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DPP - The Future of Video Advertising

What will video advertising look like in the future? (1 / 3)

Context

Advertising spend on digital now outpaces TV – and is also shifting rapidly towards mobile. But currently video advertising makes up only 11% of global digital advertising spend. So the shift appears not simply to be away from TV as a platform, but away from video as a medium. Meanwhile the video creation industry is also seeing a huge shift – away from TV towards online, and towards mobile. Could these parallel developments spell a bigger problem for the media industry than is currently acknowledged? The changes in both advertising and video consumption are being driven by consumer behaviour. By definition, those changes suit consumers well: they get video where and when they want it; and they get adverts that are more tailored to them – or that they can avoid altogether.

But does a model of online video consumption with fewer, or no, adverts suit the content creation industry? After all, the history of television is to a great extent the history of television advertising. State funded broadcasting aside, advertising has been the primary source of funding for content for decades. Historically, when we say ‘commercial TV’ we mean TV with adverts. It is a relationship that has built some of the greatest TV networks in the world. Equally, it has long been held as axiomatic within the world of advertising that the medium which offers the best return on investment is TV – or, more specifically, linear TV. So, can the two industries of advertising and the one-formally-known-as-TV (now better known simply as video) afford to develop their digital futures in isolation? Do we need to develop an online, mobile equivalent of commercial TV if content creation is to have the funding model it requires to ensure creativity is sufficiently well rewarded to go on providing high volumes of quality video deep into the future? 

At a special DPP AT HOME event at IBC, Amsterdam the DPP, enabled by Mindtree, brought together around 20 senior leaders to discuss this question. The debate was framed by special guest speaker Lindsay Pattison, Chief Transformation Officer for WPP and GroupM.

The Conversation: Lindsay Pattison CHIEF TRANSFORMATION OFFICER, WPP & GROUPM

LINDSAY PATTISON Every single client, in every single category is challenged at the moment. Two years ago, the World Economic Forum talked about the fourth industrial revolution – a technological revolution which has profoundly changed the way we all live and work. It’s a revolution that has had an impact on every single industry and it’s having a profound impact on advertising, communication and marketing.

We spend $114 billion a year on behalf of our clients all over the world. We spend $5 billion with Google; around $2 billion with Facebook; but we also spend very large amounts of money with broadcasters and any number of other so called ‘traditional’ clients.

Those clients are under huge amounts of stress. They are under pressure to grow their top line revenue; their margins are decreasing, and they’ve got challenger brands from non-western markets. The pressure to prove return on investment is harder than ever. And the pressure to prove effectiveness is difficult in an omnichannel world with lots of different options, lots of different data points and an inability for us as an industry – if you think about video, TV and all the other channels – to really look at measurement in a unified way.
So in a world where everyone’s under stress, how do we prove the efficacy of any channel of advertising in a way that compares apples to apples? The fact is, we just can’t. 

That’s why more pressure is put on video or TV advertising. Right now there is a swing back to TV from a time – perhaps three or four years ago – when marketing directors would say, “my consumers are spending 30% of their day online, but only 5% of my budget is online, and very little of that is on mobile, so I’m now going to spend 60% of my budget online.” It was crazy. But this rush to online was because people felt they could trust the metrics. Now, however, everyone knows there were challenges with the metrics – challenges with marking your own homework, challenges around safety, piracy, privacy, and so on. So that has brought a move back towards premium quality content delivered by trusted content providers.

MARK HARRISON And yet the metrics on TV were never very scientific, were they?

LINDSAY PATTISON No, they weren’t. BARB was always held up in the UK as one of the best standards, but BARB measurements themselves are challenging. As someone said to me yesterday “You know with TV what you’re getting – the ratings – but you don’t know if someone was in the room when the ad was showing.”

People felt that online gave them hard metrics and then realised that maybe that wasn’t quite the case; and now it’s acknowledged that TV metrics are flawed too. So none of the forms of measurement are particularly good – and that’s a problem.
Nevertheless, 2018 is a seismic year, with digital advertising overtaking TV advertising for the first time in terms of media investment globally: 39% on digital to 38% on TV.

MARK HARRISON: It’s said that TV represents a return on investment for advertisers that is around double what they get for online video. But could it actually be that the true ROI for online is being masked by how unreliable the TV measurement really is?

LINDSAY PATTISON: The metric that most of our marketeers would use for ROI would be econometric – that is, statistical modelling to understand the impacts of different channels over time. Now, econometric modelling was invented by FMCG [Fast Moving Consumer Good] companies to prove that TV really worked. So broadly, econometric modelling will always tell you that TV works better than anything else. But that’s because it’s based on modelling that looks at when you’re advertising and when you’re not advertising. When you get to digital, however, which tends to be always on, it’s very hard to replicate that model.

Having said all this, when it comes to softer, but really important, measures such as brand awareness, saliency, changing perceptions, moving emotions, and those harder things that work over the longer term, TV is by far and away the most proven and effective channel from a brand perspective.

MARK HARRISON: So, if WPP could choose the future, would you actually choose for linear TV to go on and on?

LINDSAY PATTISON: Yes. We really want linear TV to go on and on. If you look at statistics from the UK, 71% of all video viewing is TV; and of that, 56% is linear TV. But 95% of video advertising is TV, and of that 85% is linear TV. So live content that funds or is funded by advertising, is really important to the advertising industry and therrfore to agencies and to advertisers.
Nevertheless, we would like to see it do better. If you go back to 2012, just 39 of the top 100 programmes in the US were live sports programmes. But last year 88 of the top 100 programmes were sport – which is why companies are spending so much money on sports rights, and why some of the FANGs [Facebook Apple Netflix Google] are rushing after sport.

If you go to Australia, meanwhile, only 2% of programmes have a nine plus rating – meaning they reach 9% of their target audience. That means very few people are watching at an aggregated level, which is what matters to advertisers.
So TV viewing is massively fragmented – and that’s not helpful.

MARK HARRISON; You’re describing an attachment to the linear TV model that is historical and endures despite deficiencies. But isn’t there also another reason for that attachment, which is about brand safety? On TV you know what your advertising content is going to be sitting beside. Does that make linear TV feel very comforting?

LINDSAY PATTISON: That’s certainly an argument. You know what you are getting. Broadcasters are taking responsibility for the content they are providing, curating and putting out, because they know that they’re funded by advertising. There are other platforms and media owners who are certainly making money from advertising, but who take less responsibility for the content that is on their sites.

There are challenges online with brand safety, with verification, viewability, non-human traffic, and it’s challenging for advertisers because they now have a lot of technology costs to ensure that media is placed in the right environment.

But not everything is a platform’s fault either. We have to work with the media owners and platforms to make sure the environment is safer, because non-human traffic and piracy are criminal offences. It’s not something that’s just a Google, Facebook or Twitter problem.

So as Group M, we will continue to support the advertiser-funded model of linear TV because we need it, and our clients need it. But we will also invest in technology that makes it better; and we’ll spend money with the new players. We have to spread our bets because we need to be where our consumers are on behalf of our advertisers.

MARK HARRISON: And if you had to name the one thing that would mitigate the risks what would it be?

LINDSAY PATTISON Collaboration. Collaboration between broadcasters and advertisers; between broadcasters and online platforms; and between everyone around developing common means of measurement.

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