Teads forrester-report

A Forrester Consulting

Thought Leadership Paper

Commissioned By Teads

June 2015

Solving Digital Video

Advertising’s Premium

Dilemma

Table Of Contents

Executive Summary ....................................................................................... 1

Digital Video Advertising Is Primed For Growth .......................................... 2

Buyers Need More From Video Inventory .................................................... 3

Ensure The Future Of Video Ads By Addressing The Quality Supply

Problem........................................................................................................... 6

Key Recommendations ................................................................................. 8

Appendix A: Methodology ............................................................................. 9

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1

Executive Summary

Digital video advertising represents a golden opportunity for

advertisers, agencies, and media companies alike — but

the opportunity depends on resolving a few key challenges

facing the market today. Ultimately, both buy- and sell-side

firms have a role to play in determining the future success of

this important advertising format.

In January 2015, Teads commissioned Forrester Consulting

to evaluate how advertisers, agencies, and publishers are

adapting to new trends in video advertising. Then to further

explore this trend, Forrester developed a hypothesis that

tested the assertion that advertisers, agencies, and media

companies are seeking alternative approaches to traditional

digital video advertising because of the challenges

associated with limited video inventory.

In conducting a survey with 529 decision-makers

representing advertisers, agencies, and media companies

in Argentina, France, Germany, Italy, Mexico, Spain, the UK

and the US, as well as six qualitative interviews, Forrester

found that both buy- and sell-side companies are bullish on

digital video advertising’s future; however, challenges hold

advertisers and media companies back from fully pursuing

digital video advertising solutions. These challenges include

defining premium video inventory, dealing with the

availability and lack of premium inventory, and assuring

digital video advertising performance.

KEY FINDINGS

Forrester’s study yielded five key findings:

› All market participants expect digital video spend to increase in the next two years. Video ads represent an

opportunity for advertisers to reach customers with rich,

engaging messages about their brands and products. For

agencies, it represents higher fees and the opportunity to

work on exciting ad content, and for media companies, it

represents a significant revenue opportunity.

› Lack of premium inventory — and disagreements about the definition of premium — hold back video’s

growth. To avoid the worst of fraud and poor viewability,

advertisers and agencies default to “premium” inventory.

This drastically reduces the ad opportunities available and

muddies the market with differing criteria for what qualifies

as “premium.”

› Video is still a work in progress to fulfill its promise. Beyond simply wanting more premium inventory,

advertisers and agencies want better targeting and

measurement of their video ads’ impact. Media

companies, on the other hand, struggle with the costs of

video content and the ability of their sales force to sell it

effectively.

› Advertisers, agencies, and media companies must build an accountable, transparent video ad market. As

an emerging ad format, online video lacks the foundation

of agreed-upon standards and practices other media

enjoy. For their part, media companies that can deliver

high-quality real estate, backed by assurances on

performance, will be poised to deliver truly premium video

ad inventory that will provide the confidence buyers are

seeking. Buyers who then expand their definition beyond

known and trusted media brands and embrace media

companies that offer transparent and accountable

measurement will benefit from more effective campaigns.

› Outstream advertising offers one solution to these challenges. While video content is a natural place for

video ads, both the buy and sell side noted that video ads

that appear within editorial content offer advantages.

Media companies told us that outstream ads enable them

to offer more premium video inventory and drive solid

return on investment. Buy-side firms told us that

outstream helps alleviate concerns around viewability,

enables them to buy programmatically, and delivers a

positive end-user experience.

2

Digital Video Advertising Is Primed For Growth

Digital video advertising is a dream format for everyone

involved. For advertisers, it represents the opportunity to

reach customers and prospects with rich, engaging content

across screens. For media companies, video delivers higher

cost per thousands (CPMs), and for agencies, it provides an

opportunity to earn more on fees and work on more exciting

content. Coupled with consumers’ increasing reliance on

digital video overall, these enticements help explain why so

many advertisers and agencies expect the digital video ad

market to grow in the next two years (see Figure 1).

This growth is dependent on a number of factors, including

greater availability of premium video inventory (which 46%

of agencies we surveyed indicated as a driver of online

video ads’ growth — the top option chosen), improving

standards around targeting and ad viewability, and,

especially for advertisers, evolving consumer trends toward

time spent consuming online video content (61% of

advertisers cited this as a crucial driver of online video

spend in our study).

