How brand marketers are starting to get with the program

Search and online display advertising have proved highly effective tools for direct-response marketers and advertisers promoting an explicit call to action. And thanks to digital technologies like online ad exchanges and programmatic buying platforms, those ads can be placed quickly and easily, with very low transaction costs and highly measurable return on investment.

Those advances and advantages have helped shift millions of advertising dollars out of print publications and onto digital platforms (depopulating city rooms and magazine staffs worldwide along the way).

For brand marketers looking to tell a story that connects with customers emotionally, however, video has remained the king of all media. Its combination of sight, sound and motion are ideally suited to creating a narrative around a product or brand and associating the brand with other touch-points in consumers’ lives. That’s kept traditional broadcast and cable TV channels in the driver’s seat with respect to brand marketing dollars because they still have the largest audiences and choicest, most brand-friendly video inventory available. In contrast with other types of media, traditional TV channels still command 95 percent of the total video advertising pie thanks in no small part to brand marketers’ reliance on video.

The supremacy of television in brand advertising has also attenuated the impact of programmatic buying because most of that choice inventory is controlled by a very few number of horizontally concentrated sellers who up to now have largely kept that inventory away from open ad exchanges. Even when premium broadcast content is distributed online the ad inventory is generally sold directly by the content owner or distributor based on traditional measures of audience size, frequency and reach.

More recently, however, growth in the amount of premium video content and ad inventory available on non-traditional platforms, and pressure from brand marketers eager to capture the efficiencies and targeting ability offered by programmatic buying, particularly as audiences fragment across screens, are beginning to break down traditional ad-supported media’s last un-disrupted redoubt. (See this recent Gigaom Research report that examines audience fragmentation and digital measurement techniques as they apply to traditional television.)

According to a recent survey of marketers and agency ad buyers conducted by AOL Platforms, 48 percent of advertisers said they use programmatic buying to place video ads, including 13 percent who said they use it to place television spots. More than half (54 percent) said they expect to increase their use of programmatic buying for video over the next six months.

Fearful of being cut out of the new spending loop, some broadcasters have begun to open more of their inventory to programmatic ad platforms. Cox Media, for instance, which represents several local TV providers as well as Dish Network, recently began making inventory available on demand-side ad networks such as TubeMogul.

Indications that a major shift may be getting underway in how video ad dollars are allocated and spent are also showing up in traditional broadcasters’ top-line numbers. The most recent TV “upfront” season, when advertisers traditionally have made season-long commitments to particular shows or networks, saw total dollars committed fall by 6.1 percent.

It’s impossible to know at this point whether that downturn reflects shrinking budgets or a shift in dollars to other channels. Online multichannel network Maker Studios’ head of sales, Jason Krebs, suggested to AdWeek that marketers today increasingly view their video budgets holistically, allocating dollars across multiple platforms and screens according to their particular needs. But whatever the reason, less inventory being sold directly through the upfront market means more inventory will be available in the bid-based mid- and late-season “scatter” market, where the impact of programmatic buying is most likely to be felt.

Action in online ad tech

With more than $75 billion in total ad spending at stake, online ad platforms and ad-tech vendors are moving aggressively to position themselves to capture any shift in those dollars away from directly negotiated placements toward automated, programmatic buying and selling.

Last year AOL acquired leading programmatic video ad platform Adap.tv for $405 million. In the press release on the deal, CEO Tim Armstrong said the acquisition positions AOL “to capitalize on two clear trends in the video space – the movement of advertising dollars from linear to online video and the shift from manual transactions to programmatic media buying.”

In March 2014 Adap.tv launched its programmatic TV ad buying platform, Adapt.tv Marketplace, with inventory from nearly 100 cable channels.

Not to be outdone, Google unveiled Google Partner Select in June, which it describes as a “programmatic premium video marketplace.” That was followed in short order by the acquisition of video ad-tech provider mDialog, which specializes in real-time ad replacement and insertion in both on-demand and live video streams.

Both Adap.tv Marketplace and Google Partner Select are aimed at coaxing major brand advertisers into buying video time programmatically across screens by providing a carefully selected pool of inventory next to premium, brand-friendly content. Like the private marketplaces offered by some individual publishers, the curated exchange strategy is designed to allay the concerns of major brands and agencies accustomed to dealing with traditional broadcasters over the unpredictable context in which ads can turn up as a result of automated trading.

BrightRoll, which began as a broad-based ad network, is now focused on helping publishers build private marketplaces to attract more brand advertising across their online properties, and recently signed deals with Kellogg and Subaru for use of its ad buying software to place video ads.

Hints of shakeout?

Other video ad networks and exchanges are also investing heavily to develop more sophisticated programmatic buying and selling tools to try to capture more brand marketing dollars. YuMe, for instance, posted a $2.6 million loss for the second quarter, up from $1.1 million a year earlier and lowered its guidance for the rest of 2014 (causing its shares to plummet 10 percent in a day). The company attributed the increased loss to a 33 percent increase in operating expenses driven largely by a 65 percent increase in R&D spending to build out its programmatic capabilities.

Similarly, Tremor Video CEO Bill Day, whose shares have also been under pressure, told the Wall Street Journal in August that the company was increasing its investment in technology to “best position the company to capture the accelerating shift of television dollars to digital video and programmatic buying that is already under way.”

Traditional media providers, moreover, are unlikely to take lying down efforts by digital ad platforms to poach one of their largest revenue streams. In March, for instance, NBC Universal-parent Comcast bought digital ad agency FreeWheel for $360 million in a bid to keep brand marketing dollars within the traditional TV fold by helping them plan and execute multiscreen TV campaigns.

In a blog post announcing the sale, FreeWheel founders Doug Knopper, Jon Heller and Diane Yu said, “FreeWheel’s mission has always been to unify television advertising wherever content is viewed. To make this a reality, the industry needs an enterprise advertising platform that works on all screens, across the entire ecosystem, at scale.”