It's become a truism that media buyers eager to get into online video must grapple with a great dearth of inventory around premium and semi-premium video content.
Is the truism true?
In recent conversations with a number of video ad networks and agency execs, ClickZ was repeatedly told there's no scarcity when it comes to video ad inventory, except for a handful of top tier sites. If that's the case, what's behind claims this type of advertising is constantly oversold across the Web? And if it's out there, why aren't advertisers buying it?
Scarcity or No?
Tod Sacerdoti is CEO and founder of video ad network BrightRoll, which represents both in-stream and in-page video ads. He's heard what nearly everyone else in the digital media business has: in-stream video ads can't be bought because they can't be found.
"The general conception is that every top-tier site, or every high quality site on the Internet, has sold out," he said. "That's far from the truth."
Sacerdoti says his company consistently sells all the inventory it can get from top-tier or premium sites, but he said impressions in its "select" category of sites, including mid-tier destinations with content deemed safe for advertisers, is often left on the table. Sacerdoti doesn't want these properties identified on the record, but ClickZ can confirm the list includes nationally recognized media brands, including major news and sports destinations.
A third category of sites, BrightRoll's run-of-network tier, consists of user-generated content and other media difficult to screen for advertiser adjacency issues.
Sacerdoti said while the premium inventory always does sell out, the select tier does not. "The only time we see a scarcity is for the very high volume, short-term requests," he said, adding the company sometimes backfills ads in the select tier from buys in its run-of-network tier.
Tremor Media, another video ad network that recently signed with Brightcove, said while the top 50 content publishers may consistently sell out their in-stream inventory, there's plenty of good quality inventory lower down in the chain.
"For video ad networks like Tremor, there's enough, especially coming from the mid-long tail," said Randy Kilgore, chief revenue officer at Tremor.
Video Buyers: Few and Picky
Ari Paparo, VP of rich media at DoubleClick, estimates there are only around 20 individual buyers of in-stream inventory in the U.S. His boss, David Rosenblatt, suggested in an interview with The Wall Street Journal last week that the total number of brands appearing in pre-roll or in-stream video ads is "less than a hundred."
"There are incredibly few brands who are advertising in in-stream video," said Paparo. "But they're very serious about it. They tend to be television brands, not Internet brands...Those buyers don't want to buy remnant.
Peter Naylor, SVP of digital media sales for NBC Universal, confirms TV advertisers dominate online video.
"Most of what we sell, especially at NBC or USA or Bravo or Sci-Fi, is done in a dual platform sales environment where they're buying on-air and online," Naylor said.
And industry execs say these buyers are very picky about content -- much pickier than their online media colleagues are when it comes to placing traditional display ad buys on the Web. BrightRoll's Sacerdoti says it's become a universal standard that brand advertisers won't advertise without assurances content is completely safe. That applies even when chances are less than one percent that "a pre-roll ad will appear on a video with a girl with no shirt on," he said.
For the best-known video outlets, the tiny population of media buyers may not be much of a problem. When asked whether he's noted the video buying club is strikingly small, NBCU's Naylor shrugged.
"I guess that's true, but that's all I needed," he said. "That's a lot of relationships with top tier advertisers."
While Naylor said he expects the number of advertisers buying ads in the video frame will only grow, it's unclear exactly where that growth will come from. One group that hasn't yet involved itself in the format is direct marketers. That may seem surprising at first, when you consider direct marketers have been the progenitors of most digital ad formats, from e-mail to banners to pop-ups and even SMS promotions. The obvious reason they've steered clear of video so far is the high skill requirements and production costs, as well as the lack of a clear response mechanism. (Users can click on video, but will they?)
There are other reasons why marketers have balked at buying more video inventory. One is rights. Talent contracts still don't permit plenty of campaigns to be shown online. Sacerdoti calls that particular hurdle "a real, albeit ridiculous barrier" to the online video ad growth.
There's also the cheapskate factor. Sacerdoti says many media buyers often insist on diluting in-stream video buys with a large proportion of video banner ads on the BrightRoll network, with the sole purpose of lowering CPMs. He said the company hasn't seen a buy this quarter that didn't require at least half the impressions to consist of in-banner video.
"That's a terrible way to allocate a budget, in particular because the pre-roll unit far outperforms the in-banner unit under the performance metric of users seeing an ad, which today is the primary performance metric applied to all brand advertising campaigns," he said. "Even though it reduces the CPM, the 'M's are significantly less valuable in-banner."
A Problem of Standards
The biggest reason in-stream video advertising may not be living up to expectations on the demand side can be summed up in a single, rather dry word: operations.
Video playback works better than it used to, but the Web still lacks video ad insertion standards that can be applied across hundreds or thousands of publishers. Ads are often manually coded into publisher systems, slowing the process and creating inefficiencies in campaign and yield management.
"I don't think it's a buying problem," said DoubleClick's Paparo. "It's a liquidity problem. There's no in-stream standard for third party ad serving. The networks really aren't networks. They're spot rep [firms]. Even if you're the best media buyer in the world...without that standardization you're not going to have efficiency."
Adam Gerber, VP of ad products and strategy for Brightcove, also perceives the fragmentation of standards and ad hoc campaign management as a threat. "There needs to be an efficient way for fragmented inventory to be re-aggregated and managed on behalf of buyers and advertisers. It's a reach issue and also an ad rotation issue."
In other words, when publisher sites sell direct -- as opposed to through a network that can provide broader reach and disperse impressions -- ads can be redundant.
Another problem on the ops side is a lack of targeting capabilities of the sort that are now common in display advertising. "The general lack of targeting significantly reduces [publishers'] ability to fill," noted Sacerdoti.
DoubleClick's Paparo said he believes it's just a matter of time before the industry figures out how to create better systems to implement and target ads within the video frame. When that happens, the number and type of advertisers running these ads should increase. He noted DoubleClick and the Interactive Advertising Bureau are both working on developing ad management standards for in-stream video.
"There could be a market for the mid tail and long tail," he said. "There's no logical reason why that inventory won't get sold. There's just a little bit of a disconnect."
Kate Kaye contributed reporting to this story.
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March 19, 2014