Media companies have sensed that online video represents

a major opportunity for them as well, with 73% predicting

they will either moderately or significantly increase their

volume of video ad inventory in the same two-year

timeframe. Media companies are driven by the lure of higher

CPMs on video inventory, with 44% citing it as the main

benefit of the format, but 29% of media companies also see

video as a chance to deliver more engaging content to their

audiences (see Figure 2).

Both buy-side and sell-side firms are bullish on the future of

online video; however, there are also challenges that must

be identified and overcome — it’s critical that the market

doesn’t let drivers become inhibitors.

“I think [the amount of video inventory] will keep

increasing because consumers like to consume

video for either entertainment or information, and

[video] is probably the easiest or the best way to do

that. So I think there's in general a consumer

demand for it, and on the other hand, it is the most

impactful way to bring messages across.”

— President at a global advertising agency

FIGURE 1

Video Ad Budgets Expected To Increase In Two Years

Base: 108 agencies and 285 advertisers in Argentina, France, Germany, Italy, Mexico, Spain, the UK, and the US

Source: A commissioned study conducted by Forrester Consulting on behalf of Teads, May 2015

Significantly increase

Moderately increase

Stay the same

Moderately decrease

Significantly decrease

31%

39%

12%

8%

10%

Significantly increase

Moderately increase

Stay the same

Moderately decrease

Significantly decrease

25%

52%

15%

7%

1%

“How do you think your spend on digital videoadvertising will change in the next two years?”

“How do you think your clients’ spend on digitalvideo advertising will change in the next two years?”

Agencies Advertisers

70% of agencies and 77% of advertisers expectvideo budgets to increase in the next two years.

3

“[Video ads] show us how to be

innovative, how to beat our

competitors. It lets us do something

different and be ahead of the times.”

— Advertising manager at a European media company

Buyers Need More From Video Inventory

Buy-side participants are largely in agreement on the factors

that threaten their spend in online video — and interestingly,

many of these threats are the mirror image of those that

buy-side firms identify as crucial drivers (see Figure 3). Buy-

side firms worry that lacking standards around targeting,

measurement, implementation, and best practices will hurt

the market in the future, along with pressures on the

availability of premium video inventory.

For media companies that offer online video today, the

challenges facing digital video’s future are mainly focused

on delivering inventory in a way that makes sense for them

(see Figure 4). For one, media companies must balance the

value of video’s CPMs against the costs associated with

“becoming a video content producer,” which can be

prohibitive.

FIGURE 2

Media Companies Are Driven By Video’s Unique Enticements

Base: 136 publishers/media companies in Argentina, France, Germany,

Italy, Mexico, Spain, the UK, and the US

Source: A commissioned study conducted by Forrester Consulting on

behalf of Teads, April 2015

Opportunity for higher CPMs

Opportunity to provide

more engaging advertising

content to our audience

Opportunity to draw

budget from traditionally

nondigital ad budgets

Earning revenue off

audiences that brands

may not reach via TV

44%

29%

19%

7%

“What is the main benefit of videoadvertising for your organization?”

Buyers in North America (85% of advertisers

and 79% of agencies) were most likely to

expect increases in spend for online video,

whereas media companies in the EU (80%)

were most likely to predict an increase in video

inventory over the next two years.

FIGURE 3

Agencies And Clients Are In Step On Threats To Video Ad Spend Growth

Base: 108 agencies and 285 advertisers in Argentina, France, Germany,



behalf of Teads, May 2015

Lack of verification that

the ads were delivered

to the intended audience

50%46%

Lack of established standards

around measurement43%

36%


around implementation best

practices

42%

33%

Lack of premium

video inventory40%

27%


around ad viewability37%

35%

Agencies

Advertisers

“Which of the following factors do you think will

inhibit adoption or spend in digital video?”

4

In addition to dealing with the costs of producing video

content, over one-third of media companies have also

struggled with getting their sales force up to speed on how

to sell video ads, as lack of familiarity with cost-per-view

(CPV) models has emerged as a challenge.

Another issue is a lack of agreement around what exactly

constitutes premium video inventory. The quality of the

media brand and content is an important consideration for

all, but media companies ranked viewability more highly on

their list of considerations than their buy-side counterparts,

and they also focus more heavily on the end user

experience. Agencies and advertisers both ranked the

quality of data supplied for targeting as their third most

important consideration, while media companies ranked

targeting as only their sixth most important consideration

(see Figure 5).

“How do we define premium? This is

not easy to answer. Realistically,

everyone has their own

methodology.”

