Cross-Platform Video Advertising Accelerates Common Views Set The Stage For Faster Adoption Of A Holistic Approach To Video

Transcription

1 A Forrester Consulting September 2014 Thought Leadership Paper Commissioned By Videology Cross-Platform Video Accelerates Common Views Set The Stage For Faster Adoption Of A Holistic Approach To Video

2 Table Of Contents Executive Summary... 1 Media Companies,, And Agencies Share A Vision Of The Future Europe Is Poised To Accelerate Video Adoption... 5 Measurement Is Critical But Lacks Agreement... 8 The Right Technology Can Accelerate Change Key Recommendations Appendix A: Methodology Appendix B: Demographics ABOUT FORRESTER CONSULTING Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting. 2014, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to 1-Q44S51

3 1 Executive Summary Consumers use of online video from the proverbial usergenerated cute cat video to online streams of top-rated primetime television programs is booming. It s drawing the attention of media companies that see a lucrative new revenue stream and advertisers thrilling at the idea of a new advertising opportunity that delivers the sight-sound-motion impact of television. In March 2014, Videology commissioned Forrester Consulting to evaluate how the growth of online video will change the advertising industry. To further explore this trend, Forrester developed a hypothesis that tested the assertion that the evolving combination of data, technology, and cross-platform viewing will lead to holistic, platformagnostic planning of video. We conducted an in-depth survey with 500 advertising decision-makers at media companies, advertisers, and advertising agencies in France, Germany, the UK, Italy, and Spain to explore this idea. Forrester found that these companies share a common view of both the opportunities and challenges presented by the growth and diversity of video advertising options. Despite this agreement, it is clear that we are early in this change as all stakeholders confront questions about how to understand new consumer video viewing behaviors, successfully build a cross-platform campaign, and measure results holistically. But all participants see both media companies and advertisers ultimately benefiting from these new capabilities. KEY FINDINGS But the advertising and media sides of the industry aren t entirely aligned. and their agencies stress reach, message communication, and audience attention, while media companies emphasize the interactive possibilities and time-of-day opportunities. These relatively minor differences needn t slow adoption if these stakeholders engage in candid, collaborative discussions. Leadership is murky. Respondents foresee planning for online video and linear television merging in response to these changes in consumer viewing behavior. Change of this magnitude will require confident, innovative leadership to disrupt established organizations and envision new planning and buying processes. While many expect digital groups to emerge as the leader, the respondents who had solely digital responsibilities seemed less attuned to the holistic future. This leadership vacuum presents an opportunity for those with courage to jump in, and a potential obstacle if this leadership doesn t emerge. All stakeholders have a clear view of their technology needs. The challenges that respondents cited as their top priority and the features they want in a video ad technology platform closely parallel each other: tools to better understand video viewing behavior, target individuals, and measure campaigns. This provides technology companies with clear direction for their product road maps to bring solutions to the market. Forrester s study yielded five key findings: Media companies and advertisers see video as win-win. Large majorities in each group see both advertisers and media companies benefiting. Increasing video viewing gives media companies the opportunity to grow their overall revenue and increase cost per thousand (CPM) while also benefiting advertisers by driving greater advertising effectiveness. Two benefits improve advertising effectiveness. As video moves to a more digital technology system, the benefits marketers have seen in online marketing will come to video: more precise targeting and higher engagement by consumers with both media content and advertising.

