobile Pages (AMP), which along with comScore vCE’s extension to mobile and third-party vendors like Moat providing measurement, will see the measurement hurdle overcome. Metrics combining TV and digital video audience measurement, like comScore’s Xmedia and Nielsen’s Total Audience will make strides towards connecting all screens, but extreme fragmentation in the connected TV space will remain a spanner in the works for complete standard unification.