— CEO of a global advertising agency

FIGURE 4

Media Companies Struggle With Costs, Focus, Lack Of Inventory

Base: 103 publishing/media companies in Argentina, France, Germany,




The ROI is not as high as we would

like due to costs of producing

video content to host the ads44%

Video is too small a part of our

overall revenues to dedicate sales

or traffic manager resources to it40%

We don’t have

enough video inventory 37%

Our sales force lacks

familiarity with CPV models 34%

“You mentioned your company currently offers video

advertising. Which of the following challenges have

you experienced with selling video ads today?”

For media companies that are “digital native”

or have video as part of their existing content,

lack of video inventory was the key challenge

(47%). Non-native video media companies were

most concerned that ROI (balancing costs and

returns) of video content would not make

sense for their business (45%).

5

When buy-side firms run up against these challenges with

executing video ad buys, they report a host of negative

outcomes, including foregoing open programmatic buys for

direct buying or private marketplaces and abandoning digital

video ad buys altogether (see Figure 6).

The pattern is similar for media companies as well. Over

half stated they had favored custom executions over

programmatic approaches to selling video content or had

held back pursuing video ads as heavily as they otherwise

would.

These behaviors result in lost opportunities that affect

everyone — lost opportunities for advertisers to reach their

customers or prospects with rich, engaging content; lost

opportunities for agencies to earn on commissions and work

on engaging material; and lost opportunities for media

companies to earn revenue off of more valuable video

inventory.

FIGURE 6

Unaddressed Challenges Cause Buyers To Opt Out

Base: 103 advertising agencies companies and 281 advertisers in

Argentina, France, Germany, Italy, Mexico, Spain, the UK, and the US



“Only bought video selectively through

manual buying or private marketplaces”

“Decided to repurpose existing

video assets rather than produce

specific online content”

“Decided not to pursue

digital video campaigns”

“Sought out other opportunities or

formats for digital video content”

“What impact have these challenges had on

your/your clients’ approach to video advertising?”

Agencies

Advertis

ers

57%

52%

38%

31%

55%

41%

35%

34%

FIGURE 5

Buy-Side, Sell-Side Firms Define “Premium Video Inventory” Differently

Base: 529 publishing/media companies, agencies, and advertisers in Argentina, France, Germany, Italy, Mexico, Spain, the UK, and the US

Source: A commissioned study conducted by Forrester Consulting on behalf of Teads, May 2015

“Of the following, which three do you take into consideration

when determining if video ad inventory is premium?”

Advertisers

Agencies

Media Cos.

Rank 1:

Quality of the

editorial content

(44%)

Rank 2:

Quality of the

media brand

(37%)

Rank 3:

Quality of data

supplied for targeting

(36%)

Rank 4:

Viewability

of the ad

(35%)

Rank 1:

Quality of the

media brand

(39%)

Rank 2:

Quality of the

editorial content

(38%)

Rank 3:

Quality of data

supplied for targeting

(38%)

Rank 4:

Placement

of the ad

(35%)

Rank 1:

Quality of the

editorial content

(63%)

Rank 2:

Viewability

of the ad

(58%)

Rank 3:

Quality of the

media brand

(57%)

Rank 4:

Ad end user

experience

(46%)

6

Ensure The Future Of Video Ads By Addressing The Quality Supply Problem

To help drive the digital video opportunity, many buy- and

sell-side firms are opening themselves to additional sources

of premium video inventory, including outstream advertising,

which places video ads in the heart of written editorial

content, rather than depending on native video content to

host the ad (see Figure 7).

Buy-side firms that have adopted outstream advertising

reported that it helps address some of their concerns

around online video — 70% of advertisers said it opened up

more inventory and allowed them to buy video

programmatically, 69% reported it helped them with

determining viewability, and 65% felt it drove a positive end

user experience, thereby avoiding potential backlash from

consumers as their brands are associated with an annoying

video ad experience.

Media companies reported that outstream has indeed

relieved pressures on producing video inventory for their

buyers. Among media companies that have offered

outstream video, over 60% stated it has enabled them to

offer premium video inventory and has opened them up to

selling programmatically. Additionally, more than half stated

it provides better return on investment (ROI) compared with

other ad formats, which is partially explained by the lowering

costs of native video production (see Figure 8).

