TV ad budgets stagnate as US TV buyers embrace digital video and programmatic

US brands are shifting budget from their traditional TV spots to increase digital video ad spend, in order to catch up with audiences’ media consumption patterns, and considering taking their TV buying in-house to ensure greater transparency, according to research released yesterday (21 October) by AOL.

US digital ad spend is tipped to surpass $58bn this year, and digital video is set to account for $7.46bn of this number, demand for mobile formats said to be one of the chief catalysts for this change, according to the study entitled The State of the Digital Industry.

The findings, based on a survey of over 300 advertiser, agency, and media owner executives, indicate that TV ad spend is beginning to stagnate with spend on online video up 42 per cent compared to 2014.

Spend on mobile video is set to increase 18 per cent from 2014, and survey participants also noted that programmatic media buying technologies would play a crucial role in this transition.

Almost all (91 per cent) of brands and agencies surveyed are now buying video programmatically, with 81 per cent of media owners claiming they sell video inventory programmatically - a 37 per cent leap from the year beforehand.

Another significant trend in this shift is the rise of branded video ad formats, with advertisers and agencies devoting over 30 per cent of their overall video budgets to branded video content this year, with this set to increase by 10 per cent over the next year.

Dynamics driving the trends

The results were unveiled at an event hosted at the online advertising giant’s New York headquarter, where Joanna Foyle, AOL, SVP of client services and operations, explained that the increased investment in digital video was at the expense of traditional TV budgets.

“TV is probably the largest area where budgets are getting tapped now,” she explained. Further drilling into the details, she added that half of all participants on the buy-side were transferring budget that would normally have been spent on traditional TV spots into digital video.

She then further delved into demand for mobile video ad formats, adding her personal opinion that the forecasted 18 per cent growth was “a bit modest”, although she explained how challenges around viewability, and targetability are the likely reasons for this caution.

Programmatic TV is also gaining popularity as audience fragmentation hits an inflection point, according to the report. Over the next year, 41% of television buyers surveyed plan to rely on programmatic technology to make more strategic TV investments - this represents a threefold increase compared to 2014, according to the figures.

Media owners are now embracing programmatic

Foyle also claimed that media owners are increasingly willing to sell their video inventory using programmatic technologies due to the emergence of private marketplaces (where buyer and seller agree media costs upfront, and the media placement is then automated).

“There was some reluctance among publishers to put their video up for sale programmatically, as there was concerns about price erosion,” she said.

Now 40 per cent of the publishers participating in the survey are engaging in such a model of selling, she added.

Also participating in the event was Michael Law, EVP, managing director, of Dentsu Aegis Network's Amplifi - he controls circa $4bn of ad spend per year - who also said he thought the shift from TV to digital was actually more aggressive than the survey suggested.

However, he did add that the measurement issue would have to be addressed if the rapid growth rate was to be sustained.

“It's tough, and hard to say that any one ad or piece of content and attribute that to a sale, so it's still about the broad media mix,” he said. “There are issues around viewability, and we need to find some kind of common metric for these."

In-housing

The report also examined advertisers' attitudes towards transparency, and asked participants if they were in the process of, or considering, bringing their programmatic video buying in-house, with 68 per cent claiming it was under consideration at least (see chart below).

Commenting on the numbers, Foyle commented: "It's easy to say, but much more challenging to do, it will be interesting to see how that statistic plays out over time."

Speaking with The Drum on the sidelines of the event she aadded that this was indicative of a growing realisation among marketers that a fragmented ecosystem meant that multiple players were siphoning-off parts of their media budgets.

"They're starting to realise the 'technology tax', and that plenty of people are taking a bite of the apple. However, it [in-housing] is wildly challenging."

She went on to say that many brands are starting to ask about the possibility of making such a shift in their media-buying strategies (which poses the potential of disintermediating media agencies.

When asked what brands must consider if they are determined to perform such a move, she said that those that already have centralised media-buying strategies would be best placed to do so.

"You have to ask yourself if you have a DMP [data management platform] that is collecting data with a common taxonomy [so it can be compared on a like-for-like basis]. You also need a whole different type skills sets."

The Drum asked Foyle how the in-housing statistic measured up against this week's revelation that the ANA has selected K2 and Ebiquity/Firm Decisions to lead an investigation into media transparency over rebates between media agencies and publishers.

She commented: "The calls for transparency are clear. You have to look at how brands are interacting with our AOL One product [which is geared towards reducing the 'technology tax']. Those that have clearly are making decisions around that. Clearly there's a call for change."

AOL was making the presentation to a host of media buyers. A full copy of the report can be downloaded here.

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