There is little doubt that online video is the hottest sector in the ad world, with revenue hitting record levels.
Magna Global’s recently released ad forecast predicts a 42% jump in 2015 in the U.S. for online digital video—more than double the 19% bounce expected for all Internet advertising—to about $6.3 billion. Globally, the firm expects online video to dramatically increase its share of all video advertising from about 10% in 2015 to about a quarter by 2020, explains Vincent Letang, Magna director of global forecasting.
But among all the hoopla over digital video, there are some clouds to this blue sky story.
In August, a report from PageFair and Adobe predicted that ad blockers will cost publishers some $21.8 billion around the world in 2015 and that the number of ad blocker users in the U.S. grew 48% year-over-year to some 45 million active users in June 2015.
Overall, ad blocking in the U.S. reduced revenue by $5.8 billion in 2014 and was expected to cost $10.7 billion in 2015 and $20.3 billion in 2016. Interestingly, Oregon has the highest percentage of ads blocked of any state at 16.4%, following by Washington at 15.5%.
Some analysts have argued those figures are overstated— a September 2015 UBS report argued that the problem will only cost publishers some $1 billion this year. But there is little doubt that the fears about the impact of ad blocking technologies is growing, particularly since Apple’s announcement this year that its operating system would support ad blockers.
That announcement is especially worrisome to TV programmers. Faced with a sluggish TV ad market, they’ve been hoping to jump-start growth by expanding digital distribution and selling more digital video ads.
“Streaming is becoming critically important across all segments,” said Anil Jain, senior VP and general manager of media at Brightcove. “[Programmers] realize that video is the most engaging form of content and their biggest revenue opportunity. And that makes ad blockers a big, big deal in terms of their revenue.”
That dynamic is also prompting more interest in server side ad insertion technologies, Jain said, as opposed to the traditional method of inserting the ads. Traditionally with “client-side” approaches, ads are added to the video stream in the client or device. When the user plays a video, the client will ask for an ad from an ad network like Google DoubleClick or FreeWheel and it would be insert it into the video stream at the appropriate time.
“If there is a good bandwidth connection this usually works well,” Jain said. “The problem is that the ad blocker can track that communications and disable or block those signals going to and from the client. When that happens, the content plays but the ads never make it.”
Jain said that the Brightcove Lift product avoids that problem by stitching the ads into the video in the cloud and then delivering a stream with both the ads and the program to the device. “It is one stream so the only way you can block the ad is to block the whole stream and prevent the users from viewing the content,” he noted.
Early adopters of the Brightcove ad blocking technologies have seen the number of ads delivered increase by as much as 50%, he added.
Server side ad insertion isn’t perfect. This approach can struggle to handle real-time-bidding programmatic ad platforms where millions of potential ads could be delivered.
But broadcasters and distributors of premium video have generally steered clear of RTB public ad market places, which can reduce the value of inventory and pose major security issues. Instead they’ve tended to use private marketplaces for their programmatic efforts. In those markets and most other environments, Jain stressed that their server side ad insertion systems is easily able to support the extensive ad targeting and analytics TV companies need for their digital efforts.
The combination of a server side ad insertion and player technologies also provides a number of other important advantages, including streamlined workflows, delivery of mid-roll ads, improved analytics, integration with a number of major ad servers and compatibility with the IAB VAST specification.
Defeating ad blockers is, however, only one part of a successful digital video effort. Jain stressed that publishers also need to provide viewers with a good user experience.
“Ad blockers weren’t necessarily created as a malicious things but as a way to protect consumers from an onslaught of obtrusive ads that created a really horrendous experience and worries among consumers about how their data was being used,” Jain said. “You will hear a lot of ad blockers saying they are here to protect the consumer and hold people to a higher standard of advertising. The problem is that it is an all-or-nothing strategy that hurts publishers who have a sensible ad approach and are providing a good consumer experience.”