The Future Of Programmatic And Video: An Inventory Explosion, More Blocked Ads Or Stifling Complexity?

On TV And Video” is a column exploring opportunities and challenges in advanced TV and video. 

Today’s column is written by Phil Kyle, chief operating officer at Infinitive.

Programmatic buying has been gaining traction in the video market for some time, thanks to advertiser interest and technology maturation. As a result, some industry analysts now predict the same kind of dramatic growth for video as occurred in the display market, where programmatic dominates. Indeed, something of a consensus is forming around the “programmatic will consume video” point of view.

But there are reasons to believe that video is different and programmatic won’t completely take over sales in that sphere. And the same strategic, organizational and technological challenges that made programmatic difficult as it moved beyond remnant display sales may create even bigger issues in the more complex and higher-value world of video.

The recent controversy regarding the placement of ads before “inappropriate” videos on YouTube perfectly illustrates the big-picture issues that programmatic buying presents.

Based on recent interactions with both buyers and sellers of digital advertising, I see three scenarios for programmatic video going forward.

Scenario 1: Premium Video Inventory Explosion

For advertisers, the scarcity of premium video has long been a significant constraint. They certainly want to buy more video ads to reach their target audience, but the inventory hasn’t been available. To state the obvious, there is no need for real-time bidding when all inventory has been sold. Remnant inventory, the sale of which first prompted programmatic to become a factor in display, doesn’t exist in the video world.

For growth-seeking publishers, rising demand for video and an easier, more efficient sales process may provide an impetus for investing in new video inventory. If such inventory continues to sell well, publishers will be motivated to invest in even more video inventory.

In this scenario, all stakeholders are happy. Brands and advertisers can scale their campaigns and prices remain attractive for publishers as demand still runs ahead of supply. Such a win-win value proposition could drive the industry to overcome the tricky issues of creative delivery and measurement. It could also prompt publishers to design more efficient processes, rationalize their product portfolios and more effectively manage potential conflicts between programmatic and direct sales teams.

Obviously, this is an optimistic forecast, and adoption of programmatic for video won’t be a walk in the park. However, the potential revenue and profitability gains could drive the industry forward and help all stakeholders navigate a number of longstanding challenges.

Scenario 2: More Ad Blocking

Then again, things could get worse. If intrusive and irrelevant video ads proliferate – showing up in the middle of content pages, increasing page load times and consuming more mobile data – more consumers may be driven into the waiting arms of ad-blocking vendors.

Advertisers and publishers alike are increasingly aware of the user experience implications of aggressive ad placements, distracting formats and irrelevant context, such as diaper ads showing up on sports properties. And ad blocking obviously hurts everyone in the digital ad industry, but programmatic video could make the problem worse in the long term, even as publishers seek near-term revenue increases. Based on recent history, industry veterans may view this scenario as probable, perhaps even inevitable.

To avoid the downside risk, more publishers must recognize that just because an ad can be sold to someone or placed somewhere doesn’t mean it should be – especially if it alienates viewers by making it harder to get to the content they want. That’s the way to drive down traffic and revenue.

Premium publishers will need to balance UX concerns with revenue goals as they define their audience targeting and content monetization strategies. These are strategic considerations for senior business leaders, not necessarily ad operations teams who may be responsible for rolling out programmatic technologies.

Scenario 3: Overwhelming Complexity

It’s not difficult to imagine a world where technical difficulties, measurement questions and organizational conflicts present the same – or even more severe – challenges for video as they do for display. In this scenario, programmatic for video would gain only limited traction.

Again, industry experience provides ample evidence. Though the technology for real-time insertions and creative delivery has come a long way, rolling it out at scale with more properties is not a risk-free proposition. If insertion orders can’t be executed effectively, publishers may find themselves stuck with too many make-goods and determine that programmatic is simply not worth the effort. High error rates in placing ads on limited (and high-value) inventory greatly complicate the value proposition for programmatic video.

Measuring those ads that are served is another potential issue. What will be the standards for video viewability? What is the time threshold for users collapsing ads? And must video ads also be “hearable,” too? Or does muting by users discount the impression in some way? The industry as a whole has not proven itself very adept at tackling such questions.

Then there is the matter of channel conflict. Will direct sales teams appreciate missing out on video ad sales? Who is credited with the sale if an existing client begins to buy ads programmatically? Overlaps with linear sales must also be accounted for.

The overall complexity of programmatic could simply overwhelm publishers, even if they make sufficient investments in high-quality video inventory, make good UX decisions like placing relevant video content in sensible places on their properties and iron out the conflicts between direct and programmatic sales teams.

Bottom Line: Are We Ready For Programmatic Video?

For publishers to make the most of programmatic for video, they must understand where and how it fits into their overall revenue optimization and audience strategies. It’s important to remember that programmatic was first viewed as a way to grab low-hanging fruit and boost revenue by a few percentage points through the automated sale of low-value inventory. It wasn’t designed for all inventory, and certainly not the scarcest or highest-value inventory.

And yet advertisers are showing clear interest in buying video programmatically. Publishers will be forced to adjust, and their ability to do so thoughtfully and holistically will determine which of these scenarios plays out. As with so much in digital advertising, programmatic video is very much a “to be continued” storyline.

Follow Infinitive (@InfinitiveRocks) and AdExchanger (@adexchanger) on Twitter.

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