Digital video series: What is the future of online video advertising and will it take over from TV? The Drum catches up with a cross-section of the online video industry to discuss the evolution of online video advertising. As part of The Drum’s latest digital media supplement, focused on the opportunities of online video, we are publishing a series of articles exploring a range of topics, from how to produce effective branded content to the challenges of video real-time bidding. In today’s article, we ask: What is the future of online video advertising and will it take over from TV? As for whether digital video will take over from TV, I think digital video is more likely to take budget spend away from other mediums, such as print, outdoor or digital display, rather than TV. Our recent 2013 UK Digital Video Advertising report gives a clear indication of where things are headed in this space. As with any development within advertising, including the future of online video advertising, it depends on the audience. The future of online advertising is intertwined with how the video on demand (VOD) market develops. I don't believe however, that TV will ever stray too far from the centre of campaigns, as it can still draw large crowds and produce high volumes of impressions from a marketing perspective. TV will always have its place, but will come under increasing pressure to become more accountable, especially with the advent of connected TV. It is essential to understand that they are different mediums, using similar ad formats, that should be complementary to one other, like any other type of media. The future of online video advertising will focus on addressable media – the ability to target people based on their age, gender and interests. The winner will be the player that can generate the most efficiency – providing the right message to the right audience at the best price.
Data will define the future of video advertising, playing a role before, during and after ads are seen by the consumer.
Online video won’t take over from traditional TV per se, it’s not simply a case of one medium replacing another. With constantly improving streaming capabilities on smartphone and tablet devices, including rising 4G network subscriptions, consumers are watching video content on more than just their TV.
Online video advertising won’t kill TV, although as more and more content is viewed on smart TVs there will obviously be a shift. Much of that action happens on YouTube, which owns a huge chunk of the digital video ad market, but probably won’t capture much more in the coming years. Here’s what the market looks like today — and how it will take shape in the years to come. Video streaming giant YouTube will generate $1.1 billion in video ad revenues in 2014, according to eMarketer.
There’s a reason YouTube will attract more than $1 billion in video ad dollars this year: The site has a greater effect on consumers’ purchasing decisions than Facebook, Twitter, or Google+, according to a September report on social media advertising from AOL Platforms. After tracking 500 million clicks and 15 million conversions during early 2014 using Convertro’s attribution technology, the report authors determined that YouTube is the strongest of the social networks at introducing new products (the first stage of the purchase funnel) and closing sales (the last stage of the funnel). Private marketplaces account for some of that adoption, with 32 percent of publishers running private video ad marketplaces, up from 20 percent last year. While domestic digital video ad spending reached $2 billion in 2011, Forrester predicts that figure will rise to $5 billion by 2016. Many large Web companies are already rapidly increasing their production of digital video content.
MDG Advertising, a full-service Florida advertising agency with offices in Boca Raton and New York, NY, specializes in developing targeted Internet marketing solutions, exceptional creative executions and solid branding and media buying strategies that give clients a competitive advantage. Our core capabilities include print advertising, branding, logo design, creative, digital marketing, media planning and buying, TV and radio advertising, customer relationship management, inbound marketing programs, public relations, Web design and development, email marketing, social media marketing and SEO. Marketers will spend more than $1.4 billion on mobile video ads this year, or close to one-quarter of total digital video ad spending, per eMarketer. Marketing, advertising, communications & public relations trends, statistics, charts, graphs, infographics, presentations, and video that are not published to the e-Strategy Internet Marketing Blog or to eStrategy TV. David Erickson, VP of Online Marketing at Minneapolis Public Relations firm, Karwoski & Courage. Facebook, Instagram, and Twitter have all introduced new digital-video ad products.A Social video offers several major advantages from an advertiser perspective, includingA huge built-in mobile audiences, advanced targeting, and native-style ad units.
Our BI IntelligenceA INSIDER Newsletters are currently read by thousands of business professionals first thing every morning. Our subscribers consider the INSIDER Newsletters a "daily must-read industry snapshot" and "the edge needed to succeed personally and professionally" a€” just to pick a few highlights from our recent customer survey.

