Video State of the Industry Report, Q1 2012 The Sight Sound Motion Combo: Online Video Remains Wedded

to TV Advertising
Sight, Sound, Motion the pull of sight, sound and motion that is video advertising captivates advertisers, regardless of medium. Without doubt, online media has heightened advertisers quest for proof that their video campaigns are working. But results from our semi-annual poll of predominately digital agencies, brands, publishers and ad networks or intermediaries that comprise the marketplace for online advertising, report that television and online video continue to be planned and bought in tandem. Its precisely because Digidays constituency of media and marketing professionals are overwhelmingly digital in their outlook, that it is all the more striking that a large margin of survey respondents see online video as being more aligned with television than display advertising.

Given the choice of which medium online video should be most aligned with TV, online display or other the majority respondents choose TV over display. An 11 percent minority is still unsure whether online video represents a new medium entirely, but even fewer respondents suggested that online video might be a replacement for TV.

Nearly two thirds of respondents across the industry (62 percent) said that their use of online video is more likely to be a complement to TV rather than a replacement for TV (10 percent), and respondents to the latter have diminished from last Falls query. Some 28 percent say the medium is neither a complement nor a replacement, implying that it stands alone.

Not surprisingly, 48 percent of brand and agency respondents say that television and online video are already planned together, and 25% who arent yet doing so will within the next 12 months. That means that, within this buyer cohort, nearly three quarters (73 percent) of all online video buyers will be planning TV and interactive video together by 2013.

The missing link in uniting these two mediums? Two thirds of buyers say that a key factor in fusing TV and online video is unified measurement.

Brands have already spoken regarding their primary campaign objective for video: its brand engagement, by an increasing margin. But while brand lift was cited by both advertisers and their agencies as the best metric of success in measuring online video ad campaigns, the two remain divided when it comes to the importance of clickthrough agencies putting it near the bottom of their list of favored metrics, and brands ranking it third, ahead of common TV metrics. While still low on the scale of things, we did note a dramatic rise in brand attention to TV-centric metrics of GRP and TRP. While they barely registered a blip in last years survey, theyve moved into double digits now.

As sight, sound and motion expands to a seemingly endless array of emerging platforms, the challenge of defining engagement in a way that pleases all video buyers remains profound. Today, mobile appears to be the winner among emerging video platforms, with 59 percent of buyers saying that theyll employ mobile generally this year and fully 57 percent of those will include the tablet as a platform. The surprise here, however, is that the largest increase over 2011 projections regarding emerging platforms used for video is connected TVs ad spend on these devices is up 20 percent from 2011. Another 38 percent of buyers say they will add smart TVs to their media plan within 12 months. We will likely add a question to find out what accounts for this large jump in anticipation for the medium, though we suspect a large measure of it may be the rumored Apple TV. Conversely, it could be precisely the yearning for metrics that unite television and interactive media that are pulling advertisers into connected television: something that looks like traditional television, but that has all the interactive proof-tests of online.

What makes clear that this growing shift to connected TV isnt ephemeral is the convergence of responses of both advertisers and publishers around anticipation of the mediums growth. (While still under 30 percent, advertisers and publishers are just 2 degrees apart in their projection of the use of connected TV in video ad spend for 2012.) Overall, the outlook for online video budgets is strong, with the vast majority of brands, agencies, and ad networks (96 percent) estimating that their budgets will increase an average of 23 percent in 2012. Publishers, too, have expectations for double-digit growth in online video budgets; greater than 80 percent said that CPMs are up an average of 11percent

from 2011. More than 83 percent of publishers said their fill rate is up by nearly 14 percent from last year.

But, while TV and online video may be a combo, its not BoGo for most publishers in our poll who primarily sell online video on its own merits. Asked whether they bundle video with their television ad sales, the broadcasters and cable company respondents in our pool answered no in the majority (52 percent said no, while 48 percent said they do bundle.) When advertisers were asked where they source their online video ad inventory, the most common answer was ad networks at 73 percent. However, the growth in use of ad networks remained relatively flat. The more interesting story is the substantial rise in inventory sourcing via automated environments.

It would appear that advertisers are demanding pricing efficiency and are finding it from a mix of suppliers including exchanges (29 percent vs. 15 percent in 2011) demand-side platforms or DSPs (32 percent vs. 15 percent in 2011) and trading desks (27 percent). Trading desks were included for the first time as a choice in this years study but came out of the gate right from the start. Because advertisers were allowed to pick as many outlets as they typically employ, and because the ownership of such buying channels often overlaps, it would be speculation to assign a market share to any one buying method. If anything, its apparent that a strong third of online video advertisers are sampling a number of methods looking for value. The large majority of ad networks, meanwhile, source their video inventory from exchanges (82 percent), while a lesser number, but still healthy 68 percent deal directly with publishers. Only an average of 20% of advertisers said they expect to buy their video advertising this year at an upfront. For the majority (70%), it was anticipated to make up 10% or less of their total video buy. This number was down 10 percent from 2011. While premium publishers often are reluctant to expose their video inventory on an exchange, believing that they can reap a greater reward from direct sales to advertisers, its clear that theyre falling behind the rest of the industry in their use of real-time bidding.

While 36 percent of advertisers and agencies and fully half of ad networks and DSPs are using real time bidding methods to source video ad inventory, only 17 percent of publishers leverage RTB for sales. There appears to be more potential for private advertising marketplaces among publishers with video content. While just 8 percent currently employ such a sales platform, more than 28 percent say they will employ one within the next 12 months. Yet the notion of private marketplaces is still far from mainstream; 17 percent of publishers surveyed are still unclear as to what a private marketplace entails.

