Advertising Technology

Follow the Data: Why RTB is Growing Faster Than You Think

The-Makegood.com_Mike_Shehan

This column was written by Mike Shehan, CEO and Founder of SpotXchange, the largest global marketplace of video ad inventory, and Chairman of Booyah, a digital agency.

Much has been said in the last year about the rise of RTB and programmatic technologies within online video advertising. Some will hang their hat on the industry seeing widespread adoption of RTB and programmatic buying mechanisms in the coming months, while others will question its ability to grow, citing an overall lack of inventory within the online video space.

But if you follow the data, the truth is clear: RTB for video is currently the top driver for the industry at large, and that trend is expected to continue. In fact, RTB is forecasted to increase twice as fast as the overall digital video business, according to a Forrester Consulting Study – “RTB Powers the Rapid Growth of Online Video.” Forrester Consulting projects spending in the online video industry will hit $3.6 billion in 2013, increasing to $4.6 billion in 2014 and RTB will account for 25% of that spend. Spending using RTB in online video is expected to be nearly 45% of all growth and will help the programmatic video market cross the billion dollar threshold in 2014, reaching as high as $1.14 billion.

This growth can be attributed to several factors, namely a desire for more automated buying and selling, as the definition of RTB continues to evolve from a pricing model into a buying mechanism that allows buyers to transact at real-time or auction-based prices – with far less overhead than the typical IO-based buy.

Yet something else is at work in this new world of buying and selling digital video – an old player whose impact on the industry can’t be discounted: TV. The last few years have seen more and more advertisers moving a small percentage of their TV budget to online video. As consumers continue their love affair with mobile phones and tablets, these ad dollars have flowed from owned-and-operated sites to audience-targeted outposts in order to maximize reach, frequency and budget.

There’s no indication of the industry slowing down, as evidenced by the creation of the Digital Content NewFronts – a week long event, fashioned after the television industry’s Upfronts, which creates a marketplace for digital content creators to showcase and sell high-value original video programming. Last year’s NewFronts saw widespread skepticism from the industry and ultimately didn’t produce the results hoped for, but the fact that the IAB ran the events this year is a huge testament to just how far the industry has come in a short period of time.

While a bigger, more built out NewFronts is a great sign of TV dollars moving online, there are other factors contributing to this momentum, and ultimately the more widespread use of RTB and programmatic, including:

• Content and device proliferation: In the US, 70% of online adults say they have watched some form of online video content in the past month. The types of content viewed has proliferated in tandem with the devices on which consumers view video, as mobile phones and tablets have proven exceedingly popular for watching all kinds of programming, with many consumers often using multiple screens at once.
• Increased investment: A host of content networks and digital video production companies are seeing money flow in from the likes of Google and Time Warner, proving major players see the value in online video and are taking steps to capitalize on this fast-growing industry.
• New measurement methodologies: The industry has long complained about a lack of comparable measurement between video and TV, but measurement firms are finally making headway in evolving their measurement efforts to marry TV with digital channels. GRPs (gross rating points) without a doubt will be the common currency that unlocks large TV budgets for online video but it will be just one part of the online video measurement ecosystem. What is audience (GRP) if it isn’t engaged (interactions)? Expect to see new metrics and tools pop up for audience measurement and the comparison of viewership and social media activity.

The opportunity that exists within digital video is clear and there’s no denying that consumers will continue to bring their viewing habits online. So what do TV buyers need to be conscious of? Buyers of digital video ads already know the efficiency benefits of buying from a marketplace, but for TV buyers they need to recognize that RTB and programmatic can drive increased transparency and control over their buys, and provide valuable insight into their audience segments. And for TV buyers that cite the complexity of online video ad buying as a barrier – i.e. the need to stitch together different types of vendors to execute on a buy – RTB can be the equalizer that automates the interactions from planning, trafficking, targeting, reporting and billing. Operationally, RTB can make buying online video ads much easier and offers TV buyers the low cost of overhead they’ve become accustomed to.

Once TV buyers get comfortable with this real-time world, we expect growth for these new models will only accelerate…so stay tuned!

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