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Freewheel shows US to Europe variations in ad consumption

Every year since 2002 has been a pivotal year for advertising, given the rise and rise of digital ad formats, so using that headline about 2016 impressed us not at all, in this quarter’s Freewheel Video Monetization Report. What did impress us was the huge differences in the way the US and Europe is placing advertising and viewing OTT video.

The report starts off in infographic style, re-running 2016 news, initially iving the impression that this report is little more than another worthless piece of PR, like the constant outpourings of Ooyala, trying to push the idea that it is “a thought leader.” But by page 8 it settles down, when the first fact is that year on year video views were up 26%, and video ad views up 24%. That puts a measure on the digital progress. This means that there has been an upward trend in premium video viewing for 24 consecutive quarters with no sign of it slowing down. Yup, we knew that.

But live is growing even faster, up 36% in 2016 over 2015, faster growth than gains in short-form or long-form VoD content. Live in 2016 in the US is all about the Super Bowl, the Olympics and the US Presidential Election and our first thought was that 2016’s numbers won’t be surpassed for some time.

But Freewheel says that the rise in live TV channels (only in the US) in skinny bundles will keep Live on the boil for some time yet. TV is a funny thing and we expect TV execs everywhere are looking for Live events which they can “milk” for high advertising yields.

The truth is that in Europe, so often described as being 3 years behind the US, has gone down another track and the graph below, which we have concocted using the Freewheel data, shows that in Europe, long form digital video viewing is off the charts.

This is because Europe was early to OTT video, well ahead of the US, and it is a fact of life there, built into every set top, into every smart TV, and into the underlying protocols, such as HbbTV and Freeview, which obviates the need for Apple TV or Roku, and SVoD is mostly a TV experience. So there is no love of short-form, a persistent (but wrong) idea among content makers that consumers will only watch short videos on their phones.

Mid-Form almost does not exist in Europe, and Live is a fraction of what the US has. In this respect, we suspect that Europe IS 3 years behind the US, and that live will grow in Europe in time. But right now, 80% of all European ads are delivered in long form video – TV series and movies.

In the US, it is news and live events which drive advertising uptake, so that’s what the industry is chasing.

The devices we are watching on clearly shows Europe as a tablet loving region, but we think that Freewheel has this wrong. OTT Video streams are mostly viewed in Europe on smart TVs and it has crammed that category into one of the others for consistency, and we think missed the optimal conclusions. Also there are a lot more hybrid OTT set tops in Europe than in the US, so that reporting too has gone awry in this graph.

Our (fairly tired) point, that we have made plenty of times is that you should not ask (or allow) vendors to take the premium space in research, because they all have axes to grind. Leave it to us researchers.

Freewheel tells us that adverts have come down in length and moved earlier into the content – so that on demand content in 2016 has 99 seconds of advertising in the mid-roll break compared to 92 seconds in 2015, but in live content that rises to 104 seconds, down dramatically from 130 seconds in 2015.

The report then goes into the ad frauds uncovered at the end of 2016 and the fake news scandals around the presidential election and how that made advertisers begin their circumspection about what content their ads were in front, a theme which is continuing today. And Freewheel says that publishers are scaling back on syndication from long-tail sites as they try to manage viewability certainty and fraud by exercising more control over their inventory.

TV programs are gradually letting automated transactions happen to their inventory and the report shows that in 2014 it was just 3% of inventory, rising to 5% in 2015 and 7% during 2016. Still a long way to go for TV programmers to reach the 27% levels of pure play digital inventory which is traded automatically on auction sites. We are at the beginning of automated transactions for TV advertising and, we are sure, there remain many bumps in the road.

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