The main takeaways from VideoNuze’s fifth annual Video Advertising Summit are that this industry is young, enormous, and growing. It presents a massive opportunity for the latter half of this decade, and no one has quite yet figured out how to capitalize on its potential.
This post uses discussions at VideoNuze’s Video Advertising 2015 to frame the path the online video industry will course over the next half-decade: there will be multiple winners, content is as important as it’s ever been, and the race for context is just beginning.
Everyone Gets a Trophy
The digital video market is already large and split into many pieces—but it’s only going to become larger and more fragmented. Ad serving, ad buying, content creation, and content distribution constitute major components of an ecosystem that will serve even more niches than it does today.
The digital video ecosystem already supports multiple video players, including plug-and-play and extensible ones. Multiple ad networks serve the medium. And of course, there will be multiple syndicators (of course, there’s a certain one you should use to guarantee high-quality distributors!).
Crucially, there’s also room for more content creators than there have ever been before. As Ben Thompson, a tech industry analyst, notes, only the best creator will win out in any individual niche, because the marginal cost of distributing content on the Internet is effectively zero. However, the number of niches is enormous, and this will help ensure that off-the-wall passion projects can actually provide sustainable businesses for even sole proprietors.
The companies that get built atop groups of such creators—ones that, for instance, provide them with access to easy, interest- or motivation-based distribution, are poised to minimize their own risk while providing great value to creators. Note that at the root of each of these innovations are the people actually creating content. This is the next big lesson of VideoNuze.
King Content is Dead; Long Live King Content
At the turn of the decade, it seemed like technology companies were set to remake the video industry in its own disparately-distributed image, just as they had with music a decade earlier. Yet if there’s any lesson to be drawn from the explosion of online video and the relatively limited proliferation of online television, it’s that the content itself still very much matters. In economic terms, an episode of a specific tv show is a highly differentiated good—you can only get a specific episode of Community, for instance, from the outlet that’s selling access to it.
Television networks are themselves cautiously responding to the opportunities online video presents—see HBO Now, Showtime’s forthcoming service, and a number of online initiatives from traditionally analog providers—but they are doing so on their own terms because of the control they exert over this good. Because there are so many niches, though, the content creators that “matter” still exhibited incredible growth over the past few years. Multiple Video Ad Summit panelists cited polls that crowned YouTube stars the most important celebrities to young people. Certainly one element of the shift to digital will be experimenting with ad formats on traditional television programs, but quite another continues to be experimenting with expanding the reach and influence of online native creators.
This leads to one of the day’s biggest realizations: monetizing video will be most effective when that content is “premium,” but the understanding of the word “premium” has to change. The demographics of apps like Snapchat and enormous YouTube followings indicate that these are very strategically important playgrounds going forward. Rather than the guarantee of viewership when there was just one video distribution channel—television—there are many disparate ones and they’re all key to a successful video strategy. Premium content isn’t 22 minutes of scripted entertainment plus eight minutes of advertising—it’s whatever is most relevant for the audience, when the audience wants it.
Context is Also King
If the importance of content is obvious now, the industry is only just beginning to align around the paramountcy of context. Adam Schlecter, Chief Investment Officer of Digitas LBi, remarked that the same human will want different experiences across the different channels they visit—that depending on what they’re doing, “they have different mindsets and different goals.” This sentiment echoed throughout the conference, and across media new and traditional.
Hearst’s Neeraj Khemlani explored the idea of how content is becoming less about the network it’s on, and more about how it’s moved around and monetized—he cited examples of shows that originally developed online, or that got popular online, and then experience ratings boosts in the following seasons. The lesson here is that the viewing context matters deeply in making programming decisions, and that the platform where something is developed is not necessarily the platform where it will thrive. Presenting your content in different contexts can unearth insights about its ideal placement. Experimentation is key to connecting to your audience on its terms, expanding your reach, and maximizing your revenue.
Michelle Bandler of Google discussed YouTube—where context, too, is essential. For instance, according to Bandler, TrueView, which allows viewers to skip ads after 5 seconds, is their most effective unit. Unintuitively, though, the ads within that format that perform best are the longest, which Bandler attributed to the creative being put into the online ad formats improving. TrueView is perhaps the ultimate ad unit in terms of respecting the user’s context—users who need to get to the content immediately and those for whom the ad does not resonate are able to move forward, while those with the time or inclination to watch the ad are able to.
Conclusion: In Youth, Opportunity
As big as online video is already, the industry is poised to continue to grow. This means a few things:
- There is still time to get in on the ground floor of a huge cultural change that affects how we consume news, entertainment, music, and more.
- A small piece of the video pie in relative terms can still be large in absolute ones: online video will be the medium of choice for a generation that never purchases cable and a global contingent that never even owned a television.
- There is space for businesses we haven’t even begun to imagine on television: as an industry ages, it calcifies (see: Windows, AT&T, etc.). Even heeding my point about the fact that small niche players can still have outsize impacts, there will be some winners that are larger than others. Who they might be is for anyone to decide right now.
But besides opportunity, there is also risk and the certainty of occasional failure. Nothing has calcified yet because the industry isn’t sure as a whole what will work. Large advertisers continue to hedge and keep large portions of their budgets on television. Not every idea will work; only those that ensure consumers get continued access to what they want in the most convenient way that respects their myriad contexts will be successful. The companies that succeed will be taking risks, and delivering new experiences for discovering videos that are best for the people watching them.
That’s an exciting prospect.