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The State of Advertising 2017
Video advertising revenues are on the rise, along with AI, even as industry players argue over metrics. The current buzzwords are mobile, viewability, and programmatic.
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“These demonstrate that some very large players with adjacent assets (mobile networks and subscribers, big data/marketing cloud systems) are now dialed into the advertising and digital marketing opportunity,” suggests Green. “Next, they are looking to transform the industry. In this sense, Microsoft’s purchase of LinkedIn in 2016 could be a harbinger of many more things to come.”

Increased consolidation means brand advertisers and marketers don’t have to look for multiple technology providers to solve their needs. With its move, Adobe enters the programmatic ad buying space giving customers a chance to spread their video ad bets across desktop, mobile, and TV.

“Publishers and broadcasters are growing leery of handing too much of their content, ad business, and audience to external platforms,” says Jonathan Wilner, Ooyala’s vice president of products and strategy. “Content providers are recognizing that having hybrid approaches, blending owned and operated with third-party strategies, is the best course of action. In doing so, an agnostic ad partner without conflicting publishing businesses, and who’s focused on driving value for them—and them alone—is critical. We’re certainly seeing that with our own customers, and it is certainly core to the Adobe and TubeMogul acquisition.”

The acquisition also drew attention to the blurring lines between ad tech and marketing tech (martech). “Quality SaaS software makes it simple for the two to integrate, supplying greater value to customers— especially when it’s a part of a larger solution set that addresses multiple needs in the market,” says Wilner.

Cognitive Intelligence Unlocks Insight

One of the prominent trends driving video ad tech M&A is the need for large amounts of consumer insight and video quality that drives programmatic personalization, engagement, and increased CPM or more video ad views. IBM and Brightcove call this “cognitive,” though it also goes by the terms “machine learning” or “artificial intelligence.”

Equity funding of AI-focused startups reached an all-time high in Q2 2016 of more than $1 billion, according to researcher CB Insights.

“We are at a seminal moment in computing. We are evolving from a mobile-first to an AI-first world,” Google CEO Sundar Pichai pronounced in October.

Iddo Shai, director of product marketing, video publishers and OTT TV for Kaltura, points to the $700 million acquisition in October of data management platform Krux by CRM giant Salesforce (a potential suitor for Twitter). “That’s a very strong combination that marketers can use to gather more data about audiences,” he says. “This year has been about marketing tech rather than ad tech.”

Salesforce uses an AI-dubbed Einstein to power marketing and sales services. It is not shy of saying that just like the arrival of the PC, cloud computing, and the mobile smartphone, “AI is going to fundamentally change the way things work, forever. AI is not killer robots. It’s killer technology.”

Capturing and managing TV/video platform data so it can be exploited by advanced predictive algorithms is becoming a key focus area for the media industry. Kudelski Group’s digital TV branch, for example, is developing algorithms to help operators understand the behavior of their subscribers, predict churn, and optimize their catalogue.

Twitter’s $150 million acquisition of London startup Magic Pony Technology in June 2016 is another indicator of AI’s growing media application. Magic Pony Technology assembled a team of experts in advanced neural networks and addressed the problem of reconstructing HD video from a compressed stream.

“The TV ad industry is rapidly evolving to become a data-driven business where cognitive science will be key to ensure proper personalization and monetization,” says Simon Trudelle, senior director of product marketing at NAGRA. “From the operation side, let’s not forget OTT delivery can also benefit from smarter algorithms to improve streaming performance, reliability, and overall QoE. And many more micro-services will tap AI for additional smarts and improvements.”

TV Still Dominates

In a global first, the Netherlands’ TV industry body Stichting KijkOnderzoek (SKO) began reporting online TV ratings data in June.

Developed in partnership with Kantar Media, the move will allow advertisers, agencies, and broadcasters to monetize beyond the main TV set and analyze viewing across smartphones, tablets, and PCs for the first time—something BARB, the U.K.’s TV industry body, has been working toward.

“Hybrid approaches to measurement are fast becoming the chosen route in many of the markets we operate,” says Andy Brown, Kantar Media’s CEO and chairman. “Our blueprint for audience measurement firmly places high quality data integration and high quality panels at the center to deliver total video.”

BARB published the second of two beta TV Player Reports in June as part of a longer-term plan called Dovetail to merge online and traditional panel viewing data. The report incorporates figures from TV player apps including All4, BBC iPlayer, and Sky Go; iOS; Android; and games consoles both live and on-demand.