4 2 Media Companies,, And Agencies Share A Vision Of The Future..., agencies, and media companies face different business challenges and manage different business models. And the dynamics of these industries differ in each of the markets we surveyed. Yet the respondents to our survey were largely in agreement on the broad outlines of what the future holds. All three stakeholder groups expect this new world to provide a better advertising environment that will benefit all parties. Survey respondents reported strong agreement on five key points: Video will continue to shift to online streaming and migrate across devices. Respondents in each group agreed at the level or higher that consumers will shift more of the viewing of full-length TV to streaming from the networks sites over the next three years (see Figure 1). They also see a growing appetite for other forms of video such as original online content and short clips of news and sports highlights. A similar percentage expect consumers to embrace other devices, with smart TVs leading but followed closely by tablets and smartphones (see Figure 2). Media companies in particular also believe that consumers will increasingly turn to over-the-top devices that connect Internet-delivered video to the television set. Device Adoption Varies By Country Despite the demographic, economic, and cultural differences of the five countries surveyed, there was relatively little difference in their view of how consumer viewing behavior will change. Device adoption, however, did show some differences by country. While 18% of all respondents expect viewing on any Internet-connected device to grow significantly, about one-quarter of Spanish and Italian respondents and only 9% of German respondents expect significant growth. The UK was the most pessimistic about viewing on tablets and smartphones, but the most open to an as-yet unknown device, with 50% expecting a new device to grab moderate or significant video viewing. FIGURE 1 Consumers Will Embrace New Video Entertainment Sources In your opinion, how will consumers time spent viewing videos via the followingsources change over the next three years? (Respondents who answered significantly increase or moderately increase ) Online streaming of full-length television programming from networks sites Online streaming services Original online professional programming Online news, sports, and other short clips 73% 67% 59% 72% 64% 60% 67% Media companies agencies FIGURE 2 Consumers Will Connect To These New Sources With A Variety Of Devices In your opinion, how will consumers time spent viewing videos on the followingdevices change over the next three years? (Respondents who answered significantly increase or moderately increase ) Smart TVs Tablet Smartphone Television set via an Internet-connected device Desktop or laptop computer 78% 74% 72% 78% 80% 73% 75% 74% 71% 62% 56% 56% 60% Media companies agencies

5 3 New video sources will deliver targeted messages. Respondents acknowledged a number of benefits that Internet-enabled delivery of video offers: better targeting, interactivity, and improved communication. Among these, the ability to target specific consumers garnered the most consistently high agreement (see Figure 3). While greater return on investment (ROI) accountability is a powerful trend in the advertising world, it ranks last among benefits the survey listed, behind marketers traditional focus of delivering an effective message to the right consumer. FIGURE 3 New Video Sources Deliver More Targeted Messages What do you see as thethree greatest future potential advantages for video advertising? Targeting specific consumers Higher audience attention 43% 45% 43% 38% Media companies agencies FIGURE 4 Consumer Engagement With Content Will Increase In your opinion, how will consumer engagement with the following types ofexperiences change over the next three years? (Respondents who answered significantly increase or moderately increase ) Interacting with additional content about the program on a second screen Entering contests or playing games related to the program on a second screen Chatting via social media with others while viewing a video Interacting with advertiser s content on a second screen Interacting with characters, actors, the director, etc. 68% 72% 69% 68% 65% 67% 62% 64% 65% 62% 64% 62% 59% Media companies agencies Reaching new consumers not exposed to ads on TV Better message communication ability Enhancing video with interactivity 41% 32% 37% 38% 30% 33% 35% 32% Each Country Sees Different Advantages Greater ROI accountability 23% 22% 27% Consumers will engage more deeply with content. With the explosive growth of tablets, advertisers have become increasingly concerned that multitasking consumers may not be paying as much attention to the programs and ads as they did before these devices existed. Our respondents see the second screen being a strong companion to the television, allowing consumers to engage more deeply with the program (either with related content or with the characters, cast, and crew); play show-related games; or even interact with more information about advertisers products (see Figure 4). The greatest variance between the countries occurred when we asked them to pick the three greatest advantages. France ranked interactive features equal to their top-ranked capability: targeting. Germany placed even higher emphasis on targeting and ranked greater consumer attention a close second. Italy s top three picks were targeting, better communication, and interactivity. Spain saw the ability to reach consumers not reached on TV, deliver messages at different times of the day, and control reach and frequency. The UK placed more emphasis on ROI accountability than any other country in the study.

