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3 Predictions for OTT, VOD, and Programmatic TV in 2017

TV will always be a cornerstone in advertising. The total ad spend on linear TV is expected to reach almost $74 billion this year, showing just how strong the industry remains. But the TV category is also changing rapidly. From OTT to programmatic, advertisers and broadcasters are seeing shifts in traditional TV like never before.

So what should we expect in the New Year? Here are three predictions.

OTT video advertising will become more targeted

OTT video advertising grew considerably this year. In fact, the number of advertisers that spent on OTT campaigns doubled from 2015. And by 2019, nearly three-quarters of U.S. internet users will use OTT video services. As adoption climbs, marketers will continue to invest. But several obstacles are holding back OTT from reaching its true advertising potential.

mobilevideoBeyond its scale, OTT is an Internet-based platform—connected TV, desktop, and mobile—that provides access to rich data for one-to-one targeting. However, OTT's targeting capabilities on the supply side have been slower to develop. Making inventory available through programmatic technology would amplify targeting opportunities, but only a small portion of OTT is currently sold programmatically. For example, Hulu only launched its programmatic solution late last year, and other content creators have had little incentive to embrace it, opting to sell untargeted impressions at a high price.

But 2017 will bring changes for OTT video advertising. More OTT content suppliers will be forced to embrace programmatic as advertisers demand greater data-driven targeting. As programmatic OTT takes hold and standardizes, OTT ad spending will balloon.

Broadcasters will make or break programmatic TV

By the end of the year, digital is projected to represent 36.8 percent of all US media ad spend, while TV will represent 36.4 percent. This is an industry first. Digital is beginning to outpace traditional TV advertising due to the clear benefits it affords advertisers—easier transactions, more targeted, personalized campaigns, and better ad measurement. However, the linear TV environment can enable these same advantages through programmatic technology.

Unfortunately, the industry has been slow to embrace programmatic TV. This year, it represented only one percent of total U.S. TV ad spend. In 2018, it's projected to hit a "high" of six percent. Programmatic adoption is hampered by a lack of broadcaster buy-in. National networks have withheld inventory from programmatic exchanges, fearing programmatic will ultimately drag down pricing. However, programmatic has real pricing advantages. For instance, broadcasters can sell at higher rates to advertisers by pairing undervalued and undersold inventory with granular audience data.

So, 2017 will be a pivotal year for programmatic TV's future. More national broadcasters must embrace the technology to make it a viable long-term growth area. The hope is that those broadcasters who have already adopted programmatic will see the benefits across undervalued inventory, boosting interest throughout the ecosystem.

VOD will take small steps towards dynamic ad insertion

In 2016, almost 60 million households had access to cable VOD - up 2 million in the past year. On top of that, time spent watching VOD programming also grew to more than 9 hours per month. This is nearly double the amount of time audiences spent on VOD just 5 years ago. Still, VOD ad potential remains limited, despite adoption.

This is because VOD advertising technology and creative capabilities are fairly inert. They prevent truly dynamic, time-sensitive ad insertion. For example, embedded ad inventory on VOD typically lasts a full month. After a month, most networks then update their programs and the embedded inventory, preventing dynamic creative and timely campaigns from being placed across cable VOD. Digital channels and linear TV—which are more flexible—benefit, instead. More problematic is set-top box fragmentation. Dynamic ad insertion must occur at the set-top box-level, but without any real standardization across them, advertisers are limited in what they can do.

As consumer adoption rises in 2017, it's expected that innovation in VOD advertising will occur to make dynamic ad insertion more realistic. However, the pace of evolution—like years prior—will likely be slow. The set-top box fragmentation will be particularly difficult to solve.

Next year, OTT, programmatic and VOD will evolve considerably—for the better. Expect strides in each area to create more opportunities for advertisers and broadcasters alike.

gerry-suttonGuest post by Gerry Sutton, CEO of Adstream. OnlineVideo.net accepts guest posts based upon their usefulness to our readers.

Gerry Sutton's article first appeared on OnlineVideo.net

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