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.
This is a guest post by Samantha Merlivat, a researcher serving Marketing Leadership professionals.
Forrester’s Western European Online Display Advertising Forecast projects that online display advertising spend will rise at a CAGR of 10.3% between 2014 and 2019, jumping from €7.3 billion to €11.9billion. Two factors will account for the double-digit growth rate:
Mobile display will pick up quickly over the next five years, with tablet taking off full speed in virtually every European market. With their larger screen real estate and growing role in customers’ path to purchase, tablet-based ads will grow at a 40.5% CAGR over the period, attracting a third of total online display revenue by 2019.
Video and rich media formats are also growing strong. Video in particular will increase 20% annually over the next five years. Attracted by the higher opportunities for story-telling and building engagement, marketers will be willing to invest higher CPMs in these formats.
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.