Programmatic Video Is Trending With Marketers

joannaoconnelrevised“Marketer’s Note” is a weekly column informing marketers about the rapidly evolving, digital marketing technology ecosystem. It is written by Joanna O’Connell, Director of Research, AdExchanger Research.  

I attended “TubeMogul University” last week in California in order to get a pulse on the latest in programmatic video buying and selling and wanted to pass on what I heard in the hopes of inspiring continued dialogue among the marketing community on this topic. And while it’s tough to capture four days in just three bullets, I am going to try:

  • Marketer interest in programmatic is way up, but understanding remains mixed. While last year’s event drew just one marketer, the opinionated and visionary Gary Milner of Lenovo (who, thankfully, was back again this go-round), this year saw a massive upswing in marketer attendance. Overall numbers were still low, yes, but a 10x increase in brands is nothing to sneeze at. In speaking to them, I found a mix of programmatic practitioners who spent their days with their hands in the tools; programmatic participants, who, through agency or vendor partners were active buyers with a strong understanding of the fundamental principles; and the curious, who were not yet active but had come to the conclusion that programmatic is fast becoming a real, and critical, force in the future of digital media buying. Long and short: it’s clear there’s still an unmet need for intelligent, understandable discourse on what the business implications of programmatic are for brands. As Gary Milner noted, “Attention is the new currency. The new home page is where everyone is. And everyone is all over the web. To get all over the web you need programmatic platforms.”
  • TV thinking is infusing digital video buying, for better or worse. I found myself struck by how TV buyer-friendly digital video buying has become in a very short time.  With tools oriented toward GRP-based planning and buying and Nielsen OCR built right into the UI, it’s not a big leap for a TV buyer to start placing digital video orders. What’s worrisome about this trend, however, is that it points to a – and forgive me for saying this – dumbing down of digital buying. Reach-based buying against women 25-54?  That’s the best we can do? If video is good for nothing else, it’s great for emotionally connecting.  So, what about targeting lapsed customers? Or building a look-alike model based on the highest value loyalists? Yes, these kinds of programs are starting to show up but I am afraid not enough. I get that tapping into the $70+ billion TV spend necessitates speaking the language of TV buying, and that it’s perhaps a short term compromise in service to the longer term vision of data-driven cross platform video initiatives, but I’d love to see us push the envelope a little harder with the TV folks – how about agencies having (mandatory) seminars for TV and video buyers where each learns the ins and outs of the other’s world?  There would be some pain, but also gain, on both sides.
  • Premium publishers need more inventory to fuel programmatic video selling. For all the wild excitement about programmatic video (and I do truly believe it’s well-placed), there remains a difficult reality, which is that the economics of video ad sales don’t yet favor programmatic: premium publishers consistently sell out their video inventory via traditional, IO-based buys (with very, very high CPMs) and that leaves the programmatic video inventory stream all but dry. There was a lot of talk about the massive volume of programmatic video inventory now available, and growth charts showing strong year over year increases, but there were both implicit and explicit acknowledgements throughout the event that much more great inventory is needed to effectively meet growing brand marketer demand.  To combat this challenge, programmatic sales leads like Matt Prohaska, Programmatic Advertising Director of the New York Times are pursuing multiple concurrent strategies to beef up their company’s video inventory with an eye toward private, direct deals with high quality buyers.  That’s a good thing. But in some ways we may just be coming closer and closer to an inevitable standoff between the buy and sell sides: who will force who’s hand? Will buyers force premium sellers into more and more programmatic sales deals? Will sellers hold great inventory hostage from programmatic buyers? As with many things, we’ll probably end up somewhere in the middle with the market normalizing around a new normal in pricing and buyer/seller relationships. Sales organizations will evolve wherein there becomes a middle sales layer between “direct” and “indirect” – with programmatic powering standardized inventory at CPM’s somewhere between unsustainably high and bottom of the barrel, and marketers will use that massive volume of good, but standard, inventory to complement their high touch, custom programs.

As always, I’d love to hear what you think!

Follow Joanna O’Connell (@joannaoconnell ) and AdExchanger (@adexchanger) on Twitter. 

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  1. Joanna – Nice distillation of the key points. We work with acquisition-oriented marketers and have been helping them move dollars up the funnel with prospecting campaigns. They use a custom audience to target highly profitable “lookalikes” earlier in their consideration cycle. What is holding back the video dollars for our marketers is a more wide-spread availability of quality inventory that is targetable with their custom audience. Because of the high impact nature of the video (and higher price points, compared to display RTB), marketers are more discerning of the inventory quality.

    The “dumbing down of digital buying” is particularly troublesome when it comes to video. Relying on just a few demographics to define an audience target is woefully inefficient….lot’s of wasted impressions. At a $0.25 CPM for RTB exchange media, the wasted impressions are somewhat annoying. At a $10 CPM for video impressions, the cost of wasted impressions is massive.

    Example: If your reach based-buying of women 25-54 serves within this demo 25% of the time, then your cost per on-target impression is actually $40 CPM, compared to a 1:1 targeted solution that has very little inefficiency and produced an on-target impression close to $10CPM. Such a disparity makes video a non-starter for more acquisition oriented buyers – even for prospecting.

    I am very optimistic on the potential of programmatic video and it’s potential. We at TruSignal have developed the right tools to measure new incremental customer acquisition from video ads. However we need better access to quality inventory that is capable of leveraging our clients’ custom audiences before it becomes a core part of our recommended strategies.

  2. Joanna (Great to meet you last week)

    I agree with you about the “dumbing down of digital buying” because it forces digital to jump through offline GRP hoops that hold Reach as the barometer of effectiveness, and helps exclude online video from the upfront branding world.

    The quality and usage of digital video has increased to a point where the quality gap between a :15 digital spot and a :15 spot on TV has narrowed dramatically, but having to fit online micro-targeted impressions into an offline demo-based GRP model, could just as easily act as a barrier instead of a bridge towards connecting digital video to the upfront planning stage.

  3. Oh Joanna! Pubs don’t need MORE inventory to enable programmatic, that would just cause the same concerns pubs have with display RTB now. If pubs were smart, they’d enable RTB now – in conjunction with their direct sales strategy and let the highest price bid win regardless of where it was sold. I think pubs would see $100 CPMs on some video spots, far better than what they’re selling them for now. This gets them out of the race to discount to the big holding companies, increases the value of their inventory, and enables them to move to a more programmatic model that is even more profitable than their current model.

    I’m a buy-side guy through and through, so it pains me to give this advice (smiley) but I do think this is one of the biggest mistakes publishers are making today. Premium content providers should be the first – not last – to move to programmatic and RTB so they can watch their CPMs and profits soar.

    • I totally agree with Jay (and also thank you for agreeing to what so many publishers have known for a while)

      Why are publishers selling out of inventory? It’s priced incorrectly!

      Put all your video into programmatic and the better the quality the higher the CPMs.

      The difficulty with pricing at the moment in exchanges is that left over premium inventory is being pooled in with lower quality rubbish and as such is falling short of the price it should be sold at.

      As an ex publisher I know the deals that large buying groups/agencies are forcing publishers into. As such what they pay for their premium video inventory directly is now only slightly more that what trading desks are purchasing it for through programmatic platforms.

      At a recent publisher conference it was mentioned that publisher “brands” needed to start valuing their inventory better and taking back purchase control from buyers. At the end of the day, at certain times of the year buyers need publishers more than publishers need buyers.