Online Video Advertising: Business Market Guide
Video advertising is one of the fastest-growing opportunities online today, as well as one of the most promising online advertising formats. The emotional draw of the television experience, consumers' adoption of broadband, and subsequent change in Internet content, capabilities, and consumption all contribute to driving this growth.
Photo credit: Kheng Ho Toh and Ron Chapple Studios mashed up by Robin Good
Despite the surge in interest in digital video by both the consumer and advertiser, there are still many components of video advertising that are confusing, making the need for standards and best practices essential. To leverage and navigate the fast growing online advertising marketplace, a basic familiarity with web video industry standards like key terminology, perfomance metrics and video ad formats has become a critical necessity.
For this reason and to address the need for greater business awareness around the potential that online video advertising offers, the International Advertising Bureau (IAB) has released an overview guide to make sense of the online video advertising business.
Inside this IAB guide to the online advertising marketplace, and to its standards and best practices, web publishers and content owners will find:
- An overview of the digital video advertising market,
- An outline of multiple video ad formats,
- A review of the basic metrics behind video advertising,
- A basic economics of video advertising, and
- A scenario of the key challenges that the online advertising industry faces today.
A Digital Video Advertising Overview
by Internet Advertising Bureau Digital Video Committee
Video Advertising Market Overview
Digital video advertising was born almost a decade ago after several seminal events, but many agree it was the sale of Mark Cuban's and Todd Wagner's Broadcast.com to Yahoo in 1998 for the sum of $5.7 billion that put digital video on the map.
During the early 2000s, as the Internet valuation bubble burst and the interactive industry regrouped, digital video progressed slowly.
As the interactive industry rebuilt, leaders such as Microsoft's Windows Media Player, Yahoo's Launch, The FeedRoom, and MSNBC's video content inched the industry forward by selling "test" programs to blue-chip advertisers who wanted to learn about the medium and gain insight. CPMs tended to run on the high-end of the TV-CPM range and inventory was limited.
At this point, many believed that the future of digital video content lay in a subscription, rather than an ad-supported, business model.
In 2005 however, growth began to accelerate quickly. An explosion of companies from networks to content providers made both premium and user generated video content available as new revenue streams. Widespread adoption of high-speed internet connections and improvements in video.
Two events served to focus the advertising world on digital video's bright future.
- First, were upfronts by major media agencies such as Starcom and Mediavest.
These were the first broadband upfronts in the history of advertising and the move proved to be transformational, positioning Starcom Mediavest as a leader in video advertising.
Clients like Procter & Gamble, McDonald's, Kellogg's and Coca-Cola allocated millions of dollars for digital video and immediately focused media buyers across the industry on the value of premium online content.
- The second transformational event occurred in 2006 with the sale of YouTube to Google. For a $1.65 billion purchase price, digital video was back on the front pages of every newspaper around the world.
Unlike 1998, however, advertisers, agencies, and publishers now had experience with online display and search advertising and were ready to expand their budgets to include digital video.
Meanwhile traditional television marketers easily understood the power of digital video's sight, sound, and motion and began to take interest in online's video advertising capabilities.
According to eMarketer, digital video grew to a $775 million segment in 2007 and the same source predicts rapid growth by 2011 with $4.5 billion in online video ad spending.
Video Advertising Operating Ecosystem
The operating ecosystem for video advertising can be complex and contains various entities, all of which play a different but vital role in the development, production and distribution of video advertising. These include:
- Web Sites and portals,
- Ad agencies,
- Research firms,
- Ad serving technology and service vendors,
- Video technology providers,
In an environment as fluid as the Internet, these roles are sometimes blurred and can be confusing. The following table lists the key video operating ecosystem entities along with a description of their functions:
With tens of millions of videos available online today and millions being added each month, consumers can view videos never before accessible through traditional mediums like television.
Consumers can effortlessly go from watching a professionally produced television show to a 10-second clip of a friend describing their first year away at college. Although this universe of content is broad and varied, the disparity of video content can be classified into three main areas:
- Premier programming: gives users professionally produced content, generally, re-purposed from broadcast video and cable networks.
There is a large amount of professionally produced video that has not been digitized but is quickly working its way online.
