Omdia’s Matthew Bailey shares key recommendations for service providers, broadcasters and content owners as the online video industry pivots to advertising-supported models.
Digital’s march on advertising revenue has continued largely unabated over the past decade, with online advertising taking a 50% share of total global advertising revenue for the first time in 2021. However, 2022 saw a large slowdown, or even decline, in the ad revenue of digital giants Google and Meta, leading to a loss of ad market share for online during the year.
Yet one area of online advertising that continued to grow its share in 2022 is online video advertising, and this will continue into 2023 when it will take 23% of total global advertising revenue. Critically, this will be driven by both traditional TV players—which are increasingly pivoting to digital platforms and advanced TV advertising— and digital new entrants.
The latter includes mobile video powerhouse TikTok (already a key threat to Google and Meta) and connected-TV (CTV) manufacturers pivoting into advertising and free ad-supported streaming TV (FAST) in a bid to bolster profitability. It also includes premium over-the-top (OTT) video players, such as Netflix, which are turning to hybrid monetization models spanning both subscription (SVOD) and ad-supported (AVOD) video on demand.
Google and Meta still play a big role in digital video, but it is a segment where other players, and the vendors that support them, can not just compete but can thrive as the worlds of linear TV and digital ads collide.
Key recommendations for service providers & broadcasters
• Broadcasters and other traditional TV players should adopt a CTV-first mentality to ensure that they are prepared for the impending ad budget shift. This will involve tying linear TV and CTV together through a revamped approach to BVOD as well as adding new targeting and measurement abilities for advertisers.
• Video service providers must bolster the value of premium video content to advertisers. Rolling out new content and context-focused targeting options for CTV inventory, rather than just audience targeting, will be an ideal in this pursuit.
• OTT video players need to partner with retailers and payment vendors to allow consumers to purchase products directly within their platforms. Data and scale will also be crucial here, so partnerships or even consortiums with other video service providers, broadcasters, and retailers should also be explored.
• Video service providers with multimarket ambitions should exploit Microsoft’s global reach. Employing its technology in regionwide addressable advertising plays would be especially effective for regional consortiums of broadcasters looking to offer pan-regional, or even global, TV campaigns.
• Broadcasters must not be complacent about new sports streaming competition. Maintaining high CPMs will mean bolstering addressability and measurability.
Key recommendations for content owners
• Content owners looking to enter the FAST space should consider engaging point solutions from vendors. This will give them greater control over, and visibility of, monetization while also enabling an omni-FAST platform distribution strategy.
• Content producers should experiment with new types of short-form video content that can be distributed and potentially monetized through TikTok. Branded content will be an especially important area to consider because TikTok videos often blur the line between paid advertising and user-generated videos.
• Content producers ought to explore the implementation of dynamic product placement technology or at least design content with this in mind. This could even involve exploring the applications of in-game ad tech in other areas of media and entertainment produced using game engines.
• Mid-to-low tier sports rightsholders should explore sports streaming in FAST environments. Such licenses will be less appealing to premium video providers but could grow their audiences and monetization on free, ad-supported services.
The extract above is from ‘2023 Trends To Watch: Advertising Superthemes’, written by Matthew Bailey, principal analyst, media & entertainment at Omdia, and available here.