The first decade of programmatic video began in 2008 when the Interactive Advertising Bureau (IAB) released the Video Ad Serving Template (VAST) followed by the launch of the first video demand-side platforms DSP’s and exchanges.
Ten years on, we look at the promises, pitfalls and practicalities that have affected the industry.
Programmatic Video Promises
Let’s look back at the original promises of programmatic video:
Standardize the market, allowing third-party ad tags within Video Ad Networks/Exchanges/Publishers:: Indeed this helped standardize and open the market in a big way. There is now no need to integrate each partner in a proprietary way, simply implement an ad tag.
Increase yield by using 3rd parties to sell unsold inventory: 52 percent of publishers say that low CPM's are the biggest problem with regards to programmatic, which accounts for only 5 percent of revenue for a majority of publishers. The promise of increased yield wasn’t ever fully realized.
Possibility to target audiences in real-time. Indeed you can choose in real-time any target audience. Note that there is a growing concern about data quality, how accurate and updated is the data.
A fully automated process, more efficient. 30 percent of publishers described the manual work of programmatic as their biggest challenge. The reason — programmatic brought a new set of KPIs for the advertisers that publishers need to optimize against. Another miss for the promise of programmatic.
Programmatic Video Fails
Naturally, not all the promises of programmatic panned out.
The standardization, targeting capabilities and the new KPI/data capabilities that did happen were skewed toward advertisers.
The data and KPI’s became so complicated that full automation became elusive at best, while actually generating more work along the way.
Ultimately, targeting data eroded the brand equity of publishers as advertisers would end up buying audience and not sites. In short, programmatic media wound up creating far more work for publishers without a clear increase in revenues.
Along the way, the rapid rise and growth of programmatic across the industry manifested a number of other issues that impact everyone in the ecosystem, including:
Decentralization: In August 2010, comScore’s video report showed the top three publishers — i.e. HULU, YouTube and Microsoft — presented 32 percent off total ad views. Flash forward to the August 2016 report, and the top three — YouTube, Yahoo and HULU — represented only 20 percent of total ad views.
This is surprising, because we often perceive the market as a duopoly with Facebook and Google dominating, while in reality, we live in a far more decentralized market where Google is not the biggest and Facebook is not even in the top 10.
Fraud became more advanced: Unfortunately, programmatic provided a haven for digital fraudsters. Each year fraud became more and more sophisticated and expensive resulting in a strange outcome – with most of the fraud targeting premium sites rather than longtail publishers.
Header Bidding: During the past year we learned that bidding is not always done in an agnostic way (i.e. some players have a better position than others header bidding was developed as a solution to bypass it and make sure all parties compete on the same level. Header bidding might be a right step in solving the low-profit problem as it is claimed to increase programmatic revenues by 50 percent. To summarize the first decade of programmatic video:
- Most of the progress benefited the advertisers and to a lesser extent, the publisher
- The longtail grew and smaller publishers increased their revenues
- Fraud became bigger with a special focus on premium
The Future of Programmatic Video
- The balance of power is anything but. The industry will develop capabilities and tools for helping premium publishers.
- The power of the longtail will continue to grow. In most cases, the effect of your message will work as well in bigger sites as in smaller sites, in a small video player as well as in a big video player as research has often concluded.
- Facebook and Google are formidable opponents against the industry, yet as we’ve seen the non-social net is bigger than both. A possible outcome is that publishers will join forces against FB and Google. Header bidding is a step in the right direction as it presents an industry coalition (AppNexus, OpenX, etc.) against the dominance of Google’s DoubleClick.
Finally, it’s important to remember, despite all this progress in the past ten years, we are still very much on the learning curve of programmatic and still just realizing its full potential.