6 4 Video budgets will grow while planning becomes holistic. Online video will benefit from two sources of new spending: reallocating television budgets and shifting money from other media. As these budget changes take effect, planning will follow suit by bridging the current gap between online video and television. Almost two-thirds of agencies and advertisers expect the two buying groups to merge (see Figure 5). FIGURE 5 TV And Online Video Will Merge And Attract More Spending As the way consumers view videos changes over the next three years, how likely are the following to happen? (Respondents who answered very likely or likely ) Agencies will plan video advertising campaigns holistically across all video viewing options Agencies will merge their TV and online video buying groups Agencies will plan video advertising on each platform separately 69% 63% 65% 60% 63% 51% 56% Media companies agencies Video s growth is a win-win for advertisers and the media. Our respondents foresee that both the media and advertising industries will benefit from these changes. Almost of respondents in all groups believe that advertisers will see greater effectiveness, while a marginally smaller group expect media companies to see higher overall revenue (see Figure 6). While majorities of all groups expect that CPMs will increase, media companies are the least optimistic and advertisers the most optimistic of the groups. FIGURE 6 The Industry Is Optimistic About The Future How strongly do you agree or disagree with the following statements about changes in video advertising over the next three years? (Respondents answering strongly agree or agree ) effectiveness will improve Publishers will increase their overall advertising revenue by selling video advertising Publishers will earn higher CPMs for video advertising 68% 68% 58% 67% 64% 53% 58% Media companies agencies France And Spain Are Most Optimistic About Agency Planning Becoming Cross-Channel The combined very likely and likely answers mask important differences by country. While 16% of the total sample said it was very likely that agencies will plan video advertising campaigns holistically across channels, 32% of Spanish respondents and 27% of French respondents gave it this strong rating. The UK and Germany were more cautious, with 14% in each country rating this very likely.

7 5 Europe Is Poised To Accelerate Video Adoption All three groups show remarkable agreement in their view of the future. While there are a few differences between the stakeholders on the details, these should be easy to resolve, putting Europe on a fast track toward the future of video. One remaining drag on all three groups is the challenge of adapting their organizations and processes to take full advantage of these new capabilities. The key areas of difference include: embrace programmatic buying even more than their agencies. Two-thirds of advertisers agreed that video buying will increasingly use programmatic techniques on all platforms, compared with 59% of agencies (see Figure 7). Conversely, even though 63% of agencies expect to merge traditional and online video buying groups, said they would continue to plan each platform separately; only 51% of advertisers expect their agencies to keep planning separate. Programmatic buying will mean a greater degree of change for agencies than their clients, perhaps accounting for this disparity. In the survey, the media companies agreed that programmatic is the future, but in our follow-up phone interviews we heard that the present is a different story. The publishers see programmatic as a threat: They think we only want to buy cheap inventory. I ve been meeting with them one by one to tell them we will agree to a fixed price. I m beginning to make some progress. COO, media agency focused on Spain and Latin America Buy side and sell side aren t quite in sync on the benefits. All stakeholders agree that targeting specific consumers is the greatest area of potential for video advertising in the future. After that, the advertisers and their agencies differ from media firms on what they see as the key benefits (see Figure 8). Those who buy ads value the ability to reach audiences not reached by TV, higher attention, and better message communication, while the ad sellers put more value in adding interactivity to video and delivering messages at different times of day. Media companies may have more success if they more closely align their sales message to the benefits that buyers focus on. FIGURE 7 Embrace Programmatic Buying As the way consumers view videos changes over the next three years, how likely are the following to happen? (Respondents who answered very likely or likely ) Video buying on all platforms will become more programmatic Agencies will merge their TV and online video buying groups Agencies will plan video advertising on each platform separately 67% 62% 59% 65% 60% 63% 51% 56% Media companies agencies All groups envision adding new tactics to current video plans. Presented with a range of capabilities that spanned both old and new approaches, respondents took an all of the above stance. For example, programmatic buying of linear TV ads and the ability to work directly with media companies received nearly the same level of agreement (see Figure 9). Similarly, buying ads on specific programs and targeting ads to individuals saw similar ratings. There was one lagging area: buying linear TV ads programmatically. We ll likely see TV and digital planning disciplines merge in the future, utilizing the most familiar and beneficial elements of both. With everything digital in some way, and the line between TV and online video continuing to blur into simply content, agencies will likely bring people and skills together to best plan for this new reality. Account director, UK media agency

