IX Perspectives

Video’s Steep Climb – 1H 2016

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If you’re reading this post, chances are you’ve heard the industry buzz around video, and you’ve read proclamations about how video advertising stands to grow as a dominant digital advertising revenue stream in the next few years. The data is staggering – apparently 1/3 of all online activity is spent watching a video, and it’s poised to make up 35% of all online ad spending this year.  As publishers seek to capitalise on audience consumption habits, protect the user experience, and build pages with fewer and fewer display ads, video advertising has erupted.

Quality programmatic video inventory has been a bit harder to come by. Before header, most pre-roll, attractive video inventory was locked up in direct-sold campaigns, rarely finding its way down the waterfall. If a spot did trickle down to programmatic demand, the chances that the impression matched a buyer’s audience target was slim to none, essentially making most programmatic video impressions devoid of value. Why would a buyer targeting fitness lovers serve an expensive video ad to an impression coming from a nursing home?

The header has changed that – publishers selling video through the header allow programmatic demand to compete for side by side with direct-sold buyers. If a programmatic buyer sees a valuable video impression and bids at or above the direct-sold rate card, the programmatic buyer could win the impression. This opens up a swath of inventory for programmatic demand and eliminates the frustration of attempting to purchase consistently sold out high-value video inventory.

Index Exchange started selling video inventory in late 2015 and the growth during the first half of 2016 has been astonishing. As your trusted tour guide for the Index Exchange marketplace, today we’ll take a look at how video has grown, which brands are devoting significant budget to Index Exchange video inventory, and what we expect to see in the second half of 2016.

The Index Exchange Video Market, 1H 2016

Exchange-Wide Video Spend, Impressions Cleared, 1H 2016
Exchange-Wide Video Spend, Impressions Cleared, 1H 2016

On average, video spend has grown 215% each month since January 2016. The strongest month for video in the first half of 2016 was May, with June close behind. May is typically the strongest month of the first half of the calendar year, due to Memorial Day, the kick-off to summer, and typically scaled back budgets over the summer months (June, July, and August).

Video, desktop display average CPMs, 1H 2016
Video, desktop display average CPMs, 1H 2016

A key factor driving such growth is the higher cost of video inventory. In the first half of 2016, video CPMs were on average, 3.54x higher than exchange-wide desktop display inventory. When you remove private marketplace desktop display inventory, the difference jumps to a factor of nearly 8x. Publishers, of course, price video inventory higher than desktop and marketers are willing to pay more for the more valuable advertising vehicle.

Who’s Buying All of This Programmatic Video?

In Q2 2016 nearly 5,000 brands bought video impressions through Index Exchange: 4,739 to be exact. The brands represent myriad industries and there’s a range of size – from local brands, regional dealers, to massive, big-name marketers. See the top ten brand buyers ranked by spend below. Also below you’ll find the top ten buyers ranked by average CPM.

Top Ten Video Buyers, Ranked by Spend (Q2 2016)
Top Ten Video Buyers, Ranked by Spend (Q2 2016)
Top Ten Video Buyers, Ranked  by Average  Video CPM (Q2 2016)
Top Ten Video Buyers, Ranked by Average Video CPM (Q2 2016)

As you can see, five of the ten brands that spent the most of video advertising in Q2 2016 are CPG companies: Mondelez (formerly Kraft), Nestle, Proctor and Gamble, PepsiCo, and General Mills. Hewlett-Packard, Microsoft, and Allstate typically place within the top 20 for biggest desktop display spenders, so it’s not too surprising to see these companies putting significant dollars towards our video inventory. Two brands on this list really stand out, mostly because we rarely see them on top spending lists: Walt Disney and BMW.

Walt Disney Company, of course, is a conglomerate of mass media and entertainment companies that ranks second in mass media companies in terms of revenue, after Comcast. The company includes ABC (and its subsidiaries), Disney, Vice, ESPN, and Hulu. The company clearly is a major video bull with a slew of high-production quality content. Seeing them appear on the list of top ten video spenders isn’t surprising. Its absence from the biggest display spenders suggests video is the primary advertising vehicle for the behemoth.

What Could Video Spend Look Like by Year’s End?

I mentioned earlier that video spend has grown, on average, 215% month over month since January 2016. Don’t ready the death knell for desktop display just yet: that too has grown 104% on an average month over month. Bear with me, as this is an aggressive projection, but if this growth rate continues through the end of the year, the breakdown of desktop display spend to video (mobile and desktop) spend will look dramatically different. By December 2016, video spend would account for 69% of the pie.

Desktop Display, Video - Share of Exchange Wide Spend (Projected, 2H 2016)
Desktop Display, Video – Share of Exchange Wide Spend (Projected, 2H 2016)

As more publishers use the header to sell their video inventory, more programmatic buyers will have access to high-value, once locked up programmatic inventory. Buyers will gobble it up – they’ll have more chances to reach the audiences they need with high-impact, memorable spots. Publishers should identify header and video as a cost-saving tool – without the waterfall, video ad serving costs plummet. Publishers can reduce the amount of ad glut on their pages and rely on video to pay the bills.

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