Closing the chasm between TV and Online video. “Common wisdom” in the industry is that TV is losing ground to online video. Findings in the State of the Video Industry Survey conducted by Adap.tv and Digiday counter this perception.

1. Engagement: Closing the chasm between TV and Online video
November 2011
“Common wisdom” in the industry is that TV is losing ground to online video.
Findings in the State of the Video Industry Survey conducted by Adap.tv and
Digiday counter this perception. In fact, most brands and agencies told us that
online video advertising is a complement to television advertising, or something
else entirely – not a replacement for the mass medium. Both do share one
common denominator, however: both are being measured on engagement.
Nearly 600 agency and brand advertisers, publishers and online video
technology providers weighed in on how online video may be filling a gap for TV
advertisers. Here are a few key points that rose to the top:
• Television – especially cable – ad budgets are relatively safe for now.
The majority of ad buyers – 56 percent of brand respondents – said they
view online video as a compliment to, rather than a replacement for, their
television advertising.
• Engagement is top of mind for advertisers.
o Brand engagement is the leading online video campaign objective.
o Sharing video via social networks is considered one of the most
important ROI metrics for buyers.
o Interactive pre-rolls remain a top ad format for delivering ROI.
o iPads are a key growth area.
• Online video ad buyers dive well beyond “reach” to achieve results.
Targeting is a top criterion for video advertising buyers when deciding
which sites to patronize. Better targeting is also cited as the top potential
influence for advertisers to invest more of their budgets in online video.
Because advertisers are more inclined to work directly with publishers
than are agencies, this is an important capability for publishers to
emphasize, where they can offer it.
• Demographic data reigns. Advertisers are both conversant and
comfortable with the use of third-party data to target their interactive video
campaigns. Some 75 percent of responding advertisers achieve their

2. targeting objectives using third party data. Inversely, only 36 percent of
publishers do.
• Rates for interactive video are increasing – 92 percent of video content
publishers say their net video CPM’s were higher than last year’s by an
average of 19 percent.
• Fill rates are on the rise. Only 32 percent of publishers say that more
than 30 percent of their available video ad inventory is unsold in a given
month.
• Innovation in video advertising appears to be moving as rapidly to
mobile media as it is to online.
Executive Summary
For initiated online video ad buyers, ad budgets are poised to take a substantial
leap in 2012. For brand advertisers that have bought online video ads this year,
the projected budget increase is 47 percent. Agencies who’ve bought online
video advertising project a 25 percent increase.
Perhaps as interesting as the increase among the “converted” are the intentions
of the uninitiated. Eighty-four percent of advertisers and agencies polled who

3. hadn’t yet purchased online video ads said they plan to include digital video in a
campaign in Q4 2011 or 2012.
What has emerged is the picture of a committed cohort of online video buyers
who are prepared to migrate substantial spending from online display advertising
to digital video in the coming year. Asked from which budgets they were “most
likely” to shift spending to online video, 43 percent of agency respondents said
“Display” – substantially more than the 25 percent who tagged this category for
cannibalization last year.
Meanwhile, 39 percent – a four percent increase from last year – said “Broadcast
TV” budgets would be tapped to fund the online video increases. More than 14
percent of respondents said their spending would be incremental and not draw
funds from any other category.
For brands, online video advertising will take the biggest bite from Print budgets,
followed by Broadcast TV and then Display. Just 6 percent will represent
incremental spending. But, despite the fact that 29 percent of brand advertisers
think their Broadcast TV budgets will be asked to give at the online video altar,
the vast majority don’t see it as a replacement for TV. More than half of our brand
advertising respondents – 56 percent – said online video is in fact a direct
compliment to TV, and a third see it as an entirely different medium.

4. Jason Shulman, VP of Sales for Adap.tv commented, “Let’s all stop talking about
online video replacing TV. This data are significant and support what our industry
has felt for a long time: video is the ideal marriage between TV and online. With
TV you have sight, sound and motion. It tells a story. It evokes emotion.
Meanwhile, online is measurable, interactive and social. Digital video combines
the best of TV and the best of online. This could be a strong indicator of why
we’re witnessing such a dramatic shift in budget funds to make way for this
medium.”