8 6 FIGURE 8 Media Companies Value Interactivity In Video; And Agencies Don t What do you see as thethree greatest future potential advantages for video advertising? Media companies agencies Targeting specific consumers 43% Targeting specific consumers 45% Targeting specific consumers 43% Reaching new consumers not exposed to ads on TV 41% Enhancing video with interactivity Reaching new consumers not exposed to ads on TV 37% Better message communication ability Higher audience attention 38% 38% Ability to deliver messages to a consumer at different times of day Higher audience attention Higher audience attention Ability to deliver messages to a consumer at different times of day FIGURE 9 Will Evolve, Adding New Approaches To Traditional Video Plans In the future, how important will these capabilities for buying video advertising become? (Respondents who answered very important or important ) Ability to buy linear TV ads programmatically Ability to work directly with publishers to customize packages of video advertising opportunities 60% 53% 53% 63% Media companies agencies Ability to buy audiences across all screens including TV/video platforms 67% 74% Ability to buy ads on specific programs 68% Ability to evaluate audiences on buying behavior in my product category Ability to target ads to individuals based on their match with my target audience 71% 74% 71% 72%

9 7 Future leadership and key skills are unclear. New ways of planning and buying will require changes in the partners and operational steps that bring a campaign to market. Those with digital experience appear to have an edge in leading this future, but not a decisive one. No clear consensus emerged on whether online buying will become more like linear buying or linear buying will become more like online buying (see Figure 10). Similarly, it is a close call whether traditional or digital agencies will lead video buying, with a slight edge for digital agencies. Tellingly, perhaps, 60% of those with both digital and traditional experience believe digital agencies will lead. Digital professionals may not be ready for this role. Respondents with digital-only experience, though, have a narrower view of the future. For example, only 52% agree that planning and buying will be more holistic, compared with of their colleagues with both digital and linear responsibilities (see Figure 11). FIGURE 10 Video Planning And Buying Will Merge; Digital Has The Edge For Future Leadership How strongly do you agree or disagree with the following statements, thinking about how video advertising will change in the next three years? (Respondents who answered strongly agree or agree ) Planning for online video and linear television will merge Traditional media buying firms will lead all video buying 49% 53% 57% digital display only digital display and linear TV Digital media buying agencies will lead all video buying Buying linear television will become more like online video buying Online video buying will become more like linear television buying 54% 60% 51% 59% 53% 64% FIGURE 11 Digital-Only Respondents Show Less Agreement On Holistic Planning And Buying In The Future How strongly do you agree or disagree with the following statements, thinking about how video advertising will change in the next three years? (Respondents who answered strongly agree or agree ) Planning and buying will be more holistic 52% only and linear TV Spain Foresees A Mobile Boom Spain tends to be the most optimistic country on all aspects of the evolution of video among the five countries surveyed. On questions relating to viewing on smartphones and tablets, second screen usage, and the need for crossdevice tracking, Spain often outstripped other countries in the study. This is consistent with Forrester s findings that Spain has the highest rate of smartphone adoption, streaming video on smartphones, and the country s Europeleading score on Forrester s Mobile Mind Shift Index.

