The Online Video Explosion Is Driving Up Marketing Costs

ianwhealOn TV And Video” is a column exploring opportunities and challenges in programmatic TV and video.

Today’s column is written by Ian Wheal, global strategy director at Adstream.

Advertisers are spending more money than ever on video. Last year, video ad spend grew by more than 85% [PDF].

Video ads consistently outperform standard banner units, and studies have shown engagement on mobile video to be five times higher than with standard banners.

Although video may be the most effective marketing asset today, there’s another fact about the video explosion that’s less worthy of celebration: Video is raising marketing costs.

Video Creative Is Expensive, Especially When It’s Wasted

As video becomes table stakes for brands and marketers, the cost has skyrocketed. Creating high-quality, engaging video content is inherently expensive. Prone to reshoots, rewrites and disagreements over post-production strategy, original video ads are notoriously challenging to produce. This is why setup costs for domestically produced video content could reach new highs by the end of the year.

Most marketers are fine with the cost, given the potential ROI and brand lift with consumers. But, remarkably, many video ads – despite the cost of production – are never run.

One-third of marketing assets – including video – go unused, according to IDC. This is a frustrating workflow problem that stems from the explosion in video content that may be lost, forgotten or abandoned.

Video Needs To Be Multichannel – And Each Channel Has A Cost

Today, there is no such thing as a single-channel strategy. In the US alone, adult consumers spend more than five hours across digital screens and more than four hours across traditional linear television.

With multichannel campaigns now necessary, video has become the most popular way to drive campaign engagement across channels. Programmatic has also played a role, making the buying and selling of multichannel video ads less complicated and fueling its adoption. This is why, in 2017, 65% of all US video ad spend will be transacted programmatically.

However, multichannel video advertising can be pricey for a simple reason tied again to production: Video spots and creative are not easily ported from one platform to another. Video files and effective video content differ by channel. What works as a video ad on Instagram doesn’t work as an ad for OTT or mobile web.

As consumer consumption fragments, creative must be built from the ground up for each channel, or meticulously adapted to the specifications required at its destination (the IAB, 4As and ANA recently teamed up to address these challenges).

Snapchat is one of the best examples. As an advertising platform, Snapchat has forced brands and marketers to reorient how they think about aspect ratios for video ads. Vertical video is now popular and forcing the industry to “rethink everything.”

This degree of new thinking, ideation and production per platform costs money. Having to do this across many channels – social, mobile, OTT, video on demand, web and more – only drives costs up for marketers. Meanwhile, new and popular channels pop up daily.

Copyright Costs Are Rising For Video Ad Creative

For all advertising creative, copyrights for content must be cleared at every stage. Video content is far more complex than other forms of marketing, and the rights and royalty management challenges are magnified simply due to its multiple creative elements, including audio and imagery.

With the overall proliferation of media channels, formats and delivery models available for advertising campaigns, millions of pieces of video content are developed and distributed each day. Every piece of creative carries specific terms of use and complicated contract variables.

Brands can be subject to legal liability for accidental licensing and usage violations, and they also have to pay for the legal costs of contract reviews, dispute resolution and litigation. As video has become the go-to media for advertisers, legal costs will only continue to grow. 

Although video will take a higher portion of marketing budgets than traditional advertisers are used to, its power and benefits typically outweigh the time, money and labor. But marketers need to optimize ROI, accounting for the challenges that accompany the rise in video ads that are driving up costs.

Follow Adstream (@_adstream) and AdExchanger (@adexchanger) on Twitter.

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1 Comment

  1. Steve Orosz

    Until you can actually prove that a viewer stayed in front of the screen for a 30 second video ad to completion…. it is a guessing game like panning for gold.