As Programmatic Video Evolves, Publishers Are Just Getting Started

jeremyostermillersellsideThe Sell Sider” is a column written by the sell side of the digital media community.

Today’s column is written by Jeremy Ostermiller, founder and CEO at Altitude Digital.

Programmatic video platforms are perhaps the hottest commodity in ad tech right now, with several high-profile acquisitions taking place in the past six months alone. The sale of LiveRail to Facebook and RTL Group’s $144 million investment for a 65% stake of SpotXchange prove that programmatic video is an increasingly important part of the digital media landscape.

A hot market may also be interpreted as the end of an innovation cycle. With a basket of large players suddenly off the market, the ad industry could theoretically move on, turning its focus away from video innovation toward the next big technology play. However, this couldn’t be further from the truth. The growth and innovation in programmatic video is just beginning.

Technological Inefficiencies

The clearest indication that video is far from “solved” lies in the issues publishers still experience. Video CPMs are clearly higher than display CPMs, but not all publishers employ video on their sites.

Publishers that do monetize video, whether it’s original or syndicated video content, often have trouble filling even 50% of their video ad inventory programmatically. In some cases, low fill rates are a result of the imbalance between supply and demand or quality, but in many other cases this is due to errors and breakdowns that occur between complex video systems and timeouts caused by latency.

In every major video acquisition, the acquirer has been an advertiser-facing company. Publishers still need their voices heard, and many will undoubtedly turn to independent publisher-facing programmatic platforms to resolve the fundamental technology issues that are limiting the progress toward an efficient marketplace.

Premium Publishers Are Only Beginning To Adopt

Some publishers have chosen to combat those inefficiencies head-on, and the result is that more premium publishers are now comfortable making their video inventory available via programmatic. More than half of publishers currently make their premium inventory available, according to an AOL report. This corresponds with increased buy side focus as well, with 60% of brand video spending and 38% of agency spending going to programmatic video. This is notable growth, but half of the premium publishers and marketers are still on the sidelines waiting for the maturation of the video advertising market.

Shifting Television Budgets 

The potential shift of ad dollars from TV to online has been a topic of conversation for years, but progress has been slower than expected. Traditional television is holding strong while online video continues to grow annually by double digits. The whole pie is getting larger, but online is not yet eclipsing TV ad spending. Programmatic technology is just beginning to address issues that are constraining the explosive growth we all expect, but the real tipping point is ahead of us.

The US video ad market will hit $17 billion by 2017, according to a recent Jefferies report (PDF). Brands shouldn’t turn their focus toward the next thing right now. They should look at programmatic video solutions on a deeper level to understand how they can leverage this technology to reach consumers wherever they watch video.

The key word is “wherever.” While many believe that TV buyers will eventually help shape the future of programmatic video technology, mobile consumption is creating more inventory and opportunity for marketers. Programmatic’s biggest promise is that it can potentially “erase the lines between different screens.” As publishers continue to expand their video opportunities across screens, they’ll create more inventory and opportunity for brands to engage with consumers.

The platforms rewarded with recent acquisitions managed to set themselves apart through technology. These acquisitions don’t signal a sudden maturation in video advertising but it is a strong indication that tremendous growth and upside remain for video technology companies. There is room for independent companies to emerge and solve the issues brands and publishers face in leveraging the power of video advertising.

Programmatic video evolution is a nine-inning ballgame, and we’re only in the third inning. The growth and innovation has just begun. Let’s play ball.

Follow Altitude Digital (@altitudedp) and AdExchanger (@adexchanger) on Twitter.

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