10 8 Measurement Is Critical But Lacks Agreement With all the choices of devices, delivery channels, and content types, consumers viewing behaviors are exponentially more complicated than before the advent of online video. All three groups wrestle with the challenges of understanding this new world and measuring it appropriately to plan effectively. Equally challenging is then delivering according to plan and measuring the results. The measurement world is moving toward a cross-platform GRP measurement, though media companies are less enthusiastic than the advertising side of the business. Understanding audience viewing behavior is a shared challenge. When we asked respondents to choose their top three challenges from a list of 10 possibilities, three were common to advertisers and their agencies and the media firms: 1) targeting individual viewers; 2) understanding cross-platform viewing behavior; and 3) measuring campaign performance (see Figure 12). Execution offers its share of challenges, too. Targeting, identified earlier and one of the most important capabilities of the new video world, is near the top of the challenges each group reports. Beyond this, each group faces challenges specific to their positions: are concerned about finding the right content and meeting their reach goals, while media companies fret over forecasting how much advertising inventory they have to sell and how to obtain competitive information to support their sales efforts. and agencies want gross rating points (GRPs). Measurement is much discussed in the industry today, and all groups noted it among their top challenges. At the center of the measurement question is what role GRPs should play as advertisers try to integrate online video with television. and their agencies agree that GRPs are a useful tool. Those with both linear and digital video responsibility are the strongest proponents, with almost three-fourths believing the industry should standardize on one GRP metric and this would make them more efficient (see Figure 13). Those with only digital responsibility see this move as less necessary and are less satisfied that today s metrics are reliable. As soon as we have a standard way to understand video, to measure it across the different platforms, and give it the right value, we will be able to demonstrate the value that cross-platform campaigns deliver. Digital director, advertising agency, Spain Media companies have less enthusiasm for GRPs. The media world does not show this level of agreement for a clear reason: concern that guaranteeing GRPs will result in wasted impressions they don t get paid for (see Figure 14). However, they do see potential advantages of increased revenue and an easier sales process if a standard GRP metric were adopted. FIGURE 12 And Media Companies Share Planning And Measurement Challenges What are the biggest challenges in video advertising you face today? /agencies Challenging Achieving sufficient reach 38% 22% Targeting specific consumers 40% 18% Understanding cross-platform viewing behavior of my target audience 41% 14% Identifying content that my target audience views Identifying content that is right for my brand 33% 21% 18% Measuring campaign performance 15% Most challenging Media companies Targeting individual viewers 39% 22% Measuring a campaign s audience across all video screens or devices 32% 23% Understanding cross-platform viewing behavior of my audience Obtaining information on competitors cross-device audience behavior 39% 16% 32% 21% Measuring campaign performance 38% 13% Forecasting inventory for each type of video ad Challenging 32% 17% Most challenging

11 9 FIGURE 13 And Agencies Want GRP Metrics Do you use gross rating points (GRPs) to plan and/or measure your online video advertising? How strongly do you agree or disagree with the following statements about using GRPs for online video advertising? (Respondents who answered strongly agree or agree ) Yes No 42% 29% 58% 71% only and linear TV The video advertising industry should standardize on one GRP measurement vendor I use GRPs so I can holistically plan digital video with television GRPs are superior to impressions as a metric for digital video advertising 59% 72% 62% 69% 56% 65% only and linear TV Current metrics provide reliable ratings 52% 72% User level data/impressions are superior to GRP 56% Base: 232 advertisers/advertising agencies from the UK, France, Germany, Italy, and Spain FIGURE 14 Media Companies Are Leaning Toward GRPs... Barely Do you use gross rating points (GRPs) in negotiations for your online video advertising inventory? How strongly do you agree or disagree with the following statements about using GRPs as a currency for online video advertising? (Respondents who answered strongly agree or agree ) Yes No 43% 64% 57% only and linear TV GRP guarantees result in wasted impressions that my site doesn t get paid for Selling ads would be easier if the video advertising industry standardized on GRPs GRPs are superior to impressions as a metric for digital video advertising 72% 57% 60% 55% only and linear TV GRPs allow me to sell holistically across devices 62% User level data/impressions are superior to GRP 49% Current metrics provide reliable ratings 49% 57% Base: 151 media companies organizations from the UK, France, Germany, Italy, and Spain

