‘Audience Extension Gives Top Publishers a Much-Needed Lifeline’, by Ian Monaghan, Head of Advertising Operations, TubeMogul

The resounding success of Netflix and Kevin Spacey’s online-only series, House of Cards, has been heralded as precedent-setting by expanding the reach, exclusivity and cachet of content streamed online. This is part of a broader trend, as users are voting with their feet where it comes to watching on-demand services, as opposed to making sure they are on the sofa on time for their favourite show, at the original air time. YouGov released findings in 2012 that found that 41% of 18-24 year old viewers in the UK are more likely to watch VoD than linear TV services, a number that advertisers are more than 41% likely to be taking notice of!

Although advertising budgets are following viewers online, many publishers are, paradoxically, struggling. Why? The bulk of video ad spending is tied up in direct deals with a few top publishers, who do not have enough video inventory to meet demand. Meanwhile, viewing patterns are as diverse and spread out as the web itself, with viewers watching everywhere from YouTube, to a broadcaster’s site, to niche blogs.

The result is less revenue for all involved. At top-tier publishers, sales executives complain that they do not have enough video to sell, and that there is no money in display (indeed, CPMs for display ads are declining in real terms, to £0.69 in 2013 according to TubeMogul data, while CPMs for video ads are increasing). Others do not meet demand but have huge, loyal audiences.

Programmatic buying offers a way out, allowing top-tier publishers to sell existing advertisers on an ‘extended audience’, retargeting their viewers around the web and serving them relevant ads. For instance, if an advertiser offers up £50,000 to buy video ad space, but the publisher only has £30,000 worth of impressions, rather than leaving the extra money on the table, publishers can offer advertisers the option of reaching the exact same viewers on other sites, complete with standardised reporting on the results.

As with any online or offline transaction, the target customer or viewer doesn’t cease to exist, they just move. Although this ability – driven by cookie-laden browsers and retargeting – has existed for a long time, it is still relatively nascent in video, especially among publishers.

Within online video, the margins are high – advertisers will pay a publisher seven times more to deliver a pre-roll video ad than they would to deliver a conventional display ad. It is, therefore, attractive for publishers to be able to offer up ever more pre-roll inventory, if what’s available on their site falls short of demand.

For publishers, the mechanics are fairly simple. On every video stream, a publisher fires a small line of code (a pixel) – usually powered by a data management company or a buying platform – and uses the resulting segments to retarget and buy ads across video ad exchanges. As a campaign proceeds, publishers can easily report on the results to advertisers in a transparent way, with real-time statistics on cost, completion rates, viewer message recall and much more.

If an audience sale is integrated into a platform that evangelises full transparency and accountability for where an ad is placed, the advertiser will still be able to pinpoint where they do or don’t want their ads to be shown to make sure their message is still being placed in the ‘right’ areas of the web for the brand.

To advertisers long-accustomed to using content quality as a proxy for audience demographics and engagement, this is likely a familiar proposition taking on a new form. Judging by the numbers of publishers jumping on the audience segment-buying bandwagon, this trend has staying power.