Brands and publishers prepared to play the long game to push up online video CPMs

Advertisers and media owners expect online video to pull budgets from TV, search and display but agree the migration will be slow due to the challenges of shifting to engagement metrics rather than reach to replicate TV’s high CPMs.

Linear viewing may be nearing its death but TV as a medium remains strong. This prospect dominated this year’s Financial Times Media Summit with industry luminaries from Yahoo, IBM Global, Maker Studios and Storyful debating whether online video is sustainable and capable of replacing linear TV.

It comes down to the issue of cost per impression (CPM). For online video to truly dominate, brands and publishers alike need it to match the CPMs of TV. Video offers higher CPMs than display but at a shorter half-life whereas longer form content has a longer shelf life and reach. However, simply repurposing a 30-second TV spot will no longer cut it in the move to richer, longer viewing, meaning that original content has to come to the fore in the most effective video campaigns.

It is why there are currently 47 series on Yahoo currently and why Maker Studios grew 60 per cent in nine months last year. The appetite for video is clearly there with nearly half (49 per cent) of time spent on mobile actually on watching video that is not available on TV channels, according to Yahoo’s senior vice president for EMEA Dawn Airey.

This insatiable appetite for content is reflective of its rapid propegation across the net. In a world where the flow of video is seemingly unlimited, it’s not as simple as churning out premium content to hike CPMs. Companies are aware they need to explore different monetisation models in order to boost CPMs.

Yahoo, for example, has over a billion monthly average users and is working to leverage that reach, and consequently CPMs through the combined offering of its Brightroll data management platform and Flurry mobile app network. The idea being that with the integrated offering the media business and its advertisers can make money out of long-form, personalised content in the free-to-air environment.

Rene Rechtman, head of international at Disney-owned Maker Studios, said the sheer volume of video out there is depressing prices. “You’ll see that the majority of content out there will get decreased CPMs and you’re already seeing it in YouTube’s latest earnings,” he continued. "You’ll see differentiation on pricing according to channels, quality of content and also engagement. Reach is unlimited on social but engagement is the new currency.”

If premium content creators are going to boost CPMs they must reasses their priorities when it comes to the reach versus engagement of their videos. The abundance of content online also means that people are increasingly searching for quality video that they could be willing to pay for. Video will go from 50 per cent of all consumer internet traffic to 80 per cent by 2018, according to IBM and 72 hours of new video are uploaded to YouTube in one minute.

To help distil this accessibility, personalisation will be paramount, particularly as access to video shifts further to social. Speakers at the summit were united in their calls for different engagement metrics and creative formats to launch in order to forge that one-to-one relationship with video viewers.

Daniel Toole, executive partner and media and entertainment industry leader at IBM Global Business Services Europe, said the “big fight” would come from how advertisers respond to the personalisation problem to make their content contextually aware.

“It’s about how we can use that relevancy to leverage higher CPMs in what has traditionally been a low CPM environment in online,” he continued. “There is a lot of pent up demand for it. We haven’t quite closed the gap on the CPMs but we’re getting there.”

Advertisers are used to a measurement philosophy with broadcast that they just aren’t getting with digital. Online video platforms have ballooned but advertisers, agencies and media owners are yet to figure out what to do in these environments.

Rahul Chopra, chief executive of Storyful, said: "Google may be providing some sort of engagement metrics but most of them aren’t on a par with what [advertisers] are used to. For companies that are spreading content across multiple platforms, their ability to tie that all in and have one true number is just not there. It will hold CPMs back."

Online video spend is growing rapidly but still has much catching up to do. Indeed, it only accounts for 6 per cent of Channel 4’s revenue despite working with a broader range of advertisers across a broader advertising canvas over the last 12 months.

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