It’s the 1940s All Over Again in the Digital Video Ad Market

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ADOTAS — On July 1, 1941, Americans tuning into a baseball game between the Brooklyn Dodgers and Philadelphia Phillies on their grainy black-and-white television sets saw something for the very first time: a commercial. The 10-second ad for Bulova watches, aired by NBC affiliate WNBT, was the world’s first TV commercial.

Today’s digital video ad market is strikingly similar to the TV ad market of the 1940s. During that decade, advertisers spent millions of dollars on airtime for their TV commercials, but had almost no idea how many consumers were seeing them, the demographic composition of those consumers and, most importantly, whether or not the money they were spending actually influenced the way their brands were perceived. The only information available to advertisers about who their ads reached was provided by the TV networks themselves – which had a huge stake in “proving” the purchased airtime was worth the money. Everything changed in 1950 when Nielsen launched TV ratings. The presence of a third-party, whose sole purpose was to provide unbiased audience measurement, fueled a massive increase in TV ad spend, which will reach $200 billion worldwide by 2017.

When it comes to the current state of digital video advertising, it’s as if advertisers have borrowed a flux capacitor from Doctor Emmett Brown and traveled back to the 1940s. Today, the majority of the metrics advertisers can access are provided by the media vendors themselves (video ad networks and online publishers). These media vendors provide “proof” that their video ad inventory works, hoping to convince advertisers to buy more – just like the TV networks did between 1941 and 1950. Of course, biased media vendors are not a reliable source of accurate campaign measurement. The most glaring difference between the 1940s and today is that advertisers should know better by now.

Digital Video Ad Spending Will Increase by 40%, TV by 3%

According to eMarketer, advertisers in the US alone will spend $66 billion on TV ads this year, and about $4 billion on digital video ads. But digital video is growing at an exponential rate, as more and more consumers “cut the cord” and shift their attention to watching movies, TV shows, and other video content on their computers, tablets, and smartphones. In addition, IP-connected televisions and set-top devices, including game consoles, Roku, Apple TV, and Google’s new Chromecast, are becoming the central nervous system of the living room media consumption experience. Spending on digital video will grow nearly 40% in 2014 in the US, compared to just a 3% rise in TV ad spend.

Clearly, brand advertisers understand “sight, sound, and motion” is still the best way to reach and influence consumers. They’re eager to reach the viewer wherever they are – regardless of the size of the screen or whether it’s in their pocket, on their desktop or at the center of their living room. But in this rush to spend on digital video ads, brands have overlooked the fact they don’t really know whether these ads are actually working.

Video Marketers are Spending Big While Flying Blind

Let’s look at the digital video metrics advertisers do receive today. While many ad networks and publishers provide reports to convey the value of their inventory, the only video ad metrics currently tracked by unbiased third-party technology vendors are impressions, clicks, and completions. These metrics do give advertisers an idea of how many times their video ads have been delivered to a connected device, but they don’t provide insights into whether or not their campaigns are producing brand lift; who the audience they’re reaching is; or whether their ads are even viewable by consumers. The focus on clicks is misguided, given that most brand advertisers aren’t looking to sell widgets online or drive traffic to a landing page, but are instead interested in influencing consumers’ perception of their brands. Let’s face it, traditional TV commercials aren’t clickable – but the sheer share of budget they receive tells us that they work better than any other ad format available.

The Time Has Come for Metrics That Actually Matter

In addition to trusted and unbiased measurement, advertisers need better metrics. Impressions, clicks, and completions are a great start, but they don’t provide a clear view of whether or not a particular video ad is working. Third-party metrics will allow advertisers to compare and contrast the performance of their video ad campaigns across screens, and clearly see which video ads and media vendors deliver the most brand lift.

The digital video advertising industry is at a crossroads. Brand advertisers know that delivering video to consumers across all screens is absolutely necessary for success, but they have little visibility into what they can do to maximize the impact of their media budgets. As TV taught us, the digital video ecosystem won’t truly scale until unbiased, third-party measurement becomes the standard.

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