The data-driven future of online video advertising is here

Andrew Moore is European MD of SpotXchange, the online video ad marketplace and formerly head of trading at Aol Loading... companies aol UK -- he's speaking at our next Market Briefing event on digital display on February 3rd and here writes about why getting video ads right matters so much...

As online video moves into maturity, the industry must broaden its ambition to realise its commercial potential.

The most recent figures from the IAB / PwC show that spend in online video continues to double every year and is showing no sign of slowing down. But what is interesting is that this spend is overwhelmingly pure brand activity, the type of advertising that is not commonly associated with online advertising.

So why has online video succeeded where online display has struggled and what is driving this growth?

The answer comes from an unlikely source – traditional media. More than anyone else, TV planners and buyers in advertising agencies have successfully transferred brand budgets (from TV) into online via video on demand (VOD).

This was the first revolution in online video advertising (let's call it Video 1.0) where TV planners and buyers successfully leveraged their client relationships and created a significant new market in online advertising.

They avoided the pitfalls of online complexity and jargon that display fell into and they persuaded brand advertisers - the toughest nut to crack - to move budgets online through a simple message of driving incremental reach.

This messaging was delivered from the inside, from TV planners that spoke the same language as their clients and who understood their particular needs.

Creative formats were another key pillar in this transition. When advertisers invest heavily in a piece of creative (in this case, a TV ad), the ability to re-use them in another medium is compelling and this is exactly what has been happening.

You can of course argue that it is better to create ads specifically for the medium but very rarely do you hear debates about the effectiveness of online video creative as you do with display.

Then again, click-through rate (CTR) was never viewed as a valid metric for this form of advertising. The metrics brand advertisers typically favour relate to audience reach and frequency of exposure. As online video followed a TV format with the ad running ahead of the content, it was seen as interruptive with a 100 percent opportunity that viewers would watch.

But brand advertisers looking to extend the reach of their TV ads could do so with names they knew and trusted such as ITV or Channel 4 Loading... companies channel-4 .

As a result, the overwhelming majority of ad spend in online video sits with these broadcaster sites. Broadcasters should be rewarded for the innovation they havebrought to this space and for their investment in programming.

However, whenyou look at online video consumption in the UK, less than 5 percent of videos viewed are from UK broadcasters – consumers overwhelmingly prefer to watch shorter video clips (known as short-form content) over full TV programmes.

The assumption is often that short video clips are low quality user-generated content (UGC) but the simple fact is the web is awash with highly engaging, high-quality video that is brand safe. The long-tail concept now equally applies to online video and this delivers the scale required to deliver mass audiences. Approximately 37 million UK adults watch online videos each month.

So what should happen now?

For online video to build on this foundation and fulfill its potential it needs to look beyond the obvious buying points. However, we believe we are beginning to see the start of a second online video revolution.

Video 2.0 is all about reaching key audiences at scale and has been made possible by the rise of the online data economy. We now have the capability to identify and target key audiences online using both first and third party data.

As a result, this is giving rise to a true GRP (gross rating point) where an advertiser can define an audience on their own terms and an agency can deliver reach and frequency against that unique audience.

Just as BARB delivers overnight TV ratings, research and measurement companies like comScore and Nielsen can now audit online campaign delivery and audience level and provide independent third party verification.

In time, this will foster the advent of an online ratings system as a trading metric where advertisers only pay for the ratings that are delivered – just as they do in TV.

We believe video will continue to play a key role indriving online innovation. SpotXchange has been one of the pioneers in developing real time bidding (RTB) for video, which is starting to gain traction in the UK and just like in display, this will revolutionise the way media is bought.

The scope of opportunity for video is great but as an industry, we must broaden our ambition to fully realise this potential.

Andrew Moore is speaking at our Market Briefing event on Feb 3. SpotXchange is a commercial partner of that event.