The definition of the word ‘spec’, at least according to the first result when Googled, is “in the hope of success but without any specific plan or instructions.”
To me, this describes perfectly the current state of digital video across South East Asia. That is, the industry is aware that consumer demand for video is increasing and overall spend is increasing, but there is lack of a clear roadmap as to how advertisers can diversify away from YouTube buys and how publishers can optimise their video inventory.
Let’s take a look at the numbers.
The latest research by Media Partners Asia released at the APOS Summit in Bali, showed that online video across Asia Pacific continues to grow at pace, increasing by 47% in Asia Pacific ex-China to US$3.6 billion in 2017 and projected by MPA to climb at a 17% compound annual growth rate (CAGR) between 2018-23 to reach US$10.7 billion by 2022. Within this, Japan and Australia remain the leading markets for online video (contributing more than 55% to Asia Pacific revenues ex-China in 2023). Southeast Asia is the second-fastest growing region, with a 21% CAGR between 2018-2023 (with India the fastest with a 26% CAGR over the same period).
The Southeast Asian Dilemma
Although online advertising spend in the region is beginning to accelerate, a rising tide isn’t floating all boats. YouTube, whilst a globally dominant video advertising platform, is taking a disproportionate majority of advertising dollars due to specific anomalies of Southeast Asia. Indeed the Digital Advertising 2020 report recently released by Salesforce showed that 18 percent of digital ad spending goes to YouTube in our market – versus just 11 percent in the US market.
So what’s the problem?
To begin with, our regional legacy infrastructure means that cost has been a significant inhibitor across the supply side. With CPM rates for video significantly lower in the region, and video serving rates higher, there is limited incentive for publishers to invest in premium video content to lure advertisers away from their tried and tested.
When you add in the cost of broadband for consumers, particularly in mobile environments, along with a poor user experience in more developing markets, it’s no surprise that the region is yet to leverage the opportunity online video ads promises.
Indeed, it seems to me that we are at an impasse. Publishers are disinclined to invest in premium inventory because the dollars don’t justify it and advertisers and agencies are loath to raise their budget, both of which serve to maintain the current status quo.
The problem with this status quo (self-interest aside) is that if publishers fail to invest in and/or fail to realise the investment in premium video content, then the wider media ecosystem begins to be impacted. After all, whilst not many people may profess to love advertising, it fuels the plethora of free entertainment, media and services across Southeast Asia that is vital to so many of us in our every-day lives.
So how do we move forward from the current status quo?
Breaking the Cycle
In the short to medium term, publishers and advertisers can embrace formats like outstream video which don’t require video content to run.
However, in the medium to longer term the current impasse needs to be addressed. This means that, on the one hand, publishers may need to accept the need to invest heavily in in order to establish premium inventory, whilst, on the other hand, agencies and brands will need to be persuaded that the benefits of a diversified online video advertising spend are worth the increased CPM investment.
It feels a lot like a chicken and egg situation, but my feeling is that the first step should come from publishers who need to take a leap of faith and build out their premium inventory so the brands will come. Already we are seeing a number of OTT players in the SEA market achieving success on this front, but there is so much more other publishers could do. The online video advertising opportunity in Southeast Asia is significant and we should be putting every incentive possible before the brands so that they share their budget and their campaigns beyond the one ‘easy’ basket.
Yogesh Sehgal is country manager, Asia, Rubicon Project.