5. What the data demonstrates thus far is that ad spending continues to rise and
shows no sign of slowing down. At the same time, increased budgets at the
expense of TV have become less prominent. Increased video ad budgets are not
coming predominantly at the expense of TV budgets, as was previously thought;
in fact, advertisers are embracing online video as an ideal complement to their
TV buys. Which begs the question, “What’s helping to close the gap between TV
and online video?” When we took a deep dive into the data, the common
denominator was clear and consistent - engagement. It is top of mind in several
key areas including metrics, formats, objectives, targeting and emerging devices.
The following is a look at some of the key indicators.
Engagement was the stand-out differentiator when it came to the primary
objectives for buying online video advertising. Brand engagement was the clear
winner here, with 68 percent of respondents putting it at the top of their list, a
four-fold increase over last year’s responses.
We asked advertisers and agencies, “What are the most important metrics for
measuring your online video campaigns?” and their answers were entirely in
synch. “Completion rate” remains “king” in determining the efficacy of an online
video campaign. But brand lift is a close second, with 70 percent of agencies
saying they use brand studies to determine this. And “Sharing via Social” came
out of nowhere to land in the third most important metric of success, ahead of
both click per view and click through.

6. In hindsight, it seems likely that those publishers first or most-able to harness the
capacity for consumer-driven video sharing – and to measure its effects – will be
among those best poised to profit from pent-up digital video advertising demand.
But, back to what advertisers value, we found it significant, given all the media
buzz surrounding an “online GRP” measurement, that the three metrics – GRP,
TRP and CCP – we added to “speak the language” of TV buyers, trailed the list
of metrics ad buyers use to measure online video ad results. None of these
responses was rated “most important” by advertiser respondents. Rather, brand
buyers want what they’ve always wanted: actual proof people watched.
Interactivity generally is viewed as delivering the highest ROI among video ad
units by brand advertisers and agencies. Advertisers put “rich media overlays” at
the top of their performance list, while, for agencies, it’s “content integration.”
Pre-roll remains a staple for online video for both buyers and sellers. Eighty
percent of video publisher respondents said more than half their digital video
revenue derives from pre-roll. Unfortunately, less than half of ad-supported video
publishers (49 percent) offer the most popular interactive ad units among
advertisers and agencies: rich media overlay and interactive pre-roll. Expanding
inventory options therefore would represent an easy “win” for online publishers.

7. Certainly targeting leads to engagement, and the ability to target online video ads
is a major differentiator for both brand advertisers and agencies that use the
medium, and for the publishers they select to host their video ad campaigns. In
order of practice, both advertisers and agencies target by demographic, content
category, behavior, geography and with re-targeting, with agencies employing
these targeting methods by double digit percentages more often than advertisers
alone. Among our survey respondents, three-quarters of advertisers (75 percent)
who fielded online video campaigns this year achieved their targeting objectives
using third party data. You might therefore expect that successful video
publishers made similar use of such data, but this seems a missed opportunity.
Our survey revealed that only 36 percent of publishers who support their efforts
with digital video advertising use third-party data to target video campaigns.
Because advertisers are more inclined to work directly with publishers than are
agencies, this is an important capability for publishers to emphasize, where they
can offer it.

8. Indeed, our survey revealed that “Targeting Capabilities” is the number one
criterion advertisers and agencies have when deciding which sites to work with.
Agencies then parse by “Measurability” and “Audience Composition.” Advertisers
favor audience reach, then composition. Price drops to a mid-tier consideration,
perhaps because if the video ad finds the right audience target, it’s worth what
you pay for it.

9. Last year we inquired about emerging devices to determine whether it was in
fact, a truly “emerging” sector for online video. The fields were limited, so this
year we broadened the question and asked both advertisers and publishers
about specific brands of devices. Out of all of the emerging devices we inquired
about, video ad spending on the iPad showed the most significant increase, up
18% from last year. Adding to the indicators of engagement, the growth in iPad
adoption could very well be attributed to the idea that it’s the most popular device
because it delivers the ideal mix of TV and video exceptionally well. Publishers
also saw the bigest increase in adoption for the iPad giving them a prime position
to win at monetizing emerging devices. Not fairing as well this year for
advertisers was connected TV which remained flat year over year.

10. In short, online video ad buyers already view targeting, reach and desirable
audience composition to be differentiators for online video advertising. Making
the medium engaging and measurable is what will cause more ad buyers to open
their wallets in 2012.
On the opposite side of the industry spectrum, we took a look at the publishers in
an effort to understand how the closing of the chasm between TV and online
video buying was playing out for them. Essentially, are they selling more video
and earning higher returns?
Publishers are experiencing success. Some 60 percent of video publishers who
sell advertising report a 50 percent or better sell through rating through June of
this year. This is up 14 percent from last year, when only 46 percent of publishers
had this type of success in the same time period.