12 10 The Right Technology Can Accelerate Change Given the agreement on the future and the benefits for both advertisers and media companies, these groups have strong incentives to work together to define a clear path and accelerate this change. Technology is also likely to play a vital role, with over of each group agreeing with the statement that technology will be a differentiator. We delved deeper into the features required by a technology platform to help facilitate this change (see Figure 15): Maximum flexibility in targeting. Consistent with the importance they place on targeting, all groups ranked having multiple ways to target their desired audience as their top priority. Targeting is a key capability differentiating online video in both reducing waste and enabling marketers to fine tune their audience to align with different objectives. and connected TVs ranks considerably lower. Mastering these digital platforms will be essential in reassembling an audience to achieve their goals. Cross-device tracking. The ability to deliver ads on all these platforms is the baseline, but the ability to track consumers across devices, and so understand consumer viewing behavior, rates highly. This capability would allow media companies to better match their audience to advertisers strategies while advertisers will gain insights to shape their marketing approach. First-party data. The ability to import CRM data, a capability that will support targeting, is a next priority on this list and ranks ahead of programmatic capability and the availability of inventory by real-time bidding. Breadth of coverage of digital devices. Next on advertisers agenda is to be sure that they have the ability to follow consumers as their viewing migrates to smartphones, tablets, or broadcasters online streaming sites. But extending this to cable or satellite VOD systems FIGURE 15 The Industry Looks To Technology For Flexibility And Better Audience Information What are the topthree features in a technology platform that you look for to assist video ad buying or selling? Having multiple ways to target audiences 42% Ability to track consumers on multiple devices 31% Ability to serve ads onto smartphones 26% Ability to serve ads into videos of networks online streaming sites 24% Ability to import CRM data to use in targeting ads 24% Ability to serve ads into videos on tablets 23% Flexibility to select cross-device ratings 23% Ability to provide cross-device GRP metric 22% Base: 500 video advertising decision makers from UK, France, Germany, Italy, and Spain

13 11 Key Recommendations These are challenging times, with clear knowledge gaps in how to operate in a future that all parties agree is coming quickly. With an audience that is racing ahead to adopt new viewing behaviors, it is time for media, advertisers, and agencies to embrace new approaches to video. Since there is consensus that media companies and advertisers will both benefit, all participants should focus on their areas of agreement and collaborate to resolve issues that are in question. Forrester s in-depth survey with 500 video advertising decision-makers suggests the following actions as all parties plan for 2015: : Begin testing new video strategies. Knowing that change is coming, advertisers should start in 2015 to test and learn how new video capabilities will change their strategy. For example, with targeting a top desired benefit, advertisers must learn how to execute a campaign rooted in a more granular audience definition than traditional age and gender. This shift will raise questions with significant implications for strategies, processes, and metrics used for decades in TV such as: How should I redefine reach goals in light of defining a smaller, more precise target? How much, if any, incremental CPM is this more precise targeting worth? What new planning techniques do I need to employ to ensure coverage of the audience? Agencies: Facilitate the evolution of both clients and media companies. Agencies sit in a unique position to see the shared challenges their clients and the media companies have articulated in this study, and can serve as the facilitator to resolve common challenges. But this isn t an altruistic effort. As a future of more effective advertising and higher media company revenue unfolds, agencies will benefit, too. A side benefit of this role: Agencies will gain deeper insight into how their role and business model must evolve. Media companies: Help advertisers improve campaign performance. As this transition unfolds, media companies must go beyond their traditional role of being the carrier of the message for their advertiser. Media companies should share their detailed knowledge about their viewers cross-platform habits to help their advertisers craft the most efficient, effective campaigns. Innovative media companies will also develop new ad and compensation models that complement their advertisers new strategies. Industry professionals: Build your technology skills. With data, algorithms, and technology platforms destined to play an ever larger role in video campaigns in the future, marketers must enhance their core marketing knowledge with new technology skills so they can effectively collaborate with their technology management colleagues and provide their teams with clear direction. Senior executives should be sure to have a trusted lieutenant with deep technology skills, while mid-career professionals should consider a rotation into the marketing operations, ad operations, or other groups that provide technology support to advertising and marketing.

14 12 Appendix A: Methodology In this study, Forrester conducted an online survey of 500 video advertising decision-makers at large media agencies, publishing organizations, and advertising/marketing companies with more than $250 million in revenue. Questions provided to the participants asked about the types of video advertising opportunities that are being bought and sold, the devices they buy and sell on, the challenges they face with video advertising today, and how video advertising will be affected by changing consumer usage. The study was completed in July Appendix B: Demographics FIGURE 15 Survey Demographics: Location And Industry Where are the headquarters of your company located? Which of the following best describes the industry to which your company belongs? Germany 20% UK 20% In-house advertisers 39% Publishing/media company 30% Italy 20% France 20% agency/marketing services provider 30% Spain 20% Base: 500 video advertising decision-makers from the UK, France, Germany, Italy and Spain