Results of the reports revealed online views totaling 1.18 billion minutes a week, a figure dwarfed by the 90 billion minutes of TV/STB consumption, with Sky Sports channels dominating ranking for most live-streamed (accounting for over 10 percent of total player viewing).

“BARB is the U.K.’s only joint-industry, audited measure of viewing to online TV—you can’t get that from the IAB,” asserts Justin Sampson, BARB’s CEO. “The TVPR showed that the total amount of views on TV player apps—those by the major broadcasters who have chosen to put themselves under scrutiny of our standards—is 1.18 billion. Of that, about 15 percent is on a smartphone and 45 percent on a tablet.

“It’s not like smartphone viewing is growing really quickly and all others are subsiding. Certainly there’s a growth in viewing to mobile which we are tracking, but I might be more cautious than those with a vested interest in adding video to their mobile products when it comes to behavioural change. When it comes to watching quality content people will head toward the biggest screen they can get their hands on. The overall volume of viewing on mobile devices is 1.5 percent, and it’s not growing at such a rate that it will suddenly be 5 percent next year. We are a long way off from online dominating viewing habits.”

Ahead of Dovetail’s next stage, BARB is evaluating two data sets (from Kantar and Nielsen), with a view to implementing one of them in a future standard. “We may publish some of this data in advance of fuller merged data for which the target is January 2018,” says Samson.

Thinkbox Fights YouTube Claims

Thinkbox, a trade body backed by the U.K.’s commercial broadcasters, felt the need to counter what it called “unhelpful, misleading research trying to undermine TV” sponsored by Google.

It referred to YouTube’s claim that it reaches more 18–34-year-olds on mobile than any U.K. commercial broadcaster.

This was like “comparing a meter of gold chain with a cubed yard of solid gold,” says chief executive Lindsey Clay on Thinkbox’s website. “It ignores the fact that they spend vast amounts more time watching TV, and are so deeply engaged with TV they talk and tweet about it. It also ignores the fact that TV advertisers plan and buy across all TV, not just one specific channel.”

Thinkbox responded that 0.6 percent of video advertising is seen on YouTube; 94 percent is seen on TV, in full and with sound. For 16–24-year-olds, that rises to 1.4 percent versus TV’s 87.6 percent.

“YouTube could deliver more advertising if it monetized its long tail or stopped offering TrueView skippable ads,” says Clay. “The fact that 80 percent of YouTube’s viewing is done by 20 percent of viewers also hampers their reach potential for advertisers.”

A 2016 study by Thinkbox showed that TV advertising has greater impact than its online video counterpart. 

According to analysis combining comScore data with BARB data, broadcaster VOD stream data, and Rentrak box office numbers and calibrating this metered/census level data with the IPA’s Touchpoints study—the total amount of video the U.K. is watching increased by 15 minutes a day in 2015. TV—live, playback, or on-demand across all screens—had a 76 percent share of total video viewing in 2015.

“We need to show as accurate a picture as possible of how much TV we are watching—and where TV sits in the emerging video world,” says Clay. “With so many different forms of video out there it can be confusing, so it is important to get a grip on what is really happening. These figures show that TV dominates the video world for all age groups.”

YouTube executives suggest that Thinkbox’s study substantially underestimates both the size and growth of YouTube in the U.K., reporting that globally, the time spent watching YouTube has increased an average 50 percent for 3 straight years, and that watch time is growing at 60 percent year on year, whereas Thinkbox approximates this at 30 percent.

Thinkbox insisted it wasn’t arguing against investment in YouTube, but it was questioning “very forcibly” where that money comes from. “The direction of travel is not from TV to online video,” says Thinkbox chair Tess Alps in an interview with Campaign Live. “It’s from static text-based advertising to all forms of video advertising. We understand why YouTube would rather their growth was funded from TV rather than risk its money coming from the poorly performing, ad-blocked, bot-infested world of online display that Google plays such a significant role in.

“We have a different vision—of expanding budgets for all video advertising, within which linear TV might take a smaller share but of a much bigger cake, where its revenues also grow.”

Thinkbox suggested that YouTube/Google’s own staff members in Europe didn’t know the duration of viewing to YouTube ads nor did they completely understand how the reach algorithm (which was the origin of the 24 percent claim) had been calculated.

In November, Thinkbox issued further research. TV advertising “is six times more memorable than the next best competitor and the medium that is most likely to drive emotion, make people laugh, drive conversation and be liked. The pattern is mirrored for 15–24-year-olds.”

This article was published in the Spring 2017 European edition of Streaming Media magazine.

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