The Challenge of Mobile Video: Big Returns for Small Screens

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Monetization is a term we throw around the industry almost as frequently as adaptive bitrate, any screen, or streaming itself. As one respondent on a recent Streaming Media survey put it, the definition of success when it comes to monetization is “revenue greater than CDN costs.”

Nowhere is the terminology of monetization more prevalent than in the world of mobile video and mobile advertising delivery.

Or as another respondent to the same survey put it, the hope in mobile delivery of premium content is to move beyond “afford[ing] to deliver the content, and at least break even with ad revenue generated.”

But are we aiming at the right target? And is our target, as an industry, even on the radar of those who make the hard choices about how to spend their advertising dollars—or their clients’ dollars— when it comes to mobile delivery?

The purpose of this article is to expand beyond the technical discussions common in the streaming industry and move toward a conversation in the language advertisers and advertising agencies use to discuss how they view mobile video advertising and monetization.

CPMs Down, but Trending Back Up

CPM is a view-based measurement that stands for cost per thousand impressions (the initialism stands for “cost per mille”), and CPM rates for video advertising have fluctuated widely through the years. In the economic heyday of 2008, CPMs were $45 or higher, versus $15 for standard web banners, whereas more recently video CPMs have dropped down into the high single-digit range.

“The average CPM for preroll on mobile is around $12.50,” says Irfon Watkins, founder and CEO of Coull (left). “CPM is the dominant model but buyers are increasingly looking to more specific performance metrics to guide their campaign decisions.”

Matt Smith, chief evangelist at Anvato (right), addressed the key challenges facing mobile advertisers in a recent IP&TV News article on monetization.

In an interview with Streaming Media, Smith provided insight into CPMs for mobile-based video advertising, saying that the CPM rates are climbing now that technological barriers are being removed.

“I’ve seen customers with CPMs as high as $25, even on local station content,” Smith says. Smith adds that these rates are “the result of investment in the technology that powers their brand” for both broadcasters and advertisers. For a broadcaster, the technology is important but secondary to the ongoing concern: compelling content.

“In order for an entity to recognize revenue from their content, they need the audience [size] to support a CPM model,” Smith says. “This means offering compelling, consistent content—like a newscast or entertainment-based programming—that is of high quality and is delivered well and without incident.”

One of Anvato’s customers that fits this mold is Hearst Television, and Smith says it “[does] this exceedingly well.” In addition, he says there’s a model that broadcasters and other entities that might be building an audience need to consider.

“For those still in the process of building audience, I see them implement a sponsored model to cover the cost of investment,” Smith says. A sponsorship model, he says, isn’t the end game but a means to an end, and can itself often drive a profit.

Smith’s $25 high-end CPM rate is in line with a rate guide published by MonetizePros that splits out direct sales versus ad network averages. According to the mid-2014 guide, ad networks range in CPM from less than $1 to around $5, with an average of about $3. Direct sales, the kind of model Smith is referring to, ranges from $18 to $30, with an average of $24.

In the network model too the ad network itself takes a cut of the CPM rate, often around half, although that percentage is trending downwards.

But Watkins warns on the performance aspect of CPM pricing these days. “Performance doesn’t mean sales, as mobile video is still really a brand advertising channel, but metrics like completion rates are becoming increasingly important in determining audience engagement.”

Paul Verna, an analyst for eMarketer (right), expands on the topic of the impact of mobile video in a recent study focused on tablet and smartphone video viewing.

Verna argues that video viewers using smartphones and tablets are “poised to continue increasing at a faster rate than the adoption curve of those devices.” In other words, we are headed—again, some might say, citing past desktop video growth—toward a model with more viewers than devices.

Verna cites the ability to roundtrip, or switch between screens for on-demand content, as a primary driver in the trend toward mobile viewing. Yet, he also says “screen availability” might be a byproduct of ease of access, and a potential driving factor for advertising.

