The State of Video Monetization 2020
Room to Move
"20% of viewing has moved to the internet, but only 3% of the ads," said Jeff Green, CEO and board chairman of The Trade Desk, at a CES 2020 panel. The 2020 $69.52 billion TV ad budget (according to eMarketer) has a lot of room for movement as it becomes clearer where viewers prefer to get their content. Magna reports that U.S. OTT ad revenue was $2.7 billion in 2018, or year-over-year growth of 54% (numbers for 2019 were unavailable at press time), and we'll likely see it grow as much or more in 2020.
As companies like Hulu and Roku have been offering a very targeted experience based on first-party data, other services are going to have to start creating attractive offerings to compete.
Trend for 2020: New offerings from publishers trying to entice advertisers to spend in digital.
The total TV ad budget for 2020 looks to be just less than $70 billion, up slightly from 2019, according to eMarketer
"One of the things we are seeing at Hulu is [that] by having a less disruptive advertising experience, not only do we see a reduction in ad-related churn and a better experience for viewers, but the ROI for advertising is higher. Advertisers are seen as being part of a more innovative ad experience," said Jeremy Helfand, VP and head of advertising platforms for Hulu, at a CES 2020 panel. As an example, he discussed the ad format Hulu calls a pause ad: "When the viewer pauses—we make sure that they're not going to either rewind or fast-forward with the content—we introduce a translucent image overtop of the content. That persists on the screen until the viewer hits play and goes back to their content." The idea is that when viewers seek out food or take bathroom breaks, it's a good time to serve them an ad.
"On Hulu on a daily basis, our viewers pause on content 30 million times. Instead of introducing commercial breaks and disrupting their storytelling journey with content, what if we took advantage of a natural behavior and natural break that's happening with content?' said Helfand. "We saw a 68% increase in ad recall compared to other static type approaches." The upshot is a less disruptive, better advertising experience for the viewer and higher results for the advertiser.
"The reason why we did that [as a static image] and not in video was because our viewer feedback was that if you introduced sight and motion at a time where we paused content, they would see that as jarring," said Helfand.
Trend for 2020: More display ads used within video delivery.
"Over half of the ad-supported content on Hulu is watched in a binge fashion, meaning someone is sitting down to watch three or more episodes of their favorite content at a given sitting," said Helfand. "When the viewer starts to watch the first two episodes, we introduce a teaser from the brand." On the third episode, the advertiser offers them some sort of personalized reward, which can be a commercial-free episode or maybe a dollar-off coupon.
"The whole idea here is we're using data science to anticipate who is going to be a binge viewer, because you're introducing that experience right at the beginning of their first episode. We're combining data science and a really unique creative execution in order to surround the binge experience with much more effective advertising," said Helfand.
Trend for 2020: Innovative binge-watching ads, either in shorter series that tell a story over several ads or in a time-constrained incentive so viewers see fewer ads.
Creative Gets Creative
"We are introducing commerce into our programming, so a consumer on an LG TV can opt in to say, ‘In this scene, what are the shoppable elements that I can purchase? I really like that sweater,'" said Larry Allen, VP of ad product strategy for WarnerMedia Ad Sales, at a CES 2020 panel. Seamless shopping access creates a deep interactive experience in which a viewer can simply enable the shopping feature and then easily make a purchase through the TV interface.
That sort of contextual targeting will impact advertising as well as ecommerce. "Contextual targeting [will be important in the next year], especially now that Google has announced their plan to sunset third-party cookies," says Brian Rifkin, co-founder and SVP of strategic partnerships at JW Player.
These cookies, which follow users around the web, are now being seen as having become too invasive when it comes to viewers' privacy, and Apple and Mozilla are already cracking down on cookie usage. What will take its place? More video services will use contextual targeting, scanning content for metadata and identifying what is in the imagery. Then they can insert ads in live linear or VOD feeds "to contextually bolt onto whatever the scene is. If there's people eating pizza, the next ad, Papa John's [Pizza] shows up," said Allen.
Trend for 2020: Acquire even more metadata about content, and use it to generate relevant ads and ecommerce options.
In Conviva's "State of the Streaming TV Industry" Q1 2019 report, the company found that up to 47% of ad attempts may not make it to the viewers' screens as intended, whether the problem occurs in ad request, decisioning and selection, ad creative delivery, or playback. Conviva identified 11 ad failure points across the ad delivery chain. Some examples include up to 6-second delays caused by wrapper ads, up to 8% failure from incorrect ad media rendition, up to 12% empty ad response, and up to 7% Video Player-Ad Interface Definition (VPAID) errors.
"There's no silver bullet [to fix ad errors] but here are [a] few ways: VAST 4's (4.2) technology could resolve many of the errors but adoption has been slow," says Rifkin. Optimized user experience (UX) is also important, he says. "This one is more challenging because every site is designed differently but there's a direct correlation between a clean, well-designed page and video ad revenue. Your fill and CPMs [cost per thousand impressions] increase, while your error rates decrease." Rifkin also sees continued demand for server-side ad insertion for OTT apps to simplify custom development needs, avoid adblockers, and create a better ad experience.
Trend for 2020: Fixing delivery problems.
Research from TiVo found that for viewing new movies and new TV shows, most consumers go to Netflix, Amazon Prime, and YouTube, whereas they are more likely to find new episodes of shows they already watch on broadcast or pay TV. However, streaming has created new patterns, and expecting these discovery patterns to remain the same is a fool's game.
At CES 2020, a number of new and old companies showed off their cross-service search features. Caavo has a single-remote hardware solution that consolidates multiple apps and devices. New entrant Dabby has a service that allows viewers to not only search but to subscribe and unsubscribe to streaming services as needed, although it requires consumers to purchase proprietary hardware.
Trend for 2020: Improved cross-provider search capabilities.
[This article first appeared in the March 2020 issue of Streaming Media magazine. Click here to download the digital version of the issue.]
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Comcast Executive Director, Business Development & Strategy Matt Smith discusses the role of analytics in VOD revenue models in conversation with Streaming Media Senior Associate Editor Troy Dreier at Streaming Media East 2019.
Crunchyroll/Ellation EVP, Media & Entertainment Michael Dale discusses how to convert Ad-Supported OTT viewers to subscribers in this clip from OTT Leadership Summit at Streaming Media West 2018.