Online Video Advertising



Online video advertising is a great way to promote your brand. This is not only because it is a new, exciting way to advertise, but because the online video advertising market is growing as a faster rate than search, desktop display, and TV advertising. The overall online advertising market reached $42.5 billion in 2013, and is expected to grow to $60.4 billion by 2017.

As you’ve probably noticed, there are a variety of sites with a variety of topics that you can advertise on. Many of these sites– such as YouTube– have various topics on which you can target potential customers.

There have been many studies over the past few years, which show not only the present, but the future efficacy of online video advertising. In 2013, online ad revenue reached $2.8 billion; in 2016, it is expected to reach nearly $5 billion. In just December of 2013, there were 35 billion online video ads views– “averaging over 100% year-over-year monthly growth during the year.”

Although online video advertising has traditionally been more expensive than other platforms, it has become progressively cheaper. And perhaps most importantly, of all online ads, online video advertising boasts the highest click-through rate (CTR) at 1.84 per cent.

Video ad revenue is expected to increase at a three-year CAGR (compound annual growth rate) of 19.5% through 2016. This dramatically outpaces any medium other than the mobile sector in terms of ad revenue. Traditional online display advertising is expected to grow at only three per cent a year.

As for concerns about the industry, there are a few. One concern us about whether users are actually watching or paying attention to online video ads. (One can simply turn the volume down or multitask). One study done by an ad management platform company called Vindico found that 57 per cent of the three billion ads that they studied over two months were “unwatchable.” This simply means that ads were played over other ads, the volume was turned down to an inaudible level, or there were other distractions in the vicinity. This can make it seem rather bleak for the industry.

To add to the bleakness, many online video advertisers that pay for ad impressions end up finding out that their ads are not designed or placed on the sites or videos that they intend. Here is a story, edited and paraphrased, from the New York Times. It describes the frustrations of an agency vice president in trying to get directions followed by a media buyer:

Many of the ads were running in tiny players, 3 inches by 2 inches– the company ordered 6 by 5 inches– on the sites. Some were auto-playing when it was specifically requested that they don’t. Rage began to mount when the VP read the list of sites where the ads were running; included were porn websites. Her team opened one site with an especially lewd name and there was a collective gasp. Some cursed. Ms. VanHeirseele picked up the phone immediately and angrily to call the media buyer.

Kellogg’s, the conglomerate known for breakfast cereal, found in their own investigation that nearly a third of their ads were run overseas, while they specifically instructed that the ads be run in the United States.

Also, internet technology such as the popular AdBlock, make it so users of such technology can avoid video ads altogether. Although official numbers of users who use this type of software are hard to find, owners of popular sites have done their own research.

For example, Niero Gonzalez, founder of video gaming site Destructoid, found that nearly half of his 3 million users were using ad blocking technology. Granted, Gonzalez’s site may not be the best example, as its users are generally very tech-savvy, but it still shows the prevalence of this kind of software. It is estimated that 22.7% of all web users use ad blocking software.

It is more common to see ad blocking amongst users of Mozilla Firefox and Google Chrome. It is less common to see ad blocking actions done by users of Apple’s Safari browser and Microsoft’s Internet Explorer. This ad blocking software can cost a company thousands, if not more, due to lost ad impression opportunities. Unfortunately, it’s not always mega corporations that are hurt by ad blocking– it is often smaller, independent news and entertainment sources, such as Destructoid.

On a more positive note, as of this past June, new rules were implemented by the Interactive Advertising Bureau (IAB) concerning the viewability of an ad. If one could see at least 50 per cent of the ad player for at least two seconds, that would register as a viewed ad. Previously, there were no substantial guidelines in place– for an impression, an ad did not have to be viewed at all.

Lastly, computer hackers have created bots that serve no purpose but to increase impressions upon a video. In early 2014, Tubemogul, an advertising technology company, found that three bots were generating 30 million unique hits a day, which computes to as much as $10 million a month. The hackers who do this are likely stationed overseas and are hard to track down. Obviously, they have monetary reasons for conducting such obtrusive actions.

To get back to the viewership of online video advertising, even in the fourth quarter of 2013 it was estimated that connected TV and streaming devices (like Roku, Google Chromecast, etc.) accounted for just 2% of online video ad views. This is important because it shows the way in which people watch online video ads.

With the advent of complex, algorithmic tools such as programmatic ad buying– which can be read about in more detail here— the marketplace is becoming no easier to understand. Thus, it is necessary to become an expert of sorts to some extent if advertising online.

Nevertheless, it is clear that while the industry for advertising is shrinking in many sectors– such as in the newspaper, TV, and radio industries– there will be a sharp increase in demand in industries such as the search engine, display ad, and especially the mobile sectors– along with, of course, the online video ad sector.

To give a little history of online video ads, they have been around for about a decade. They didn’t become so popular and ubiquitous until the beginning of this past decade, however, as video sites like YouTube took off, and streaming sites and services such as Hulu and Netflix started.

So, any online video ad that you’d recognize was likely made in recent years. The first online video ads– as are most things that haven’t been tested– were clunky and had a low production value.

So perhaps a better place to start is with the first online ad of any kind ever. This ad was placed 20 years ago by Global Network Navigator (GNN), a subsidiary of O‚ÄôReilly Media, to a Silicon Valley legal firm. GNN ended up dissolving soon later. In 1994, AT&T bought the first ever banner ad on Wired’s website– two companies that remain in existence to this day.

For a more modern overview of social media and ads, YouTube– actually Google as a whole– first experimented with video ads in March of 2009. Twitter first tried promotional trends and tweets on April 13, 2010. Earlier than these two, Facebook first added advertising in 2006, a mere two years after its launch. A little more than a year following their launch of ads, Facebook began to offer targeted ads– that is, ads that would reach a certain age or demographic. In January of 2012, ads were added to news feeds of users.

With over 1.2 billion internet users worldwide, it is imperative to stay on top of internet advertising trends for your company. If you don’t choose to adopt the ways of the future, you’ll sadly be left behind.

Ultimately, the further you delve into the world of online video ads, the more complex you will see it is. You will run into terms that you’re unfamiliar with, and concepts that are initially confusing. But don’t give up! You will understand everything should you give it time.

Hopefully, this article helped you with understanding the past, present, and future landscape of the online video ad industry. Now start advertising!

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