The video advertising industry has experienced rapid growth over the last 5-10 years, spawned from the increasing popularity of the format. During this time, it’s become awash with intermediaries, all trying to claim their slice of the cake. Many of these middle men have taken that slice without contributing to the publisher, advertiser, or viewer in any valuable, tangible or measurable way.
When we look back the video ad-network arbitrage model circa 2011, we see a simple model for programmatic advertising that’s done a job, but that’s lacked the necessary measurement and invalid traffic detection required today.
It now seems we’ve gone from one extreme to another, with a plethora of intermediaries filling every possible space, and yet the solution for quality video advertising has not yet been achieved. We’ve reached a point of reckoning. The middle men who aren’t contributing or performing will be vanquished in 2017, leaving a trail of destruction.
The ad tech apocalypse is upon us, here’s how we got there and who will survive it.
The video ad-network arbitrage model
This is the year video advertising started becoming popular. The biggest problem was that there wasn’t enough pre-roll (an ad before the content). This stunted the growth of early video ad platforms. So with display advertising getting cheaper and cheaper, brands and agencies bought ad slots on web pages originally designed for display banner ads. As these slots are inherently smaller, generally muted and not as obvious to a user, they were far less effective than pre-roll. Thus, in-banner video was born, bringing with it a multitude of problems that Tubemogul called out at the time.
The video exchanges didn’t do any dynamic analysis or fraud protection at the time, so buyers didn’t know if they were buying real pre-roll or in-banner. This Adexchanger article on the subject divulges more.
Video ad networks soon followed, white labelling these same platforms to create in-banner video ads, and then selling it back to platforms. These platforms like Liverail loved it, as it gave the plausible deniability as to where the inventory came from, and made them grow enormously.
In 2012, some video Ad networks were making 300% margin.
Cut to 2017:
Let’s jump to the present, and take a look at what has happened since:
There are now hundreds of companies arbitraging, all buying and selling to each other - just take a look at any of the many lumascapes of the ad industry that further illustrate this point.
All the 1st generation video SSPs have been bought, and cleaned up their acts (in Liverail’s case completely closed), so there’s nowhere easy to sell it.
3rd party vendors now exist to show what is in-banner from real pre-roll, creating transparency.
Facebook is the king of in-banner, and can demonstrate a clear ROI. If you want to buy it, you go there.
Ghost sites and fraud paid-for traffic are easier to detect.
Advertisers are demanding clawbacks on media buys that are flagged as fraudulent by the vendors.
Average 90 day payment terms means that they carry large liabilities
The CPM prices have dropped now advertisers know what they’re buying
Zero-sum game. All the growth in ad spend is going to Facebook & Google -AKA the walled garden - not to the open web.
Disintermediation, with advertisers going direct to publishers for the best inventory.
Having spoken to many publishers, their average margin in 2016 was 20%!
All this adds up to a rough 2017 for the all the middlemen, who are now scrabbling to rebrand themselves video SSPs with a “proprietary exchanges” and “patented algorithms”.
If you are a publisher with quality inventory then don’t mess around, get on one of the big video SSPs, and do PMP deals directly with brands & agencies.
The only tech that publishers should be using, is that which creates more of, or adds value to their existing supply. It’s never been easier to sell it yourself.
If you are a middleman, then create something of real value. Solve a real problem for publishers, not just an inefficiency.
If you’ve been watching the market for the last few years you’ll have noticed the lay offs, the acquisitions and the negative media attention aimed at programmatic. And the reasons won’t come as a shock:
Arbitrage / less inefficiencies in the market to exploit.
The wrong approach to mobile
Old display exchanges missing the boat on video
Lack of unique data
Innovating in the auction not the format - actually solve a problem, not an inefficiency.
Companies to watch in 2017 will be those that can keep steady growth, get a grip on their spend
Whilst we have made incredible inroads to detecting fraud, viewability and creating transparency on the buy side, there are still unknown factors across emerging formats that need to be addressed, and there is threat posed by those still haggling their way in, without the required expertise.
Old display exchanges providing liquidity
The old display exchanges coming into video advertising but without the experience, or understanding its nuances and how to guard against fraud. Video is a shared & embedded around the web. With limited experience in how to deal with this, these old display SSP/Exchanges are already responsible for far more fraud than dedicated video platforms like SpotX.
It’s still a real wild west out there, the verification vendors haven’t yet developed adequate solutions. There are plenty of hacks to make ads autoplay on mobile browsers, and plenty of obnoxious unclosable ad units coming out to clog users screens with obnoxious unskippable ads.
Who will survive
Surviving the ad tech apocalypse will come down to being unique, contributing value to publishers, advertisers and users, and having the conviction to offer proof. If you’ve got a strong business that’s presenting something unique, and innovating the formats and channels rather than how they are sold and you’re able to differentiate yourself in a commoditised market - you’re in with a real chance.
Tick the basics: highly quality, highly viewable, fraud free.
Have defensible tech & direct partnerships
Cut through the noise with clear buzzword free messaging.
Transparency is a must. Advertisers are sick of being lied to, they’re sick of fraud and sick of inefficiencies. Publishers need viable ad formats that ad value for their audience and as for the viewers - they just want better experiences.
We’re seeing a move to buying based on audience targeting and engaging metrics. We’re also starting to see mobile video ascend the ad revenue rankings. But to survive in ad tech in 2017, you'll need to:
- facilitate measurement
- develop and or enable appropriate and creative ad formats
- target audiences
If you can't add value and help enable a sustainable ecosystem, your spot in the food chain will become obsolete.
If you liked this post we recommend: