Up until now, paid services like Netflix, Amazon Prime, and HBO have dominated US online video viewing, particularly for long-form, TV-style content. Uptake of ad-supported, TV-style online video has been slower; traditional TV providers control much of this content, and they’ve been cautious about making their programming available outside the lucrative TV bundle. Even if many viewers want to cut the cord, they may not follow through as they realize they cannot get all the content they want. YouTube, of course, has a massive ad-supported online video business that has been growing healthily according to our calculations. However, even YouTube falls short of Netflix in terms of downstream bandwidth consumption, and its estimated ad revenue is only a small fraction of traditional TV ad revenue. For online video ad spend to show meaningful growth, consumer-generated or web-only content won’t be enough. A truly robust online video ad market will require the migration of traditional TV content to digital platforms.
This migration appears to be gathering momentum. Recently, we have seen a number of developments that could drive the uptake of ad-supported online video and that indicate that 2017 could be the year when ad-supported online video starts to make a splash.
The dictionary defines “readiness” as the state of being fully prepared for something. It is easy to compare how well prepared companies are for digital marketing by looking at their digital marketing staff strength as a percentage of their total marketing staff and at their digital marketing spend as a percentage of their total marketing spend. More-prepared marketers prioritize digital in their marketing planning. More-prepared marketers run best-in-class digital marketing programs and communicate with the customers across multiple devices. More-prepared marketers measure how well their digital programs accomplish their business goals and how channels work together to accomplish a desired outcome.
In the past, Forrester has developed tools and frameworks that help firms assess their digital marketing maturity. Forrester has now launched a new research framework: the Forrester Readiness Index (FRI) for digital marketing. This framework is a quantitative assessment that provides insights into the digital marketing environment and available opportunity for 55 countries across the globe through 23 quantitative variables.
If you are, like me, deeply involved with digital advertising, one of the industry mantras of the last few years was anything with a taste of “PROGRAMMATIC.”
Yes, you can say it with me now: “PRO·GRAM·MAT·IC.” Ahhhh.
In reality, I think that we are only starting now to truly see programmatic methods and techniques adopted by ad sellers and buyers. Finally, in 2014 we have seen marketing leaders driving their digital media buying practices forward by combining rich customer data with algorithmically driven buying platforms to make digital advertising dollars more effective in reaching target audiences. And, while there is a long road ahead of us before the robots become self-aware, there are some key trends shaping the industry that point to a more sophisticated future for media buying:
1) Budget increases - Major brands and massive holding companies have huge goals for programmatic spending. With P&G striving to buy 70% to 75% of digital ads programmatically by the end of the year, Google striving for 60% of digital marketing budget on programmatic, and what seems like an arms race amongst the holding companies to see who can spend more programmatically, the future of software-driven media buying looks bright.
2) Growth in TV-land - As marketing leaders have started to up the ante for programmatic, sellers have taken notice, specifically across video and TV. The buzz about programmatic TV is taking hold, and we are seeing a new generation of ad tech commit to solving that problem for advertisers.
With 44% of all retail sales in Europe set to be offline sales that are influenced by the Web in 2018, it's not surprising that online display advertising spend in Europe will grow more than three times faster than total advertising spend over the next five years. Forrester's Online Display Advertising Forecast shows that online display advertising will continue to cannibalize advertising spend via other channels.
Firms are increasingly using video and rich media to engage, entertain, and attract the attention of online users and to enrich their brand storytelling. The growth of mobile device adoption and usage is also changing the way that users consume content:
1.Video: Google recently stated that video had entered a fourth dimension, incorporating sight, sound, motion, and interactivity to win the hearts and minds of video viewers. With more than 100 hours of video uploaded to YouTube every minute, Google has created YouTubeNation to curate video content and grow video audiences, especially among those ages 18 to 30.
This week, Facebook announced its rollout of auto-play advertising videos – starting with a teaser for the upcoming movie Divergent. The video ads automatically start playing, without sound, when they appear. Users can click on the video to view it with sound or scroll past it if they aren't interested.
Video definitely has the future. In a blog post by my colleague Michael O’Grady last year, he revealed that video was the fastest-growing digital content category. The Forrester Research Online Display Advertising Forecast, 2013 To 2018 (Western Europe) shows that European Internet users spent 68% of their online time in 2012 watching online videos, and we expect more than 90% of the online population to watch online video regularly by 2017. As a result, video advertising will account for a third of total display advertising spend in 2018.
The drivers behind this take-off of mobile ad spending are:
Increased device ownership, particularly of tablets. Smartphone installed base growth in 2012 was more than 35%, while tablet installed base growth exceeded 120%. By 2016, tablet sales will overtake the sales of desktop and laptop PCs.
The intensity of online tablet use. Despite tablets representing less than 30% of the mobile device market in the US, they represent more than 40% of total mobile page views. In addition, the majority of tablet users watch video on their tablet, compared with about a third of smartphone users.
At least once a week I get a client inquiry wondering what is "the next big thing in interactive marketing," seeking to identify what will out-tweet Twitter or out Goog Google. Well, in his new report, Competitive Strategy In The Age Of The Customer, my colleague Josh Bernoff articulates what is next for all businesses: A disruptive shift, where the power of customers means that firms must focus on the customer now more than any other strategic imperative. In fact, the only source of competitive advantage is the one that can survive technology-fueled disruption — an obsession with understanding, delighting, connecting with, and serving customers. In this age, companies that thrive, like Best Buy, IBM, and Amazon, are those that tilt their budgets toward customer knowledge and relationships.
The zinger in this report for interactive marketers is to: Prioritize word of mouth over mouthing off. Cut your ad budget by at least 10%, and spend the money on connections that have a multiplier effect like social, devices, and content. Ads are far more effective when customers are primed to believe them.
This means that interactive marketing of the future is really focused on interactivity -- not just on pushing out marketing messages through digital channels. Three ways to get started creating more interactive marketing relationships:
Frank Gertsenberger, VP of Product Marketing for Audience Science wrapped up day one with an excellent update on privacy concerns and expected changes due to FTC and congressional work on behavioral advertising policy.
The concern is that even though data is being collected anonymously, when enough anonymous data points are collected, is an individual still anonymous?
Four entities are running concurrently to tackle this challenge:
The FTC began investigating data practices about two years ago and determined that the risk with behavioral marketing is that consumers are not aware of what data is being collected; current privacy policies are insufficient at explaining how consumer data is employed with behavioral marketing.
Congress – A subcommittee was convened last year to quantify the value of behavioral marketing in order to determine its value in the online economy. Through studies supported by the NAI (the network advertising initiative), Congress now understands this and is outlining a policy outlining what the baseline protections should be for consumers.
NAI– A membership organization which now represents more than 80% of all online ad spend, and created studies focused on answering Congress' need to value behavioral marketing. Also helps audit member sites to aid compliance efforts.
The Associations – This is a collection of online advertising associations like the DMA (direct marketing association), the IAB (interactive advertising bureau) and the ANA (association of national advertisers). This group is taking a pass at developing requirements for providing enhanced notice to consumers.
The second session of AudienceScience Summit this afternoon is a panel moderated by Quentin George, Chief Digital Officer of Mediabrands. Panelists include Dave Dickman, SVP of Digital Media Sales from Warner Bros. Television and Barbara Healy, VP of Online and Mobile Fulfillment at Tribune.
The theme of the panel was intended to address how these publishers manage their audience assets. But really the primary message I took away was that publishers are focusing on solution sells -- finding ways to sell more high margin offerings -- whatever these happen to be. I was expecting to hear more specifics about how they are working with publisher optimization solutions, or data management offerings. But it sounded instead that it was any and all efforts to create unique ad solutions, rather than just impressions.
Two points heard, one good, one bad:
1) Warner Bros talked about an alternative way to think about creative, empowering creatives to build original programming that airs on the Web and allows users to provide input into the plot and production that the program takes. This approach garnered premium sponsorship (from J&J) and helped creative resources feel a part of (and not irrelevant to) emerging media.
Coming to you live from the AudienceScience Targeting Summit in Las Vegas, a three day event for publishers and advertising talking about changes in display media and the value of targeting for both sides of the online advertising ecosystem: buyers and sellers. My presentation was part of the publisher day (Day one is for publishers, day two for both publishers and advertisers, and day three for advertisers alone) and spoke to the findings of a custom study I worked on for Audience Science earlier this year. The conclusions I shared today are:
Online advertising has significant growth in store
Audience and behavioral targeting will grow further advertiser investment in display media
And yet, advertisers still second guess display advertising value because it is so hard to take full advantage of (I walked through a laundry list of challenges online advertisers face like media proliferation, measurement challenges, $$ shifting downstream from branding to more direct sales channels, operations inefficiencies and limited staff)
So publishers must be ready to help create more automated, more dynamic, more data driven advertiser solutions to help advertisers overcome the challenges with using display today.