With inflation looming, questions remain about the impact on marketing budgets and the media distributors relying on advertising revenue. The good news is, for video adverts at least, business is booming. Global video advertising spend is projected to reach $180.40bn in 2022, a growth rate of 20.1% (Statista), with video the top media format for advertisers for the third year in a row (Hubspot).
So you can consider your monetization options, here's a look at the market trends, attribution challenges, and where advertisers are focussing their attention.
Video advertising grows in popularity.
The good news for content owners and distributors is that video advertising opportunities are only increasing. Across digital advertising spend, video remains one of the fastest growing channels for marketers. PwC’s IAB Internet Advertising Revenue Report reveals video was up 50.8 percent in 2021 compared to 2020, leading to revenues of $39.5 billion (Advanced Television). This trend is true for both long-form and short-form video content: Hubspot's 2022 Marketing Report reveals marketers are looking at a wide range of distribution channels, including YouTube, TikTok, and Facebook.
Marketers are paying attention to the opportunities for increased engagement and demographic targeting, as well as the potential to innovate with increased interactivity. This attention means healthy prospects for producers or distributors looking toward advertising as a revenue stream.
OTT and CTV advertising opportunities boom.
The increased demand for CTV (connected TV) advertising slots means the market looks especially promising for media companies looking to monetize their content using adverts.
CTV continues to overtake linear TV as a viewing method. According to Nielsen, July 2022 saw an average of 190.9 billion minutes of streaming content watched per week. Across the month, streaming accounted for 34.8% of viewership, compared to 34.4% and 21.6% for cable and broadcast, respectively.
CTV usage has grown more than two times faster than mobile and desktop usage. However, viewing habits vary significantly by region: CTV accounted for 48% of all video impressions in North America, with a big jump down to 22% for EMEA and LATAM, and another drop to 11% for APAC (Advanced Television).
Advertisers are responding to the increased popularity of the format with target audiences. However, CTV offers other benefits, including improved targeting precision compared to linear TV. 56 percent of advertisers say their main reason for increasing CTV spending in 2022 is its ability to target audiences precisely. This capability will only grow in significance with the deprecation of third-party cookies in 2023.
CTV advertising benefits smaller brands.
The democratization of video advertising is great news for AVOD channels and providers that can't offer premium bidding spots. Advertising results are no longer limited to those with the biggest budgets or campaigns. Instead, it's easier than ever for smaller brands and providers to find each other.
However, it’s not so clear how well streaming advertisements work for large brands. Katie Coteman, Warner Bros. Discovery Head of Ad Sales for UK & Ireland, points to issues with CPMs and CPTs. “Historically,” she says, on linear TV “they’ve been paying quite reasonable CPTs. Quality CTV inventory is much higher priced.”
All this means more space for smaller brands, who can use streaming advertising to target particular content demographics without as much competition from the heavy hitters, and who are seeing improved ad effectiveness as a result. “We’re seeing studies which show [...] that when [these DTC and local brands] buy with broadcasters there’s more mass, but there always seems to be around six times greater ROI through programmatic than linear,” reveals Jaidev Kakar, Director of Advertising Solutions for CTV and OTT at PubMatic. The democratization of video advertising could lead to interesting volatility and dynamism in the FAST and AVOD bidding markets.
Marketers and agencies struggle with technology capabilities, data analytics, and attribution.
Despite the health of the video advertising market, tracking, analytics, and attribution remain urgent issues. Gartner’s 2022 Marketing report reveals that 26% of CMOs see marketing data and analytics as a top-three capability gap, and 22% are dissatisfied with marketing technology.
Accurate attribution remains the gold standard for evidencing ROI. As a result, specialist advertising technologies and third-party providers continue to grow in importance. Marketers are looking for accurate solutions for audience segmentation, retargeting, and attribution as the industry keeps rapidly propelling forwards. Streamers can expect a knock-on demand for sophisticated bidding and tracking systems.
As a result of technical challenges, AVOD advertising is still a bit messy.
AVOD platforms tend to rely on programmatic ad trading, with the exception of some big players expanding horizontally. (In LATAM, for example, cinema chain Cinepolis, which already offered a pay-per-view platform for big blockbusters, are adding ad-supported streaming options using their in-cinema advertisers). However, programmatic auctions are still in the process of undergoing standardization, and there are a lot of kinks to iron out. “Each of the different SSPs that participate in a programmatic auction for a slot [...] may be responding to that publisher in a slightly different way,” says Paul Gubbins, VP of CTV Strategy at Publica. “Bidders may not include the IAB category of the brand, or the name of the advertiser, which results in viewers sometimes seeing the same ad back-to-back in the same ad pods”. Platforms and distributors will need to do all they can to improve these stumbling blocks for advertisers to continue growing their investment in digital video.
Overall, it's a very healthy market for video advertising, and content providers can capitalize on this to increase their revenue. However, technical gaps must be addressed to retain advertiser interest long-term.