Thought Leadership

Can Ad Tech Capture the Next $20 Billion in Video Spend?

April 18, 2018
By Tameka Kee

In just two short years, the market for programmatic video is forecast to reach nearly $20 billion.

But buyers face a market fragmented by different ad units, video players and attribution models — while digital-first sellers face the challenge of adapting to linear TV business models like the upfronts.

Will these obstacles prevent the bullish video forecasts from coming to fruition, or will the industry develop new solutions and best practices to capture that spend?

John Peragine, our SVP and Global Head of Video, answers some of the hard questions about the potential growth of programmatic video.

Can you describe the “state” of video advertising in 2018?

JP: 2017 was a phenomenal year for digital video, and we fully expect the momentum to continue on through this year. At Rubicon Project, we saw a 51 percent increase in our video business last year, actually outpacing the overall forecasted growth rate for programmatic video, according to eMarketer.

As this year’s video market continues to take shape, we’re seeing publishers making more of their “premium” inventory available programmatically, and also adopting formats like Vertical Outstream to create new video monetization opportunities where there may not have been any before.

On the buy side, DSPs and the advertisers they represent have been heavily focused on scaling video viewers — which is partly why we saw more than 105 billion new video ad requests on our platform last year — with an eye for inventory that comes packaged as part of a clean, safe, “well-lit” deal.

So you’re saying that the latest eMarketer forecast isn’t too bullish?

JP: I think the industry can get close to $20 billion in programmatic video over the next two years, but there are a few things that need to change.

The greatest challenge our industry faces is how to make all the puzzle pieces fit together. No doubt, programmatic has gone through leaps and bounds to solve this problem, but we’re still laying the groundwork for some of the newer formats, particularly OTT and Connected TV.

The IAB has also done a tremendous job of standardizing the video industry across things like viewability and deliverability, but we still have a ways to go to help advertisers be seen, publishers get paid, and viewers be delighted.

Are there specific tools, platforms or technology plays that would help?

JP: With the case of video — and specifically OTT — it’s less about technology, and more about a shift in attitude.

Take the evolution of server-side ad insertion (SSAI) as an example. SSAI is what allows us to deliver ads as part of a “pod,” or group of ads that will run within a video stream, which was the first technological hurdle to clear in terms of monetizing OTT inventory.

Let’s say an ad break includes four slots, the first (Ad 1) and last of which (Ad 4) are sold directly to specific advertisers (Figure 1). The rules of those direct deals might block ads from competitive companies (such as an ad for Toyota running right after a Honda ad) in the same pod.

Figure 1

The remaining two pods (Ad 2 and Ad 3, respectively) could be made available for programmatic sale, but because those direct deal rules are currently not shared, the revenue opportunity that stems from potential access to tens of thousands of advertisers is often unrealized.

This impacts fill rate and keeps the publisher from monetizing a whole pod — but the solution for that isn’t a technological one — it just requires ad technology companies to share information in a way they’re currently not comfortable doing. Once this is figured out it will unleash a large quantity of the premium, brand safe, long-form content that advertisers desire.

So vendors need to just “play nice?”

JP: It’s not just vendors. Legacy mindsets across both sides need to evolve in order for programmatic video to continue to grow.

Another example is the perception of the word “programmatic.”

As an industry, we’ve worked to move beyond the instant association with low-quality, remnant inventory. Both buyers and sellers understand that shifting inventory and dollars to programmatic “pipes” yields the potential for increased access to audiences and revenue.

But in terms of linear TV — which is where many of these forecasts see the revenue growth coming from — buyers and sellers still have outdated perspectives on automation, primarily that it’s going to cannibalize their direct sales on the sell side, because buyers will be looking to get what was once sold at a premium on the cheap.

It’s up to us as programmatic leaders to help influence the business practices behind the technology, in order to capture that “next $20 billion.”

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