“As viewing becomes more individualized, people customize their experiences according to whatever screen is available at the moment,” Verna says, adding later in the report that a “major takeaway of this report is less about tailoring content to a specific target group than about broadening one’s existing audience base via mobile devices.”

Smartphone or Tablet? Or Both?

When it comes to content consumption, Smith says the delivery platform is critical to the overall decision about whether smartphones or tablets are in the lead.

For ad agencies and advertisers, one question being asked is the level of granularity one can expect from an ad-insertion solution.

“This depends on delivery platform,” Smith says. “For iOS, Android, and desktop, we know where the user is and what platform they are on. Further, each user maintains a unique connection with the cloud, enabling content and advertising delivery on a per-user basis.”

In other words, Smith notes, the framework for this level of granularity is “ready and working today” but has yet to see strong adoption.

“The ad world needs to embrace and utilize this capability,” Smith says. “We can target users much more effectively and intimately on today’s platforms, providing a much more unique ad experience than ever before.”

Watkins agrees that it’s about the technology, but adds that it’s also about the data underlying the decision process.

“Different demand-side platforms (DSPs) use different data sources to model campaigns,” Watkins says. “Some are more transparent about how they’ve arrived at your target audience than others.

“Then you’ve got other technology vendors in the advertising chain who are all adding layers of data to the mix: contextual data about the content the advert is being placed against, brand safety, etc.,” Watkins adds. “There’s an abundance of data to target against.”

Those increasingly detailed, or perhaps complex, levels of data can be beneficial if used correctly.

“An advertiser’s first-party data is the most valuable of all,” Watkins says. “So in terms of guarantees it’s about finding technology partners that can deliver against clearly defined advertiser goals.”

On the premium content front, especially when it comes to OTT content delivery, companies such as Netflix understood this trend a few years ago. Once Netflix added profiles, which allow as many as five different users on a single account to maintain their own viewing histories—and allow Netflix to better recommend content to disparate users on a single viewing device, such as an Apple TV or Roku OTT box—the amount of video consumption grew dramatically.

We’re not there yet in the tablet viewing pattern, as on most tablets video delivery follows the pattern of smartphone video consumption, which assumes one user per device. But, let’s say we actually get to that level of granularity. What are the implications?

One implication, which Verna highlighted in the eMarketer study, is a radical shift of not just advertising but actual content consumption—be it live linear or on-demand content—to mobile devices.

Parks Associates has also noticed this trend. “Forty-four percent of U.S. tablet owners increased their time spent watching video on this device over the past year,” Brett Sappington, director of research at Parks Associates said in early 2013, explaining why there’s interest in moving the TV anywhere needle toward live-linear mobile viewing, among service providers and content owners alike.

That mobile viewing trend continued to grow throughout 2013 and 2014. The advent of new carriage agreements that broaden the scope of where live-linear television content can be consumed—TV Everywhere or TV Anywhere— should have a significant impact in 2015.

eMarketer’s findings show that smartphone viewers lag behind tablet viewers in terms of the amount of content they consume, though the study also cites a Consumer Electronics Association report from June 2014 that shows the opposite.

Another recent study, this one from the Interactive Advertising Bureau, also shows that smartphone viewing (46 percent) outpaces tablet viewing (41 percent) when it comes to self-reported responses to a question about which devices are used to view original digital video.

“[Our] metrics show tablets ahead of smartphones with regard to video usage,” Verna says, comparing these reports to eMarketer’s findings. “The disparity could stem from different methodologies, survey samples, frequencies of use and interpretations of terms such as ‘digital video.’”

At Home or on the Road?

Regardless of which mobile platform is used, one trend is clear: We are in an era in which mobile viewing is outpacing desktop viewing, at least in terms of growth, and it might soon eclipse the desktop in terms of actual video consumption. However, a curious parallel pattern is emerging, in that we’re not necessarily leaving home to use our mobile devices to consume content.

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