Industry predictions, while predictably self-interested, expressed hope that all the elements of a vibrant, video marketplace would come together to improve both the worth and the availability of quality video content and ad availability. Many publishers, if not enamored of networks, have audience targeting on the brain. Said one, Ad Networks need to show value to the clients. They need to work together with premium publishers to bring something special to clients. RTB may force ad networks to consolidate quickly if they cannot reinvent themselves. Personalization appears to be one route to better targeting for some publishers, one predicting that the coming year would foster more personalization, with video ads not only targeting audiences, but making use of user's social content as part of their digital ad experience. Another foresees more volume against quality original content, and still another growth in mobile and connected TVs. One said simply that 2012 will bring planning, buying and measuring akin to TV, another, more integration with TV buying and cross-platform buying, a third,

closer integration of TV and video and a fourth sees Video Audience Buying becoming more mainstream. Agencies anticipate greater demand for video, triggering a flood of production. More dollars being spent on it, larger pools of inventory, was a typical prediction. Metrics are top of mind, one saying, the industry must, Improve backend measurement to redefine GRPs away from demographics to more relevant target audience delivery, and another, I anticipate the marrying of TV panel (Rentrak, Nielsen, others) and cookie data to help divert more money to digital video and also create some excellent case study opportunities. One predicts online video will be sold on a TRP basis. If online video wants to take TV money it will need to be sold comparably to TV. While less specific, another demands the industry unify a measurement model across all types of video, which will prove to the client that broadband video is integral in their campaign buys. More customized content may be on the horizon, and with it a larger percentage of budget allocation. This will create pressure on traditional broadcasters as one predicted a tighter market for made for TV content while scripted digital content explodes. Advertisers echoed the need for custom content versus repurposed TV spots, and others referenced short-form content. But most wanted better targeting and pricing, and better ways to measure their value. Like agencies, theyre obsessed with better tracking integration with TV and a TV GRP/TRP equivalent at the very least, HOPEFULLY more integration with audience tools that will coordinate with broadcast audience tools. Nirvana might take the form of the ability to buy broadcast and in-roll video advertising and share content across media. (Currently, broadcast and web are sold, produced, distributed separately). Finally, the industrys intermediaries look to greater integration with television and the merging of TV and online video, potentially through connected TV, and the growth of inventory availability through RTB. Executive Summary While cross-measurement and integration challenges remain, both buyers and sellers of online video are spurred to optimism by steady growth in ad spending, CPMs and fill rates. Engagement may emerge as videos core metric, as both publishers and advertisers look for more creativity that is specific to the medium, even while it may be planned alongside television campaigns. But if the flow of brand dollars into online video argues for greater integration with television campaign planning, it doesnt bring with it a love of the television upfront. The rise of programmatic buying in online media is seeping inexorably into online video marketplaces. With better metrics, buyers insist, must come greater efficiency as theyre better able to compare apples to apples or audience

to audience. Ironically, the need to move beyond the Web to platforms like smartphones and tablets may hasten the adoption of more TV-like metrics such as reach and engagement, even as real-time bidding for this flood of inventory replaces the rigidity of the upfront. Publishers, meanwhile, are tripling their efforts to employ private marketplaces in an effort to comply with buyers need for greater transparency and measurability of inventory. At the same time, however, they seek to move beyond overly simplistic ad avails such as pre-roll. Connected TV may spell the answer for broadcasters, even as it isolates Web-only video producers, but the latter are committed to a currency of quality and creativity that both buyers and sellers hope will continue to widen the availability and accessibility of video content, and enlarge the market for video advertising. Look for growth to continue in online video ad uptake, in tandem with digital television planning. Driving this trend: o Brand and agency interest in synergizing sight, sound and motion o Tools that deliver the toggles for ad planners to determine their desired reach and impact o The transparency and availability that derives from exposure of more online video content via RTB Look for publishers to accelerate efforts to move video buyers onto private marketplaces but also to expand their efforts into custom and branded content as a way of deepening their most important one-to-one relationships. Look for both buyers and sellers to try to coalesce around an engagement metric for sight, sound and motion that aligns campaign goals in both television and online video. Accelerating this trend: o The move to yet more platforms beyond the Web that compound the need for unified metrics o The sudden ramp-up in interest for connected television as the potential missing link between television and interactive audience engagement metrics. Expect the continued expansion of RTB platforms in online video, and for buying efficiencies participants experience to put pressure on television content producers to offer similar buying solutions to displace the television upfront once and for all.

Methodology This survey was conducted in late March and early April of 2012 from the universe of Digiday subscribers, conference attendees and speakers who themselves represent digital media and marketing professionals. The following chart represents the percentages of respondents in each cohort.

To participate, the only incentives offered respondents are chances to win either free conference passes and/or the tablet of their choice, and the full survey results.

Adap.tv and DIGIDAY will continue to survey digital advertising and publishing practitioners in this fast-moving marketplace twice annually. If youd like to be included in our next outreach, please email Melinda Gipson at Melinda@digiday.com. For more information about this report, please contact Katherine Ryan, Katherine@adap.tv. Adap.tv 1 Waters Park Drive, Suite 250 San Mateo, CA 94403 www.adap.tv