When Margins Attack: The Impacts of Video Supply Deficit

According to the Online Publishers Association, 80 percent of consumers recall watching at least one video in the last week, and 46 percent of them took some action because of it. With those levels of engagement, brands are investing in online video advertising more than ever.

With so much money on the table, publishers are jumping at the chance to cash in. Adding original video content to a site is a great way to increase engagement while adding massive revenue potential, but the unique skillset and resources required to produce quality video content are uncommon if not rare. As a result, video inventory has been slower to grow than that of display and mobile. Because video demand is greatly outpacing supply, unexpected strains are pressuring the buy-side to adapt.

This supply-demand imbalance is driving what has become an unfortunate trend for digital publishers. Such limited video inventory on the market is driving some advertisers to purchase display traffic for impressions of their video creatives. The lower cost of display traffic further incentivizes this behavior. Thus, buying publishers’ ad space as display and then reselling it as video has become a very lucrative, albeit shady, business in ad-tech. The person who benefits the most is the middle man who collects a margin based on the difference of what he has paid and what he is collecting for the space.

While technically rendering muted video creative in display tags is not a violation of IAB policies, autoplay and auto-audio video ads are. But what’s the real consequence for breaking a rule when there are no police to catch you?

To say the problem is rampant is not an overstatement. At least one in three publishers in our network has run into this problem. While it may seem like this phenomena is just an annoyance, the effects of this loophole aren’t to be shrugged off. Sneaking video into display units have implications on publisher revenue, site load time, user experience, and can even result in blacklisting by video networks. Most of the leading exchanges, supply-side platforms, and other supply players have systems in place to prevent unwanted creatives from being placed. Getting everyone to adopt the same standards is the hard part.

Nothing to Sneeze At

Publishers who don’t have a dedicated video player on their website are often surprised at the difference between display and video revenues. While display usually pays between $0.20 and $3 per 1,000 impressions, video CPMs are usually two to four times higher. That said, when video creatives lurk their way into display units, publishers are only getting paid for a tiny fraction of that impression’s true value.

Video ads can often slow the load time of the page, particularly when they aren’t run through a player that is built to help compress load time. This is compounded when multiple ad units are loading video simultaneously. A load time increase of just one second can increase page abandonment by up to 25 percent, therefore trickling down to other important metrics like time on site, pages per visit, search ranking, and social shares.

Video exchanges are thankfully working hard to crack down on this strategy. Unfortunately, some publishers have been unfairly penalized, even blacklisted, for the shady behaviors of buyers of their inventory. The process to get this decision reversed when the publisher wants to monetize their own content is arduous, if not impossible.

A Team Effort

In an effort to recapture lost revenue for publishers, a number of exchanges are now offering “plug and play” video players and targeted content to publishers in an effort to neutralize the cost of getting started with video. Other exchanges have created demand restrictions for certain zone types, a practice that will likely become commonplace in the industry in the near future. In fact, open RTB standards now provide functionality allowing the supply side to dictate the type of content they are willing to accept.

While the supply side of the ad-tech industry fights to better regulate video and display creatives, there are two ways for publishers to protect themselves. If you happen to catch one of the culprit’s ads on your site, capture the campaign ID of the ad. Providing this piece of information enables ad partners to track down and block the ad in question. Raising the price floors for your 300×250 display tags can also help fend off video ads, as they are often served through lower tier campaigns.

Ultimately, publishers should decide if they want video content and advertisements on their site. If they do, they should look for a reputable player or supply partner and follow the video guidelines. If they don’t, they need to protect their site, identify repeat offenders, and work with the ad partners to block these types of ads.