Video advertising: future models, previous mistakes
No doubt you’ll have seen the latest Facebook controversy (no, not that one): the social network didn’t let news publishers know about a bug that discounted people who watched less than three seconds of video, thereby artificially increasing the statistics around how long people were consuming videos on average. As a result, some people are claiming that Facebook effectively created the pivot to video that saw newspapers and magazines shed tons of editorial roles in favour of video teams, to cater for this new audience demand for video content. Some are even suing Zuckerberg’s brainchild over it.
Due to all the broken promises and missed expectations that came with news publishers’ rush into video, it’s easy to forget that the reasons behind the drive to produce more digital video were sound: consumers are viewing ever more video online across OTT services like Netflix, user-generated-content platforms like YouTube, and livestreaming sites like Twitch. Even if the figures around view time were skewed, the trend is undeniable – one of the worst affected companies, Mic, even claims that the inflated metrics weren’t even a consideration in their own change towards digital video.
Audience attention is fixated on those video platforms; it was only natural that news publishers should have attempted to exist on them. Equally, it was only natural that the organisations that owned those sites – Google and Amazon – should have pulled the rug out of that ambition by hoovering up the vast majority of the ad-spend the newspapers expected to reap.
By 2019, video traffic will account for 80% of all consumer Internet traffic. Check out the best practices in our 2018 guide to social video: https://t.co/2WOfcpcaE5
— NewsWhip (@NewsWhip) October 3, 2018
Earlier this year, further shine was taken off digital video by a string of high-profile debacles surrounding unsafe advertising environments, bizarre algorithmically generated videos and questions around ad effectiveness.
But despite the high-profile failure of those publishers, audience demand for digital video continues to increase. Even reddit, which only launched its native video platform a year ago, has recently reported it’s hitting 1 billion video views a month. Inevitably, the companies behind the platforms are heavily investing in technology to better squeeze money out of those consumers:
Google, for instance, is bring YouTube back into the fold. CNBC reports that YouTube is now the second-most used search engine in the US, and consequently that there are huge swathes of the population who are in desperate need of being shown more relevant information pertinent to their video search: “Now, people searching for reviews on a movie may see a banner for showtimes in their area, or someone looking at a game review might see a link to download the game. Travel-related videos could include information to help users book a trip”.
In a way it seems strange that Google would have waited so long to flip the switch: its core tech has been able to do this for quite some time. As The Verge points out, however, the company has been grappling with issues of privacy and user perception for quite some time, and YouTube is so exclusively about video consumption that any attempt to bolt on extraneous tech might have put users off: “Only last year did Google start letting advertisers target ads on YouTube based on that individual user’s search habits on the site itself, as opposed to just running ads against the type of content a user was watching. Now, it looks like Google is integrating its search ad tech more directly into the YouTube ecosystem.”
There are questions around the extent to which Google can alter YouTube’s core proposition without driving away a proportion of its audience, but as we’ve seen with Twitter, fewer but more profitable users is preferable for platforms at the moment.
In the past four quarters, Twitter’s net profit is just over $1 billion. In the four quarters prior, Twitter lost $367 million.https://t.co/XHlucPsu0o
— Media Voices Podcast (@mediavoicespod) October 25, 2018
The streaming service Hulu is also aiming to shake up its own video ad system, by boosting the proportion of its revenue that comes from non-intrusive ads (up from 10% right now). It, too, is benefiting from advertiser demand for ads opposite high-quality video content rather than the low-quality user generated content that has flooded the market. What’s especially interesting about Hulu’s new endeavour is how it is seeking to ameliorate the traditional issue of advertising against OTT content – that it doesn’t have time-specific ‘water cooler moments’. AdAge explains:
“Traditional TV has long played up seasons and holidays in programming, promotions and sponsorships. But that’s not as easy for so-called over-the-top streaming platforms that lack a communal live feed.
“‘A lot of OTT and on-demand environments, you don’t have a sense of time because it is mostly library content,” [Peter] Naylor says. “With Hulu, you have a sense of time since we get last night’s TV the next day.’”
And, while the time in which other media companies would have unhesitatingly jumped to create content for Facebook is over, the social giant is also ramping up its video ads capability by adding a premium option for its in-stream ads. It all goes to show that, while the amount of video which audiences want to consume has been overstated, there’s still huge growth in the video advertising space.
Whether individual publishers rather than platforms will see any of the benefit from that is a different story.
Chris Sutcliffe
Martin Tripp Associates is a London-based executive search consultancy. While we are best-known for our work across the media, information, technology, communications and entertainment sectors, we have also worked with some of the world’s biggest brands on challenging senior positions. Feel free to contact us to discuss any of the issues raised in this blog.