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11 October 2018

Three ad reports – all glorify video which never holds your attention

Several companies have prepared research which is supposed to drive the NewFronts revenue this week – video advertising that is showing online form major online platforms. They all tell a confusing story.

The Interactive Advertising Bureau has out a new 40 page plus report trying to convince everyone of the merits of what it calls ASV OTT – Advertising Supported Video over OTT – both free services like YouTube and paid like Hulu, which contain ads.

We have our reservations because it seems to suggest that these should be distinguished from TV viewers and SVoD views, and are an audience which is tough to reach any other way.

When you realize that a large percentage (52%) of them are cord cutters and cord shavers, who have opted out of receiving pay TV, and that 77% of these opted out because they want to save money, it is less clear why you would want to advertise to them. But the report points out that the opts outs are not because they have no money, but because they don’t see a cable TV subscription as value for money.  Some 34% of them have an income above $75,000 – which really seems counter intuitive.

Additionally the reports suggests that 50% of them actually LIKE adverts and want to interact with them and say these adds on OTT video are more fun than those on TV. They seem more and more like a perfect audience, with 52% saying they are open to new brands.

The sample size is impressive, US only 18+ and statistically valid with over 2,700 web interviews taken from the MARU/Matchbox Springboard America online panel, on days in September and October this year and paid for by SpotX.

Not sure about you, but this is to advertising what the sub-prime mortgage was to the finance industry, combing good audiences like Hulu and CBS on long form, with rubbish inattentive audiences. We are always trying to look for the level of engagement that TV has offered for the past 50 years  – people concentrating and watching something that’s an hour long, and remaining engaged throughout. But this audience seems to be living on some of that, and for the rest of the time on scraps from free services.

This seems to us to be one of those artificial panels which has taken the best out of people who view YouTube, Pluto, Roku Channel, Crackle, Vevo, Xumo, and mixed them with people who pay to view Sling TV, DirecTV Now,  Discovery GO, FX app, WatchESPN, Xfinity, Spectrum, and Hulu with ads and CBS All Access. Ask why they were not analyzed out separately? Because that’s not how the sponsor works.

Interestingly only a company like SpotX could actually reach this type of audience, using programmatic, so no wonder it has sponsored such research.

The report claims that ASV OTT viewers are a valuable audience who are similar in demographic to SVOD OTT viewers, but reachable primarily through ASV and they are more desirable than TV only viewers.

We doubt that entirely – what perhaps the IAB means is that you can reach these people AND do it exceptionally cheaply because you are reaching to them programmatically – so you pay for less ads to reach the same interested audience. We’ll give them the benefit of the doubt, but these claims seem like they are designed to confuse people into buying rather than genuinely offer benefits to advertisers.

On the same day we get a mailer from eMarketer claiming that in 2018 digital video advertising will grow by almost 30% in the US, so same geographic market, but now instead of defining it by audience scraps, it is by video viewing. eMarketer says this market is worth $27.82 billion in 2018 and that video ad spending will make up 25% of US digital ad spending.

Let’s come back to engagement – surely it is only a video audience with exceptional engagement, that will replace pay TV markets, which have traditionally been the biggest in the world.

But once again the first line throws us, Facebook will capture a quarter (24.5%) of all video ad spending in the US this year, at $6.81 billion (including Instagram) eMarketer tells us. So is this the same segment that the IAB is chasing, Facebook is shifting from 30 second Instagram videos posted by its users – so YouTube class video – to fully scripted long form video. That’s fine, it has the right type of high engagement of video in mind, but how on earth can a service which is in its infancy, and one that has already admitted to being unable to be sure the ads shown are not fraudulent, extract more revenue from advertising than YouTube’s $3.4 billion or so.

We’re sure this is not attractive to the key advertisers supporting the $70 billion plus TV advertising industry. There’s no proof of engagement, no track record of bringing results, and no proven path to verify advertising, and we’re just all going to jump on the bandwagon and throw money at Facebook. Sounds quite baffling.

Facebook is a top social video ad platform in the US, but it doesn’t have the credentials to be the top video advertising platform. The report talks about the success of in-feed video, which in a sense is almost co-incidental video. We call it “I got a notification, absent mindedly clicked it and found myself watching a video and was halfway through before I clicked off,” revenue stream. That’s just not engagement, and it will be years (if ever) before someone consciously goes to Facebook to watch a long form video, which they selected in advance, and not because a friend sent them a random link.

The same report says that Snapchat’s US video revenues will be tiny at $397.3 million up just 19% and Twitter will get half of its US ad revenues from video this year at $633.3 million.

In the same week UK consulting firm Strategy Analytics said that mobile advertising is set to peak. Now this is not video advertising or even advertising around videos, but increasingly that’s what people are doing on phones, so the two are related.

Global (so this report is global not just the US) mobile advertising spend will have a CAGR of just 10.9% through to 2023 just taking it to double the $104.7 billion in achieved in 2017 to $222.3 billion. Strategy Analytics says this is driven by a growing base of “engaged”  smartphone users. Digital advertising dollars will include in-app ads, search, classified, display, and text links as well as video and radio and social and any other kind that anyone can think of – the only requirement is that it is clearly and obviously shown on a smart phone. Ads on phones will rise by 2023 from a 55% to 67% market share of all advertising. There’s something wrong with that. Most people do everything they do absentmindedly on their phone, always in a hurry. Is it the right platform to convince them to buy something?

But the message is that the strong growth years are behind us, and mobile advertising expenditure will slow significantly. Strategy Analytics talks about mobile advertising suffering from headwinds including increased cautiousness following Facebook’s Cambridge Analytica scandal and the implementation of GDPR in 2018. Funny that the eMarketer report and the others prepared for the NewFronts failed to mention those scandals, as the research companies have a vested interest to ignore reality and preach to their existing clients – for instance the IAB has a ton of tech firm making up its membership and they need to sell new advertising systems on order to make money.

Strategy Analytics said the US, China and Japan will remain leaders although their positions will erode and search will remain the dominant form of mobile advertising at 47% share, but that mobile video will grow fastest at just 16.5% CAGR, and guess what it talks about – the 6-second mid-rolls, and vertical ad formats from Snapchat, Facebook and more recently YouTube. Nothing associated with long form video.

We suggest that until real video hits online and mobile, search will remain the leader and broadcast TV will continue to have resurgence until technical issues are overcome, which no-one has a vested interest to solve such as verification of programmatic ad delivery. Engagement of attention, rather than the vapid half awareness of search, will win the day, but not quite yet.