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The Importance of Programmatic Video Advertising

Since the Stone Age, humans like to express themselves in visuals. Experiences and traditions were told on cave walls. Complete stories were told by images and pictures.

With the evolution of media, people start to visually tell stories in the internet. Companies also started to tell their stories in digital images, hoping to reach a broader audience. Why? Images catch the visitor’s eye. It seems that static images are simply not enough anymore in today’s digital world, so companies switched to moving images: to videos.

Videos help brands to develop engaging messages to their customers, whose interest in video content is continuously growing, proven by higher click-through rates, compared to display advertising. In the era of digital advertising, it has become more and more important to publishers to offer premium video spaces, especially in-stream video advertising, as this is essential for monetizing costly video content.

What Is Programmatic Video Advertising?

Programmatic advertising in general helps brands and publishers to streamline their processes and overcome cost inefficiencies. Moreover, through detailed targeting information, it helps brands to reach their intended customers with tailored message in real-time.

The advantage of programmatic selling for publishers is that they can price in additional information about the user, resulting in higher CPMs (cost-per-mille). However, publishers have to face one incremental issue: offering quality in- stream inventory.

The Supply Gap of Quality In-Stream Inventory

When it comes to video inventory, the current demand by advertisers is way higher than the supply. This scarcity of inventory makes prices rise. Moreover, “premium video inventory is selling out through traditional digital direct sales channels“ (PricewaterhouseCoopers LLP, IAB Programmatic Revenue Report 2014 Results). Thus, publishers who possess such inventory can sell it at high prices directly to the advertisers.

Only exceeding inventory, which could not be sold via direct channels, is being pushed to be sold via programmatic channels. As consequence, publishers can control the revenue from their inventory without having to pay ad tech taxes. Furthermore, advertisers pay high prices for this inventory, but cannot satisfy their demand. Let’s call that the “Supply Gap of Quality In-Stream Inventory” which needs to be filled immediately.

Not only ad tech tax hinders the adoption of programmatic video advertising, but video advertising’s susceptibility to fraud as well. Video inventory creates higher CPMs, which is why it becomes victim of malicious parties more often than usual display ads, as videos generate more revenue for fraudsters. Also, due to an opaque value chain, it can sometimes happen that publishers act as inventory aggregators and build ad networks, which are often anonymous. These networks can be involved in so-called “in-banner fraud”, which occurs when a buyer, via a DSP, intends to buy (premium) in-stream inventory. The selling party acting as ad network pretends to offer such inventory, in reality, however, the ads are displayed in advertising banners in unsafe environments where they can hardly be seen by any user. Leading fraud protection companies estimate that this kind of fraud applies for almost 50% of video ads bought programmatically.

Solving the Problem

In order to solve the supply gap problem, it is necessary to create transparency and trust within the market by eliminating non-value adding activities. Furthermore, it should be the overall goal to bring together the buyer and seller side in a premium business network of trusted partners. Last but not least, we all know that technology plays an important role in digital advertising, so the latest technologies need to be leveraged to unleash the full power of programmatic video advertising.

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