Video has witnessed inordinate growth in the last few years; so much so, in fact, that Syndacast predicts that 74% of all internet traffic in 2017 will derive from the channel.
In the States, Google-owned YouTube claims 21% of the total digital video market. Meanwhile, competing social media platforms boast an equally significant influence in driving the channel’s growth. In 2015, for example, Facebook revealed its daily video views had doubled from four to eight billion in just seven months.
Running side-by-side this surge in video consumption in the world of display advertising, programmatic buying has showed not the slightest sign of even levelling off in the short term. The marriage was an obvious one, and the past decade or so has seen a pack of companies quietly mining the opportunity of automated, highly-personalised video ad serving, as it grows gargantuan.
Mergers & acquisitions
In 2016, the market has been witness to a string of acquisitions consolidating some of the last remaining pioneers; public ad tech giants have stormed the finite market, readying their tech stacks for what’s clearly been deemed an investment-worthy affair for years ahead.
It was arguably Facebook’s 2014 acquisition of the (now wound-down) video tech RTB platform LiveRail that triggered a gold rush; a sale worth $500 million that laid the foundations for video advertising success that the social network enjoys today, enabling advertisers to deliver targeted advertisements packaged in Facebook’s own increasingly innovative formats.
In the wake of this, Tel Aviv-based Matomy Media Group made a $25 million bid for Optimatic in 2015, while earlier this year Ve Interactive purchased Optomaton for the smaller sum of €5.13 million - announcing the intentions behind the move in a platform launch just a few weeks ago.
Parisian startup StickyADs.TV was one of the last of the prviate firms to go this year, bought by Comcast subsidiary FreeWheel, a video management solutions provider for some of the world’s largest media and entertainment companies. Reflecting on what he diplomatically referred to as a year for “multiple alliances and consolidations”, the acquiring company’s general manager of international, Thomas Bremond, told PerformanceIN that the acquisition was “a perfect illustration of how the industry must offer unified solutions to publishers”.
However, dwarfing all of the above, while already public in its own right, TubeMogul capped off a ten-year run with a $540 million acquisition by Adobe in November, equipping the acquiring firm’s Marketing Cloud with a Demand-Side-Platform (DSP) capable of buying inventory across desktop, streaming devices and TVs.
Attempting to shed some light on the additional reasoning behind this volley of recent acquisitions, PerformanceIN spoke to Andy Morley, the UK managing director of Tremor Video - a leading Supply-Side-Platform (SSP) - and what he proudly regards as a “major player in video since the early days”, having been founded in 2005.
“As demand for more targeted video advertising increases, publishers are turning to specialist programmatic platforms to drive sales,” says Morley.
“Many of the major ad tech and mar-tech players are aware that building their own video marketplace or ‘fit-for-purpose’ technology will take too long. So, whether it’s in partnership or as an acquisition, they are approaching teams who have specialised in video since day one, because they are far more likely to be able to maximise for the opportunity in video.”
It’s easy to focus on headline growth stats for the States, where eMarketer predicts programmatic video to account for 60% of digital video spend in 2016 - a 21% hike on last year. Morley, however, is quick to point out the scale of the market on our side of the Atlantic. In the UK, the market is forecast to be worth $600 million by 2020, by which time, it’s predicted that half of all video advertising spend in Europe will be purchased programmatically.
“Many premium publishers are now focusing on video, placing it at the heart of their content strategy,” comments Morley, citing the BBC’s plan to increase video five-fold in five years and the Telegraph’s focus on the efficient distribution of existing video content as examples of a wider trend.
Unlike those that have rushed the market to merge and integrate with ad serving platforms, AppNexus - a weighty enough outfit to keep even the likes of Google checking over its shoulder - built its own way into the market this year, unveiling its SSP ‘Video Publishers Suite’ in H2.
Speaking to PerformanceIN, the group’s SVP of video technology, Eric Hoffert, agreed that the combination of Google and Facebook’s recent moves into digital video advertising, alongside wider industry consolidation, have indeed been a “catalyst” to the growth of programmatic video in 2016, setting a launch pad for 2017.
However, whether the case is there for 2016 being programmatic video’s most formative year or not, Hoffert notes there are a number of challenges to overcome as it creeps towards maturity.
These includes things such as video latency, where AppNexus itself found loading times of over five seconds cause a 25% drop-off rate, as well as continuing grapples with ad relevance and more seamless native in-video advertising, the latter of which is admittedly seeing headway made by companies such as Taboola.
Another significant limitation is that while the industry shows all the signs of strengthening, envisioning it reaching the kind of growth anything like that shown by programmatic display is unlikely, simply because there isn’t enough video inventory to trade. While US predictions see programmatic taking a 60% of video ad spend this year, video’s share of total programmatic display spend as a whole is estimated to sit at just 24.5%.
This shouldn’t be cause for concern, though. While there could be some initial hesitation to dive in, similar to that shown by programmatic display, there’s no reason to suggest advertiser demand for increased accountability across the breadth of digital advertising won’t expand into video marketing campaigns.
This will put increased pressure on publishers to turn to programmatic in order to enable audience-informed buy-in, and in turn, inventory will increasingly make itself available.