11. Regardless of platform, it’s broadcast-quality video that continues to command
premium prices. Asked to select the average gross CPM for various kinds of
online video, more than half of advertisers (55 percent) said broadcast video
commands a rate of $21-$30, while 46 percent of advertisers were equally likely
to pay $11-$15 or $16-$20 for “mid-tier,” professionally produced online content.
Half of respondents put the value of user-generated content at between zero and
$5 average gross CPM.

12. However for all publishers, net video CPMs are up. Asked how their current net
video CPMs compared with 2010, 92 percent of publishers said they increased
by an average of 19 percent. Decreases, where noted, averaged just 4 percent.
Among ad-supported video publishers, the percent of their total online ad
revenue that derives from video, the majority (61 percent), said less than half, but
for 12 percent it’s greater than 91 percent.
The largest group of respondents – 35 percent – said less than one-third of their
inventory is wasted in a given month. But only a quarter of respondents are
operating at more-or-less “full capacity.”

13. Key Takeaways
• The interactive industry needs to stop talking in terms of “when the TV dollars
will move to the Web” and explore more inventive ways to make interactivity a
component of every television ad campaign. Advertisers and agencies don’t
consider interactive media as a replacement for either TV or cable.
• Interactivity will drive innovation and spending in online video in the coming
year, but it may come not just from interactive pre-roll, but via social sharing,
and the tracking of such interaction by consumers. Premium video content
providers looking to hang onto or expand their revenue gains in this medium
need to explore sharing extensions of their own video and that of their
advertisers for maximum reach and engagement.
• Mobile video is top of mind for experienced online video advertisers, and isn’t
perceived as that much of a technological leap beyond online video by
prospective video ad buyers. Publishers looking to expand their hold on the
medium should be looking at both the IOS and Android for expansion.
• Put another way, video content providers and buyers who don’t tap the
medium’s capacity for social sharing and audience targeting, will miss the
next wave of digital video ad adoption.

14. What does the future hold for online video advertising in 2012?
2012 predictions among all respondents included some of the following:
• It will grow tremendously as the costs continue to replace expensive TV
advertising production
• More opportunities and increase[d] budget
• More social networking
• A significant increase in online video ad spend- it is the new cable TV
• Increases in spending
• Better targeting and more integration within buys
• More cross-platform buying
• Consistency of formats, ease of measuring, and continuing to close CPM gap
to TV
• A shift to mobile video
• Ad network consolidation
• Advertiser selection of content, instead of publisher page contextual targeting
• Better measurement via Nielsen and other research orgs which will help bring
more ad dollars from TV
• Brand-relevant metrics Engagement doesn't get close enough to the brand
marketer's overall goal of driving awareness, purchase intent, etc.
• Buying through RTB environments or automated trading
• Connected TV interaction
• DSPs and SSPs becoming increasingly important flexibility to deliver in
banner video greater emphasis on engagement (over click and completion)
• Hoping for better standardization of standards and technologies
• Increased budgets and more available inventory
Methodology
Adap.tv and Digiday partnered for the second year in a row to take a deep dive
into the perceptions and practices shaping the Internet’s digital video advertising
market. Nearly 600 agency and brand advertisers, publishers and online video
technology providers weighed in for this survey, which was conducted in
September 2011. Digiday’s surveys poll emerging media practitioners that have
demonstrated an interest or expertise in the emerging medium that is the topic of
exploration. For the current survey, agency execs led participation at 47 percent
of respondents with brand advertisers combining to bring the buy-side input to
just over 60 percent. The 111 participating video content publishers represented
23 percent of respondents, with advertising network, DSP and SSP technology
and service providers weighing in at 17 percent. Each cohort was offered slightly
different questions about the shape and perceived direction of the video
advertising market in which they participate, tailored to their market vantage point
– except where we sought to explicitly compare their expectations for and
investment in this particular medium.

15. Adap.tv and DIGIDAY will continue to survey digital advertising and publishing
practitioners in this fast-moving marketplace twice annually. If you’d like to be
included in our next outreach, please email Melinda Gipson at
Melinda@digiday.com.
For more information about this report, please contact marketing@adap.tv.
Adap.tv
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San Mateo, CA 94403
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