- Professionally-generated specialty programming: video content professionally but generally created for a specific subset of online video consumers.
Whether it is original content for the web or content from traditional media like local news or community events, consumers are searching for and consuming video content relevant to their micro interests.
- User-generated video: consists of clips created and uploaded by everyday people and make up the largest volume of videos available online.
Generally, the majority of these clips are watched by a small group of users but due to viral word-of-mouth messaging some become extremely popular and are viewed by millions.
While these categories may vary in production quality, time length, and resolution, consumers are drawn to each category for different reasons and a variety of video ad products have been developed to best fit each of these different experiences. See the video ad product compendium section below for more information.
Video Ad Product Compendium
In May 2006, the IAB broadband committee (now the digital video committee) defined a video ad as a commercial that may appear before, during, or after a variety of content including streaming video, animation, gaming, and music video content in a player environment.
This definition included "broadband video commercials" that appeared in live, archived, and downloadable streaming content.
Since 2006, both the experiences and consumption of video content has evolved significantly. While the 2006 definition of a video commercial is still relevant today, newer video ad formats have been introduced to compliment these emerging types of video experiences and environments.
Through 2007 and into 2008, the most common digital video ad experiences were either viewed within or around "in-stream video", "in-banner" or "in-text" formats.
- In-stream video is generally played or viewed from a video player like a client browser.
- In-banner video is generally displayed in IAB Universal Ad Package (UAP) banners.
- In-text video is generally user-initiated and triggered by relevant highlighted words within content.
Due to the fact that in-banner video advertising and in-text is generally tracked and operationally supported as a rich media advertisement, the major focus of this document will be on in-stream video advertising.
While these three video ad types currently make up the majority of video ad inventory, there are other available methods of triggering a video ad experience, including brand integration like sponsorships and branded content.
Another area of innovation in video advertising is to advertise entirely outside of the video all together, or within the perimeter of the video, leaving the video stream ad-free - this practice is generally referred to as an advertising "skin".
- In-text video advertising is similar in that it does not require video content to deliver a video ad.
- In-text video highlights words and phrases within the text of web content and links the word to a relevant video advertisement. See example 3 in the video examples section below.
In-Stream Video Advertising
There are two core video ad product categories in today's in-stream ad experiences. These are, "linear video" ads and "non-linear video" ads:
- Linear video ad: is presented before, in the middle of, or after the video content is consumed by the user, in very much the same way a TV commercial can play before, during or after the chosen program.
One of the key characteristics of a linear video ad is that the user watch the ad instead of the content as the ad takes over the full view of the video.
Examples of linear video ads include:
- A traditional repurposed 15 or 30 second TV ad
- A purpose-built digital video ad product with interactivity inherent within the core video product experience
- A full screen display ad or bumper ad viewed within a video player
Because a user cannot experience the intended video content during a linear video ad impression, the ads are either placed before the content (also referred to as pre-rolls), between the content, or after the content.Note: the term "pre-roll" is also regularly referred to as a 15 or 30 second spot, but in this document "pre-roll" is used consistently as a description for the placement of the ad which is preempting the start of the video.
- Non-linear video ad: runs parallel to the video content so the users see the ad while viewing the content. Non-linear video ads can be delivered as text, graphical ads, or as video overlays. Common non-linear video ad products include:
- Overlays which are shown directly over the content video itself
- Product placements which are ads placed within the video content itself
Both linear and non-linear video ad products have the option of being paired with what is commonly referred to as a "companion ad".
- Companion ads: commonly text, display ads, rich media, or skins that wrap around the video experience, can run alongside either or both the video or ad content.
The primary purpose of the companion ad product is to offer sustained visibility of the sponsor throughout the video content experience.
Companion ads may offer click-through interactivity and rich media experiences such as expansion of the ad for further engagement opportunities.
The video ad products that publishers and vendors sell to media buyers are generally a combination of linear, non-linear and companion ad products packaged together in a compelling way.
Popular combinations of in-stream ad formats include:
- Linear ads (A) + Companion ads (C)
- Non-linear ads (B) + Companion ads (C)
In-Stream Video Examples
The following section illustrates examples of different in-stream ads and combinations:
1. In-Stream Video Ad Example
In MSN's video player example to the right, a linear video ad plays before the video content and is accompanied by a clickable, expanding 300 x 250 display companion ad product.