With our full money-back guarantee, we make it easy to find out for yourself how valuable the daily insights are for your business and career. Online video ad revenue will reach nearly $5 billion in 2016, up from $2.8 billion in 2013, while TV ad revenue will decline by nearly 3% per year during the same time period.
Video ad views exploded in 2013, topping over 35 billion views in December, averaging over 100% year-over-year monthly growth during the year. Online video ads are significantly more expensive than other formats, but prices are steadily declining as more publishers rush into video, and placements open up. Video ads have an average click-through rate (CTR) of 1.84%, the highest click-through rate of all digital ad formats. Viewability, the question of whether video ads are actually seen by multitasking online viewers, has emerged as an issue, but we believe that overall demand for online video is too high for viewability to put too much of a crimp in the video ad market. Streaming devices and connected TV accounted for just 2% of online video ad views in the fourth quarter of 2013, but companies like BrightLine are experimenting with formats to grow this new niche market. Newly launched video ad platforms have been among the companies to adopt programmatic tools, including real-time bidding, ad exchanges, and advanced analytics.
Examines how video ads stack up against other digital advertising formats in terms of both cost and performance.
Looks at the issue of viewability, and explains how the problem could impact future spending on video ads. Business Insider IntelligenceA is a new research and analysis service for real-time insight and intelligence about the Internet industry. The companies that dominate digital advertising have been around for over a decade: mainly Yahoo, Google and Microsoft.
But there is a slew of new companies that are grabbing share and will soon dominate the landscape. As other forms of advertising are losing their effectiveness, digital advertising has become the new hot media. Every day, agency trading desks like IPG Mediabrands and Xaxis are using software like ours to buy ads that appear on TV content – the difference is the content is now streamed on computers, tablets and more.
Advertisers are seeing the benefits of automated buying with VOD and it won't be long before they start demanding its use elsewhere.
We are rapidly moving towards being able to effectively reach a consumer on whatever screen they are using at any given time.
This will be the single highest drive behind the development of online video advertising, and could see it take the majority hold away from TV. TV continues to be the best way to reach mass audiences and delivering high impact, but online and mobile video are very strong compliments to it. The introduction of online GRPs into the digital lexicon demonstrates a shift in the way that digital marketers are approaching video advertising, and targeting TV budgets. Linear TV’s issue of wastage, which is currently still the norm, will become less acceptable over time. There is no doubt that the proliferation of different devices including mobile phones, tablets, living room entertainment systems, connected TVs, to name a few, are fundamentally changing how people access and engage with TV and video content.
We’ll move further away from simply buying environments and focus on our specific audience and the story we tell to them. What we will see is a convergence of video media as it’s accessed through an ever increasing range of devices, it will be driven by data and differentiated by the context, not the environment in which it is viewed. Rather than take over from TV, online video advertising and TV will unite forces and become one. Additionally there are interesting second screen opportunities that can link with on demand and linear TV, so there's a lot of activity in this area. The ability to watch video content on numerous devices will continue the growth of online video advertising.
In the short term online and offline planning and buying will continue the process of convergence.
Video actually has the opportunity to complement TV as people can download video content to their phone that allows them to interact with TV programming.
It’s an exciting market for publishers, which are looking to counter declining display ad rates. The rise of programmatic buying also has enthused budget-savvy brands and agencies, and video publishers are slowly coming around to embrace the new tech. The first: proliferation of premium subscription services like Netflix or Amazon Prime Video, which don’t serve ads. Twitter is strongest at the middle stage of the buying cycle, where consumers see retargeted ads or other marketing efforts intended to rekindle interest in a familiar product.

Around 30 percent of publishers’ total video ad inventory is now sold programmatically, according to a report AOL-owned released this week.
A majority of publishers (55 percent) said they plan on starting or participating in a private marketplace within the next 12 months. Display is the biggest loser, with nearly half of ad buyers surveyed (47 percent) saying they’ve decreased their display budget to increase their video spend. The 250% increase will likely be due to higher video quality, an explosion of video-viewing media devices, growing branded video content, and the widespread acceptance of younger audiences.
Advertisers are following their lead, with ad sellers from TV and digital video tailoring their packages to media buyers. As consumption of video content on smartphones and tablets continues to grow, so will mobile video ad spend, which will more than quadruple by 2018. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensureA you stay ahead of the curve and benefit personally and professionally.
Fortune 1000 companies, startups, digital agencies, investment firms, and media conglomerates rely on these newsletters to keep atop the key trends shaping their digital landscape a€” whether it is mobile, digital media, e-commerce, payments, or the Internet of Things. Facebook is obviously prime among them, but these new growth companies also include YouTube, Twitter, Hulu, Demand Media and more. Nielsen Online Campaign Ratings gives agencies a way to make direct comparisons to TV, and products like our own BrandPoint help them act on that reporting.
However, in order to achieve this, advertisers need to be buying their media programmatically and centralising the decision-making process.
We will be creating a more effective dialogue and gaining a far deeper understanding of our viewing audience. What’s more, as consumers are plugging their digital devices into TVs to watch online video content, they’re also seeing online video ads on the biggest screen in their homes.
Part of this process is that both TV and online video mediums need to learn from each other. Online video advertising will grow into a whole new area of creativity, which we have already seen the forerunners of this year with Vine and Instagram. YouTube also proved most likely to convert users into buyers based on its own video ads alone, meaning purchasers had no exposure to a product through other social channels. Just over half of publishers surveyed now make their “premium video inventory” available for purchase through programmatic environments, up from 36 percent of publishers that did so last year.
New cross-platform measurement options are also being developed by companies such as Nielsen and Kantar.
At that point, mobile is expected to account for about 48% share of the digital video ad spend total, double this year’s share.
However what is and will always remain true is that consumers will always be interested in high quality entertaining content regardless of its source and delivery mechanic. The personalisation that advertisers are used to in the online world will sync with TV advertising.
Traditional TV has to keep up with the tracking and targeting capabilities of online video technologies. Mobile video consumption has surged 532 percent since 2012, according to video technology specialist Ooyala. The research firm expects the Google-owned site to grow its video ad revenues in line with the overall market, predicting its market share will remain relatively steady over the next several years. Today, 50 percent of brands have tapped their display budgets to bolster online video, compared to 30 percent last year; and 40 percent cut their cable budgets for online video, compared to just 10 percent last year.
The online video advertising sector has to find metrics that attract the attention of the TV planners and buyers who make their decisions on gross ratings points.
But mobile videos tend to be shorter, and have shorter, less expensive ads accompanying them, so that sector actually suppresses the overall market, eMarketer reasons. In addition, younger consumers are the leading users of these media devices, which bodes well for their continued growth.

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