Ultimately, advertisers and agencies want more assurances

they’re actually reaching their audiences, and they want

better standards on viewability and measurement so they

know their valuable video dollars are paying off. While some

of the solution here rests with media companies devoting

themselves to transparency, the industry as a whole is

seeking stronger, more clearly worded standards — a

responsibility ultimately shared by companies representing

both the buy and sell side of the video ad market.

For their part, media companies told us they were looking

for lower-risk opportunities to get off the sidelines or go

FIGURE 7

Buy- And Sell-Side Firms Seek To Diversify Their Video Ad Mix

Base: 529 publishing/media companies, agencies, and advertisers in

Argentina, France, Germany, Italy, Mexico, Spain, the UK, and the US



Outstream

ads

77%70%69%

Instream

video ads

60%60%

72%

Banner

video ads

59%65%

54%

Agencies

Advertisers

Publishing/

media

“In the future, how important will the following video ads

be to your clients’ overall advertising portfolio?”

(Showing “more/much more important than today”)

Eighty-five percent of agencies and 82% of

advertisers in North America believe outstream

advertising will be a more important part of

their media mix in the future. Media companies

in Latin America (81%) are most likely to see

outstream becoming more important, followed

by 67% of media companies in the EU and 63%

of media companies in the US.

FIGURE 8

Outstream Advertising Has Made It Easier For Media Companies To Offer Video Inventory

Base: 86 publishing/media companies in Argentina, France, Germany,




More inventory means we

are able to execute video

sales programmatically

67%

It lets us offer additional premium

inventory for video ad content66%

It provides a better (less obtrusive)

end user experience than

other digital video advertising

60%

It delivers better ROI than

other ad formats59%

“How strongly would you agree or disagree with the

following statements about the outstream video you

offer your clients?”

(Showing “agree” or “strongly agree”)

7

deeper into the video advertising opportunity. As they do so,

they need to bear in mind that video is a costly proposition

for their buy-side clients as well. Therefore, they must

devote themselves to effective means for targeting, as well

as transparency in viewability and performance to instill

confidence in their buyers that their investment has found a

safe home.

“Premium does not have to be costly, but it must

provide a guarantee of transparency and how to

manage what clients want (through transparency).”

— CEO at a global advertising agency

8

Key Recommendations

The video advertising market can and should be a boon to advertisers, agencies, and media companies as it evolves

and matures. That said, there remains significant room for improvement to ensure this opportunity makes sense for

everyone involved. Buy- and sell-side firms can contribute to the success of online video ads by:

› Buy-side: Demanding clarity on the tough questions. It is incumbent on buy-side firms to demand

accountability for their digital video advertising buys. Prioritizing buys that help address questions around

effective targeting, setting high standards for viewability, requiring accountability on performance, and bearing in

mind the experience of your customer will show that solutions that can address these questions will be valued

more highly and influence your sell-side partners to focus on delivering to your needs.

› Sell-side: Understanding that you can be a video ad provider without necessarily being a video content producer. Using video ad formats that don’t depend on living within existing video assets are a way to expand (or

create) a media property’s available video inventory with lower cost and risk than having to create ample video

assets to meet advertiser demand. Realize, however, that buyers’ expectations for accountability are rising, and

choose solutions that provide accountability and a positive end user experience.

› Sell-side: Finding technology partners that can help you get off the sidelines. Media companies have been

held back from pursuing video advertising (either at all or as heavily as they may like), due to the hurdles of cost,

time, and employee skills that are in front of them. Look to technology partners to help cut these hurdles down to

size through powerful capabilities but also a robust service layer to support your first steps.

› Everyone: Understanding that premium ad real estate is about more than just the neighborhood. It’s only natural to consider the reputation and quality of the media brand as an important aspect of defining premium

inventory, which is agencies’ first consideration in driving the future growth of online video. However, both buy-

and sell-side players should embed performance and end user considerations into their equations for defining

which inventory to classify as premium.

9

Appendix A: Methodology

In this study, Forrester or conducted an online survey of 529 advertisers, agencies and media companies Argentina, France,

Germany, Italy, Mexico, Spain, UK, and the US. It then supplemented the survey findings with 6 qualitative interviews. The

study evaluated the current state, benefits of, and challenges and solutions to online video advertising. Survey participants

included decision-makers involved in video buying or selling at their respective companies. Questions provided to the

participants asked about their current video advertising buying or selling practices. Respondents were offered a small

incentive as a thank you for time spent on the survey. The study began in January 2015 and was completed in May 2015.

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