2. In-Stream Video Ad With Skin
In this example by heavy, a 1020(w) x 620(h) ad unit surrounds a video for the duration of the program and actually becomes part of the viewing experience.
3. In-Text Video Ad Example
Vibrant media's screenshot to the right shows a user mousing over a relevant word which triggers a relevant video advertisement.
4. In-Stream Video Ad Overlay
5. In-Stream Video Ad Overlay
In this screenshot, Yahoo! offers a non-linear overlay that is triggered by the user mousing over the video advertisement content. This overlay communicates a call to action to the user.
6. In-Stream Video Ad Overlay
This screenshot illustrates a non-linear overlay ad format with an accompanying companion ad to the right of the video.
The core metric used for currency in digital video advertising is a "digital video ad impression", also referred to as a broadband video commercial impression as described in the IAB's broadband video commercial measurement guidelines released May 2006.
In 2006, the IAB's broadband committee and measurement task force developed a set of broadband video commercial measurement guidelines.
Specifically, these guidelines determined at what point a video commercial is counted by defining a video ad as a commercial that may appear before, during, and after a variety of content including streaming video, animation, gaming, and music video content in a player environment.
The key point to this guideline is that the video impression is measured at the latest point possible in the delivery of the ad creative to the user's browser, which is the closest opportunity to see by the user.
The 2006 measurement guidelines are still the basis for the currency of video buys in 2008, specific to in-stream, linear and most non-linear video ad products.
In the future as the IAB embraces new non-linear ad formats into the mix of standardized video ad products, careful attention will be paid to determining the proper currency metrics for these new formats where appropriate.
Other non-currency measurement metrics exist today but because of the amount of innovation in the medium, none have become standard.
General Business Overview of Video Advertising
The buyers of digital video advertising include the interactive and traditional ad agencies and extend to major marketers, long-tail marketers and resellers. For the most part, digital video advertising buying mirrors other media buying behaviors.
Today, most buying of digital video is being done by interactive agencies on behalf of the major marketers. Traditional agencies and buyers of traditional media have lagged thus far, but are entering the marketplace. Progress at agencies where digital buyers are working closely with traditional buyers presents a powerful model for the future.
The sellers of digital video advertising range from the largest portals and media companies to the most specialized user-generated content sites on the web.
The major online portals and broadcast media companies comprise the bulk of the video traffic and all have made strategic moves in both the content and technology space to insure their leadership positions.
The smaller content sites generally use both direct sales and/or network sales strategies to fulfill their inventory needs. To take advantage of incremental video advertising revenue many websites are now choosing to deploy in-text video advertising within their content pages.
Current pricing practices in digital video suggest that the medium is quickly maturing.
CPM-based pricing is the predominant model for buyers, particularly the In-Stream, Linear Ad format (pre-rolls, post-rolls, etc).
CPMs can span a wide range and are based on a number of factors including the quality of the site's content and users, targeting capabilities, and individual programming.
These buying models are helping to bring large, direct marketing advertisers into digital video and long-tail marketers or "mom and pop shops" that have not had a place in the medium in the past.
Many brand-based advertisers believe the CPA and CPC models lend accountability to brand-based advertising where other media have traditionally struggled.
Current Industry Challenges
There are many components of digital video advertising that have yet to be standardized, including creative units and new metrics.
While the video industry is still relatively young, the IAB digital video committee recognizes the importance of simplifying the buying and selling process as an impetus for further long-term growth.
The following have been identified by the digital video committee as current key challenges:
Key Digital Video Product Terminology Recap
About the author
The IAB digital video committee is comprised of IAB member companies who are committed to creating and implementing a comprehensive set of guidelines, measurement, and creative options for interactive video advertising. Additionally, the committee will educate markets and agencies on the strength of broadband as a marketing vehicle.
Internet Advertising Bureau Digital Video Committee -
A Digital Video Advertising Overview - badboo
Video Advertising Market Overview - golloween
Video Advertising Operating Ecosystem - Rainer Junker
Content Experiences - SSilver
Metrics - Alex Bramwell
General Business Overview of Video Advertising - grki
Reference: IAB [ Read more ]
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