Forrester: 2017 could be the year for OTT advertising
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Michelle Clancy
| 05 February 2017
Professional, premium video is the only segment that has viable ad rates, and so far there’s been little of that content available in ad-supported over-the-top (OTT) services. But 2017 could be the year that starts to change.
And solving this problem with advertising-supported online video sets up the potential for huge and brand new monetisation opportunities.
Compared with paid services like Netflix, Amazon Prime, Hulu and HBO, ad-supported, TV-style online video has been slower to see adoption, mainly because these services tend to lack content. And without eyeballs, providers can’t charge ad rates that allow the business model to work.
“Traditional TV providers control much of this content, and they’ve been cautious about making their programming available outside the lucrative TV bundle,” explained Forrester analyst Brandon Verblow, in a report.
“Even if many viewers want to cut the cord, they may not follow through as they realise they cannot get all the content they want. YouTube, of course, has a massive ad-supported online video business that has been growing healthily according to our calculations. However, even YouTube falls short of Netflix in terms of downstream bandwidth consumption, and its estimated ad revenue is only a small fraction of traditional TV ad revenue.”
For online video ad spend to show meaningful growth, consumer-generated or web-only content won’t be enough — Verblow said that the segment’s growth will require the migration of traditional TV content to digital platforms.
Fortunately for those hawking spots, there are signals that 2017 could be a bellwether year for such activity. For instance, the launch of AT&T’s DirecTV Now OTT service in November 2016 created critical mass for the “skinny TV movement” architected by DISH Network’s Sling TV service. Now, there’s significant corporate weight behind online ad-supported video given that AT&T is the largest pay-TV provider in the US.
Into this fray come Google’s YouTube and Hulu, both of which will reportedly launch livestreaming OTT TV services to be paired with its existing on-demand video offerings. Both have an expected price point of under $40 per month and will benefit from large existing online video bases. CBS content is now slated to appear on the upcoming Hulu live streaming service and could also start appearing on other OTT offerings, such as Google’s service and DirecTV Now.
“CBS’s entrance into OTT packages would round out content availability from the four major networks – allowing these new OTT services to better compete with traditional cable/satellite TV providers,” Verblow said.
All of this activity will directly translate into online video ad spending, according to Verblow. However, to capitalise fully, distributors and advertisers will need to pioneer cross-platform approaches to engagement.
“What is the significance of online video ad growth if it becomes primarily driven by the migration of traditional TV content to digital platforms?” Verblow said. “If viewers are seeing the same video content with the same video ads that are also bought and sold as units within programmes based on Nielsen GRPs, whether those ads appear on traditional or digital OTT channels is not very meaningful.”
Instead, in a ‘post-digital world,’ the line between traditional and digital content is irrelevant to consumers.
“Marketers will need to develop screen-agnostic planning and execution to reassemble the audiences that fragment across these screens in order to achieve their reach, frequency and communication objectives,” Verblow recommended. “Going forward, it will be important to track innovations such as audience-based buying, whether ads are targeted to specific users or whether ads are interactive. These are the factors that have the potential to generate incremental value and the ones that should really matter to advertisers and content providers.”